kindly donated by Robert Gaudet Jr EU Competition Law Cartels and anti-competitive agreements (Art. 101 TFEU)

1. Tutorials
 LLB Students:
 Tuesday 23 April - 10 AM – Tutorial Room 8
 Tuesday 23 April – 5 PM – Tutorial Room 8
 Friday 26 April – 9 AM – Tutorial Room 7
 BCL/BBL Students:
 Thursday 25 April – 10 AM – Tutorial Room 7
 Friday 26 April – 11 AM – Tutorial Room 10

2. Competition Law
Article 101 TFEU

3. Introduction

4.  _______________
 _______________
 _______________
What Is Purpose of
Competition Law?

5.  Better “shopping” experience – choice, price, value ->
increased consumer welfare
 Introduction of new and innovative products
 Better use of society’s resources -> increased efficiency
 Prevent aggregations of economic power to protect consumers
and competition
 Create single European market without national divisions
created by private agreements

6. Areas of Competition Law:
 Cartels and anti-competitive agreements (Art. 101 TFEU)
 Abuse of dominant position, e.g., monopolies (Art. 102 TFEU)
 Mergers (Regulation on mergers; Article 102 TFEU)
 State Aid (Art. 4(3) TEU, Art. 14, 34, 101, 102, 106, 107-109 TFEU)

7. Articles

8. Article 101(1) TFEU:
“The following shall be prohibited as incompatible with the
internal market: all agreements between undertakings,
decisions by associations of undertakings and concerted
practices which may affect trade between Member States and
which have as their object or effect the prevention, restriction or
distortion of competition within the internal market ... “

9. “ ... and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other
trading conditions;
(b) limit or control production, markets, technical development,
or investment;
(c) share markets or sources of supply; … ”
Article 101(1) TFEU (cont’d):

10. Article 101(1) TFEU (cont’d):
“… (d) apply dissimilar conditions to equivalent transactions with
other trading parties, thereby placing them at a competitive
disadvantage;
(e) make the conclusion of contracts subject to acceptance by
the other parties of supplementary obligations which, by their
nature or according to commercial usage, have no connection
with the subject of such contracts. …”

11.  “Any agreements or decisions prohibited pursuant to this
Article shall be automatically void. ...”
Article 101(2) TFEU:

12. “The provisions of paragraph 1 may, however, be declared
inapplicable in the case of:
— any agreement or category of agreements between
undertakings ...
— any concerted practice ...
which contributes to improving the production or distribution of
goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit, and which
does not:
(a) impose on the undertakings concerned restrictions which are not
indispensable to the attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition
in respect of a substantial part of the products in question.“
Art. 101(3) TFEU:

13. Case Law

14. What is an “Undertaking”?
 ________________
 ________________
 ________________

15. “Undertaking” =
 Höfner: any entity engaged in economic activity regardless of
legal status or way it is financed
 Corporations, partnerships, individuals, trade associations,
professions, cooperatives, state-owned corporations acting in
commercial context (but not those exercising public powers)
 Does not include entities that only pursue social objectives and
do not engage in economic activity (e.g. old age insurance
plan)
 Does not include organizations representing labour or
management entering into collective agreements -> need to
allow those for social policy reasons

16. What is an “Agreement”?
 _________________
 _________________
 _________________

17. Cases 41, 44and 45/69 ACF
Chemiefarma NV v Commission
[1970] ECR 661 – Quinine Case
Facts:
Procedural History:
Holding:
Rationale:
Cinchona Tree.
Source: Encyclopedia Britannica Kids
online

18. “AGREEMENT” =
 Polypropylene: Commission found (as upheld by CFI) oral
agreement; there was agreement if parties reached consensus
on a plan which was likely to limit commercial freedom even
though not all firms took part in all parts of the cartel
 Expression of joint intention to act in certain way on market
 Attendance at meetings where agreement is reached and
party does not oppose that agreement (even if party does not
expressly agree to it) (Hüls decision)
 Concurrence of wills between at least 2 parties – not unilateral
 Concurrence can deduced from conduct

19. What is “Concerted
Practice”?
 ____________________
 ____________________
 ____________________

20. Case 48/69 ICI v.
Commission [1972] ECR 619
Facts:
Procedural History:
Holding:
Rationale:

21. ICI v Commission:
 “[Article 101] draws a distinction between the
concept of ‘concerted practices’ and that of
‘agreements between undertakings’ or of
‘decisions by associations of undertakings’; the
object is to bring within the prohibition of that
Article a form of coordination between
undertakings which, without having reached the
stage where an agreement properly so-called
has been concluded, knowingly substitutes
practical cooperation between them for the risks
of competition.”

22. What is an “Oligopoly”?
 __________________
 __________________
 __________________

23. What is “Parallel Conduct”?
 ___________________
 ___________________
 ___________________

24. Cases 89, 104, 116-117 and
125-129/85 A Ahlstrom Oy v
Commission [1993] ECR I-1307
(Wood Pulp Case)
 ECJ annulled a decision of the Commission finding a “concerted
practice” where there was a large number of firms, they
charged similar prices, they changed prices simultaneously and
uniformly
 ECJ said parallel conduct, on its own, cannot be proof of
concerted action unless that is the only plausible explanation for
the parties’ conduct

25. Case T-9/89 Hüls AG v Comm’n
[1992] ECR II-499; Case T-11/89
Shell Int’l Chemical Co. Ltd v
Comm’n [1992] ECR II-757; etc.
(Polypropylene Cases)
 CFI found “concerted practice” where meetings held to
fix prices and set sales-volume targets; and firms
exchanged info about: prices they would charge, profit
thresholds, sales volumes needed, and sales figures
 Undertakings that participated could not fail to take into
account information that was disclosed when they
determined their own conduct on the market

26.  Are concerted practices unlawful if there is no
effect on the market?

27. Case C-199/92 P Hüls AG v
Commission [1999] ECR
I-4287
 Concerted practice of fixing prices (part of Polypropylene
cases but later in time)
 “[P]resumption must be that the undertakings taking part in the
concerted action and remaining active on the market take
account of the information exchanged with their competitors
for the purposes of determining their conduct on that market”
 A “concerted practice ... is caught by Article 81(1) EC*, even
in the absence of anti-competitive effects on the market”
* Art. 81 EC = Art. 101 TFEU

28. Exceptions ...
 ___________________
 ___________________
 ___________________

29. Article 101(3) TFEU:
 “— any agreement or category of agreements between
undertakings ...
 — any concerted practice ...
 which contributes to improving the production or distribution of
goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit, and which
does not:
 (a) impose on the undertakings concerned restrictions which are
not indispensable to the attainment of these objectives;
 (b) afford such undertakings the possibility of eliminating
competition in respect of a substantial part of the products in
question. “

30. Case 56/65 Société La
Technique Minière v
Maschinenbau Ulm GmbH [1966]
ECR 235 (“STM decision”)
 Facts: German company gave company, STM, exclusive right to
sell its equipment in France; STM could sell the goods outside
France; “parallel imports” could be obtained in France from
other MS
 Holding: “exclusive right of sale” agreement OK
 Rationale: “it may be doubted whether there is interference with
competition if said agreement seems really necessary for the
penetration of a new area by an undertaking”; there is
opportunity for competition through “parallel re-exportation and
importation”

31. Cases 56 and 58/64
Establissements Consten SARL
and Grundig-Verkaufs-GmbH v
Commission [1966] ECR 299
 Facts: Grundig gave Consten sole distributorship in France;
could not sell outside France; absolute territorial protection so
other Grundig distributors could not sell in France
 Holding: unlawful under Art. 85(1) EC [Art. 101 TFEU]
 Rationale: absolute territorial protection isolates/shelters French
national market from competition with separate national
markets within EC – distorts competition; no favourable effects
can lead to different result

32. Consten:
 “There is a presumption that vertical sole distributorship
agreements are not harmful to competition and in the present
case there is nothing to invalidate that presumption. On the
contrary, the contract in question has increased the competition
between similar products of different makes”
 “The situation as ascertained above results in the isolation of the
French market and makes it possible to charge for the products in
question prices which are sheltered from all effective competition
… Since the agreement thus aims at isolating the French market for
Grundig products and maintains artificially, for products of a very-
well known brand, separate national markets within the
Community, it is therefore such as to distort competition in the
Common Market.”

33. Franchises
 _______________
 _______________
 _______________

34. Case 161/84 Pronuptia de Paris
GmbH v Pronuptia de Paris
Irmgard Schillgallis [1986] ECR
353
 Facts: franchisor gave franchisee rights to sell wedding clothes
with exclusive use of Pronuptia mark on condition franchisee not
open another shop in same area or help third party do so;
franchisor helped set up store, give know-how
 Holding: agreement is lawful
 Rationale: restrictions allowing franchisor to communicate know-
how as part of distribution system without aiding competitors is
not restriction in sense of Art. 101; must preserve identity,
reputation of network symbolized by mark

35.  “ A clause prescribing that the franchisee can only sell
products provided by the franchisor or by suppliers selected by
him must, in these circumstances, be considered necessary for
the protection of the reputation of the network. It must not,
however, operate to prevent the franchisee from obtaining the
products from other franchisees.”

36. Block Exemptions
Using Art. 101(3) as the basis, the Commission has established
block exemptions listing agreements that are exempt from Art.
101:
 Specialization agreements
 Research and development
 Vertical restraints, e.g., vertical agreements between
manufacturer and retailer for distribution
 Technology transfer
 Franchising

37. Limits to Art. 101(3):
Certain agreements are condemned under Art. 101 without
looking at possible benefits under Art. 101(3) ... in other words,
these agreements violate Art. 101:
 Agreements that limit “parallel trade”
 Horizontal price fixing
 Market division
 Collective boycotts
 Absolute territorial protection (Eisele case)

38. What is “Parallel Trade”?
 ______________
 ______________
 ______________

39. Parallel Trade:
 “Parallel import” = “When a product made legally (i.e. not
pirated) abroad is imported without the permission of the
intellectual property right-holder (e.g. the trademark or patent
owner). Some countries allow this, others do not.” Source:
OECD online
 “Parallel trade” = “Imports of genuine copyrighted, patented
or trademarked products without the authorization of the
copyright patent or trademark holder. Parallel trade is the
subject of great debate, especially in the pharmaceutical
industry ...” Source: Dictionary of Int’l Trade

40. Parallel Trade:
 “A kind of arbitrage in which drugs are imported without the manufacturer's
consent into a jurisdiction from a market having lower prices. Since drug
prices are regulated in most countries, parallel trading is unlikely, however,
to produce the usual implication of arbitrage - the emergence of a single
(or close to single) price for each product overcoming inefficiencies arising
from uncompetitive practices - because the price differentials reflect efforts
to earn a return on Research and Development investment rather than
differences in production costs. Parallel trade, though legal in some
jurisdictions (for example, within the EU), is bitterly opposed by the
pharmaceutical industry because it undermines the value of a patented
product and because it effectively imports the results of other countries'
regulatory schemes. It is not clear that parallel trade redounds particularly
to the benefit of consumers or third party payers, as distinct from that of the
parallel traders”
 [Source: www.dictionarycentral.com]

41. Cases C-501, 513, 515 and
519/06 GlaxoSmithKline Services
Unlimited and others v
Commission [2009] ECR I-9291
 Facts: GSK made agreement with wholesalers in Spain to
charge lower domestic prices and higher export prices
 Procedural History: proceedings brought by Commission against
GSK
 Holding: unlawful
 Rationale: “agreements aimed at prohibiting or limiting parallel
trade have as their object the prevention of competition”

42.  “an agreement between producer and distributor which might
tend to restore the national divisions in trade between MS might
be such as to frustrate the Treaty’s objective of achieving the
integration of national markets through the establishment of a
single market”
 “[Art. 101 TFEU] aims to protect not only the interests of
competitors or of consumers, but also the structure of the
market and, in so doing, competition as such. Consequently,
for a finding that an agreement has an anti-competitive object,
it is not necessary that final consumers be deprived of the
advantages of effective competition in terms of supply or price”

43. Vertical Agreements:
 Exclusive distribution agreements –> producer supplies only a
particular distributor in a particular territory - must look at
context to see if caught by Art. 101(1)
 Selective distribution agreements –> supplier distributes only
through certain outlets, e.g., with special expertise, e.g.,
specialist sales staff, brand image
 Exclusive purchasing agreements –> agreement to buy all
needs from particular supplier, e.g., petrol stations and pubs –
ok if “cumulative effect” does not interfere with market

44.  Metro-SB [1977]: “to preserve, in the interests of consumers, ...
this channel of [selective] distribution ... forms one of the
objectives which may be pursued without necessarily falling
under the prohibition of Article [101(1)]”
 BMW [1995]: agreement between BMW and dealers forbidding
dealer from sending cars to leasing companies that hired out
cars beyond the national borders of dealer was “absolute
territorial protection” - unlawful

45. Private Enforcement of
Competition Law
 Case C-453/99 Courage Ltd v Crehan [2001] ECR I-6297:
private right of action in national courts for anyone who
suffers damages as result of violations of Article 101
 Manfredi decision

46. White Paper on damages
actions for breach of the EC
antitrust rules (2008)
 Recognized need for new methods to increase private
enforcement of competition law to encourage compliance and
distribute damages
 Considering various options including opt-in class actions;
representative actions brought by an association with a legitimate
interest
 Overlooked Dutch, Danish, Norwegian laws permitting opt-out
class actions and Swedish, Danish (and now Italian and Polish)
laws allowing for opt-in class actions
 Derogatory comments made about opt-out class actions, i.e., U.S.
model for class actions

47. Two examples of deficit in
access to justice:
 Class action in USA on behalf of purchasers of diamonds settled
for 300 million USD distributed to victims of worldwide cartel
 No similar action for private damages brought on behalf of
European victims
 Class action in USA on behalf of owners of Apple MacBook due
to defective power cord that frays, sparks, bends, stops working
settled for $10 million distributed to USA consumers
 No similar action for private damages brought on behalf of
European victims

48. Future of competition law:
 More private actions brought by lawyers on behalf of
consumers?
 Class/group/collective actions?
 Discussed in Brussels on November 12-13, 2012 at conference
by ABA Section of International Law, jointly presented by NUIM
Department of Law and Netherlands Bar Association and
others
 Test case procedure?

49. Next ...
 Article 102 TFEU – Abuse of Dominant Position in
Competition Law