EU Competition Law

I. Introduction – scope

✓ From the beginning of the project of Europe’s unification under the influence of the Freiburg School and the theories of ordoliberalismus, the founding fathers included in the Treaty of EEC a chapter especially dedicated to competition.

✓ The contained rules aim at assuring that competition in the single market will not be distorted.

✓ This covers inter alia the prohibition of restrictive behaviors on behalf of undertakings (restrictive collusions between two or more undertakings and abuses of dominance).

II. Section 1: Rules applicable to undertakings

II.1 Coverage

II.1.1 Coverage rationae personae

II.1.1.1 Subject to EU Competition Law

✓ Prohibition of anticompetitive collusions (article 101 TFEU) and prohibition of abuse of dominance (article 102 TFEU) are addressed to undertakings. The notion of “undertaking” in EU competition law covers not only commercial entities provided by traditional company law such as limited companies (sociétés anonymes), but encompasses every entity engaged in an economic activity regardless of the legal status of the entity and the way it is financed (see among others CJ, Case C-41/90, Hoefner and Elser, para 21). As “economic activity” according to the CJ must be considered “any activity consisting in offering goods or services on a given market” [See among others, CJ, Case C-35/96, Commission v. Italy, para 36].

✓ Thus, the integration of an entity in the public sector in strict or broader terms does not exclude per se the possibility of qualifying it as “undertaking” for competition law purposes, provided that it assumes the fulfilment of an economic activity. Consequently :

o Public services without separate legal personality from the State itself can be considered as “undertakings” provided that they deliver economic activities. E.g. the case-law concerning the accreditation of telecommunications terminals: [CJ, Case 118/85, Commission v. Italy, para 13, CJ, Case C-69/91, Decoster, para 15 and CJ, Case C-92/91, Taillandier, para 14].

o Other public law entities that pursue an economic activity. As economic activity can be considered any activity for which private supply is possible, even in the case that the activity is de jure or de facto monopolized by the public law entity in question. E.g. the case-law concerning public employment offices, [CJ, Case C-41/90, Hoefner and Elser, para 22 and CJ, Case C-55/96, Job Center, para 22].

o By virtue of article 106 paragraph 1 of the TFEU, EU competition rules are applicable to public undertakings and to undertakings vested with exclusive or special rights :

■ Public are the undertakings to which the State exercises decisive control. According to article 2 letter b) of the current transparency directive (2006/111/EC), decisive control is presumed: a) when public authorities hold the majority of the registered capital of the undertaking in question or b) when public authorities control the majority of the voting rights of the undertaking in question, or c) public authorities have the right to appoint more than a half of the

members of the Board or other supervising body of the undertaking in question.

■ Undertakings vested with exclusive or special rights can be also private undertakings. However, because of their special status, they are considered to be particularly exposed to State influence. Exclusive rights are easy to define: these are coercive rights that authorize only the beneficiary to proceed with a specific activity in a given market. By contrast, special rights are more complicated: they are rights attributed by a state act to at least two undertakings to which they reserve the right to proceed with a specific economic activity or to which they grant specific legislative or regulatory advantages, which affect substantially the possibility of other undertakings to compete with the holder of such rights and these rights are attributed on the basis of non-objective, discriminatory and non-proportional criteria. Conversely, it is admitted that a general licensing regime does not tantamount to the attribution of special rights [See directive 2008/63/EC on competition on telecommunications terminals and CJ, Case C-302/94, British Telecommunications, para 34].

✓ Cooperatives and other forms of social economy organizations are for the purposes of EU Competition Law considered as “undertakings” (See GC, Case T-61/89, Dansk Pelsdyravlerforening v. Commission, para 50).

✓ Liberal professionals (doctors, lawyers, architects etc.) are considered for the purposes of EU Competition law as “undertakings” and their associations as “associations of undertakings” (see CJ, Joint Cases C-180-184/98, Pavlov, paras 73-78 and CJ, Case C-309/99, Wouters, paras 47-49).

II.1.1.2 Not subject to EU Competition Law

✓ Public/Private entities serving exclusively social goals of a non-economic nature are not caught by EU Competition Law :

o An entity entrusted with tasks of environmental police, even if this entity takes the form of a private law legal person [See CJ, Case C-343/95, Diego Gali v. SEPG), para 25] was not qualified as an undertaking.

o Social security & health: some clarifications must be drawn → compulsory social security schemes based on the principle of solidarity are excluded from the application of EU competition rules [See CJ, Joint Cases C-159-160/91, Poucet & Pistre v. Assurances Générales de France]. Similarly, the Court found that EU competition rules did not apply to an Italian Institute of compulsory insurance against work accidents and occupational diseases [See CJ, Case C-218/00, Cisal di Battistello Venanzio & Co v. Istituto Nazionale per L’Assicurazione Contro Gli Infortuni Sul Lavoro (INAIL)]. Less clear was the case of German sickness funds. Contrary to its Advocate General who suggested that the sickness funds should be regarded

as undertakings, the Court took finally the view that they weren’t because they were based on the principle of solidarity and were integrated in the German system of social security [See CJ, Joint Cases C-264, 306, 354 and 355/01, AOK, esp. para 51]. Conversely, a body operating a pension scheme in which there was no mutuality and cross-subsidies between the beneficiaries was found to be an undertaking despite the fact that it was a non-profit organization [See CJ, Case C-244/94, FFSA and others v. Ministère de l’agriculture et de la Pêche]. Although compulsory, a pension fund operating according to the principle of capitalization was found to be an undertaking [See CJ, Case 67/96, Albany, para 87].

o An entity entrusted with the surveillance of air traffic assuring air navigation safety [See CJ, Case C-364/92, SAT Fluggesellschaft v. Eurocontrol] was not considered as an undertaking.

o Public entities charged with providing courses in the frame of the national education system are not providing economic services and, thus, they are not regarded as “undertakings”, even if students have to pay to the State an amount of money as fee of contribution to the cost of operating the national system [See CJ, 263/86, Humbel].

✓ Severability test → The GC took the view that in some cases it is possible to separate the functions of an entity that are connected to the exercise of public power from those that can be regarded as ordinary commercial activity [See GC, Case T-155/04, SELEX Sistemi Integrati SpA v. Commission]. On appeal the CJ [See Case C-113/07] did not reject theoretically the possibility of applying such a severability test, however in the case at hand, it considered that the GC erred in law by considering that the other activities of Eurocontrol were separable from the main activity of monitoring air traffic for security reasons.

✓ End-consumers are not to be considered as “undertakings”

II.1.2 Coverage rationae materiae

With the exception of State Defense (see articles 346-348 TFEU), practically all sectors of economic activity are caught by EU Competition Law. Some limited exceptions are accepted for some particular activities such as art, culture and sports. Agriculture and fisheries, although organized in EU level in the particular form of Common Market Organisations (CMO), still generally subject to EU Competition rules [See Regulations 1308/2013 and 2017/2393 for agriculture and Regulation 1379/2013 for fisheries].

II.2 The exception of Services of General Economic Interest (SGEI)

II.2.1 In general

SGEI are economic services that present a vital importance for the population.

Currently SGEI benefit of a quasi “constitutional” protection within the EU legal order because article 14 of TFEU in a symbolic way recognizes that SGEIs are a common value of the member states and that they contribute to the promotion of social and territorial cohesion of the EU. However, far from being only symbolic, article 14 TFEU provides for a legal basis for EU legislation. Namely the European Parliament and the Council may, according to the ordinary legislative procedure, issue regulations determining the principles and conditions of the SGEIs. It is stressed that the relevant EU action is without prejudice of the competence of the Member States for the provision, the assignment and the financing of these SGEI. This provision of the TFEU is inspired by the principle of subsidiarity according to which regulation and provision of SGEIs seems to be a privilege of the Member States, which are more closely placed to the local particularities that the efficient provision of these services need to take into consideration.

II.2.2 SGEIs limited immunity from the application of EU Law – conditions / article 106 para 2 of the TFEU

Article 106 para 2 provides for a limited exception to the application of EU Law (consequently and even primordially of the EU competition rules) in favor of undertakings – whether public or private – which are entrusted with the performance of SGEIs. The term “services” is not used literally and should be understood broadly so as to encompass also provision of goods, provided that this provision is of general interest (e.g. electricity provision to remoted or isolated areas).

Application of the exception is subject to the fulfilment of four conditions : a) the undertaking must be effectively “entrusted”, b) with the provision of a or more SGEIs, c) the application of EU Law must result to obstruct the due performance of the SGEI in question (“the obstruction test”) and d) Union’s interest must not be affected. More specifically:

II.2.2.1 “Entrusted”

The exception to apply, the undertaking – public either private – in question must be entrusted with the provision of one or more SGEIs. Entrusted means that some specific tasks have been specifically assigned to the undertaking by a positive state act (law, administrative act, regulation or public contract, e.g. concession etc.). The fact that the State simply tolerates, approves or endorses the practices of the undertaking is insufficient for the latter to be considered as “entrusted” [See decision of the Commission Uniform Eurocheques, OJ L35/43, 1985 and decision of the Commission GEMA, OJ L 134/15, 1971].

II.2.2.2 with SGEIs

The undertaking must be entrusted with one or more SGEIs.

SGEIs is an EU law concept. It is suggested [See J.L. Buenida Sierra, 6.146] that it constitutes a maximum standard beyond which Member States cannot go. SGEI denotes an economic activity that should be carried in the public interest (e.g. collect and dispatch of courier, or provision of electricity in remoted and isolated areas etc.). Indicatively the CJ has admitted that they constitute SGEIs: the administration of major waterways [CJ, Case 10/71, Ministère Public de Luxembourg v. Muller], the operation of non-economically viable air routes [CJ, Case 66/86, Ahmeed Saeed], the operation of electricity supply networks [CJ, Case C-393/92, Gemeente Almelo], the provision of mooring services in ports [CJ, Case C-266/96, Corsica Ferries France SA] and the provision of emergency ambulance services [CJ, Case C-475/99, Ambulanz Glöckner]. It can be seen from the case-law of the Court that it expanded the ambit of SGEIs far from the limits of the traditional sphere of public utilities.

II.2.2.3 Application of EU Law must obstruct (“the obstruction test”)

EU Law and especially EU Competition rules remain inapplicable only insofar they obstruct the performance of the specific duties assigned to the undertaking in question.

The basic elements of standard of proof are the following:

✓ The tasks of public interest entrusted to the undertaking should be performed in economically viable conditions. Thus, as per the justification of an exclusive right to collect and dispatch ordinary courier, it is reasonable that the exclusive right covers all the territory of the Member State, prohibiting competitors to proceed with a cherry picking or cream skimming that would undermine the provision of the SGEI [CJ, Case C-320/91, Corbeau].

✓ Article 106 paragraph 2 of the TFEU implies the application of a proportionality test. Namely, competition rules remain inapplicable only in as much as there are no other (less drastic) means to achieve proper operation of the SGEI in question [CJ, Case C-203/96, Chemische Afvalstoffen Dusseldorp].

✓ Severability test: in some cases it is appropriate to distinguish between separable (detachable) parts of the service in question, which do not constitute SGEIs and can be offered under normal market conditions. For instance postal services of value added (such as express courier) are not comprised to the basic postal SGEI [CJ, Case C-320/91, Corbeau].

II.2.2.4 Union’s interest must not be affected

We have little trace of application of this condition. It can be construed as a further manifestation of the proportionality test or seen as an autonomous condition. In De Post – La Poste (OJ L 61/32, 2002) the Commission considered that a practice of the dominant operator to tie services of added value to the basic postal service throughout the territory of Belgium by isolating thus the whole market of a Member State would be able to

affect the development of trade to such an extent that would be contrary to the interests of the Union.

II.2.3 Direct effect of article 106 para 2 TFEU

Actually direct effect of article 106 para 2 TFEU seems to be as a whole accepted. By way of reminder article 106 para 2 has four conditions of application: a) the undertaking must be entrusted, b) with a SGEI, c) the application of EU competition rules must obstruct the provision of the SGEI and d) the inapplicability of EU competition rules must not affect the trade to such extent that would be contrary to the Union’s interests.

As far as conditions a) and b) are concerned, it was clear long ago that they were of direct application by the national courts [CJ, 123/73, BRT v. SABAM]. Condition c) (the obstruction test) initially on the basis of Muller judgement, it was held that national courts are not competent to apply it but only Community institutions. However, this position has changed by the ERT judgement of the Court, where the Court expressly admitted that it is for the national court to verify whether the application of EC rules would obstruct the performance of the specific tasks related to the SGEI in question [CJ, Case C-260/89, para 34]. As per the condition d) also it could be argued that Union’s institutions are better placed to apply it, but if seen as an extension of the proportionality principle, national courts could arguably apply it also. If admitted that condition d) is not directly applicable, national courts could not set aside the application of EU Law, but only consider that the conditions of application of article 106 para 2 of the TFEU are not met and, thus, consider that EU Law is fully applicable. However, it seems according to the more recent case-law of the Court [CJ, Case 218/00, Cisal, para 19 and therein cited case-law] that direct effect of article 106 para 2 of the TFEU whether applied positively or negatively is not anymore questionable.

II.3 Independence of wills – State driven restrictions of competition

In order to be caught by EU Competition Law, anticompetitive action of undertakings must be the result of their independent will. Thus, undertakings are immunized against any liability for restrictive agreements imposed by statutory act or equivalent means or for abuse of dominance imposed by the State. Conversely, according to the CJ articles 101 and 102 TFEU may still apply when the State intervention does not eliminate any possibility of autonomous action on behalf of the undertakings concerned.

II.3.1 Joint application of articles 4 paragraph 3 TEU and 101 paragraph 1 of TFEU

Article 101 TFEU is addressed to the undertakings. State actions restricting competition are not prima facie caught. However, the Court appealed to the principle of loyal cooperation (now provided by article 4 paragraph 3 TEU), in order to apply indirectly article 101 TFEU to state behavior. According to this concept state measures must not jeopardize

the effet utile of article 101 TFEU. When does this happen is a matter of application of some formalistic criteria adopted by the Court. Thus:

✓ State authorities have the right to determine directly competition parameters (prices, quantities), in such a manner that no concomitant behavior on behalf of undertakings is possible [See indicatively CJ, Case 231/83 Cullet v. Leclerc, CJ, Case 267/86, Van Eycke and more recently CJ, Case C-221/99, Conte, paragraph 23, CJ, Case C-446/05, Doulamis, paragraphs 20, 21 and 24 and CJ, Joint Cases C-94/04 and C-202/04, Cipolla, paragraphs 46, 47 and 50-54]. The Court has rejected the so-called substitution theory which is an effects based approach enlarging the scope of application of articles 4 paragraph 3 TEU and 101 TFEU to any state measure that would have the same results as a prohibited private agreement or in general collusion.

✓ The State measure obliges the subject undertakings to adopt the restrictive agreement. This is a clear cut case that falls under the scope of articles 4 paragraph 3 TEU and 101 TFEU [CJ, Case C-225/09, Jakubowska, paragraph 49 and therein cited case-law.

✓ The State measure / behavior simply incites undertakings to adopt a restrictive agreement/collusion. Articles 4 paragraph 3 TEU and 101 TFEU can apply provided that a high standard of proof is met. Namely, the State must have exercised irresistible pressures to the undertakings concerned [See GC, Case T-387/94, Asia Motors and others v. Commission, paragraph 65].

✓ The State measure reinforces the effects of private collusions. Either the State renders a private agreement obligatory by means of a consequent state act, either the State delegates the exercise of regulatory tasks to private individuals. More specifically:

o Force erga omnes: articles 4 paragraph 3 TEU and 101 TFEU can apply provided that a high standard of proof is met. Thus, the state act must repeat fully the restrictive private agreement and not just be inspired by it [CJ, Case C-2/91, Meng, paragraph 22 and CJ, Case C-245/91, Ohra, paragraph 15].

o Delegation of regulatory tasks: The application of articles 4 paragraph 3 TEU and 101 TFEU is excluded when cumulatively : a) the delegated bodies operate in favor of public interest and b) the State is not alienated from its regulatory function, either because it has the right not to follow the suggestions of the delegated bodies or to substitute to them, if it considers that the decisions of the delegated bodies do not serve properly the goals of public interest in subject matter [See indicatively CJ, C-185/91, Reiff, paragraph 14, CJ, Case C-153/93, Delta, paragraph 14].

II.3.2 Joint application of articles 106 paragraph 1 and 102 TFEU.

Article 106 paragraph 1 TFEU plays as per public undertakings and undertakings vested with exclusive/special rights, a similar role (or even reflects) the principle of loyal cooperation.

Thus, Member States should not adopt or maintain vis-→-vis these undertakings measures contrary to the treaty and especially the EU rules of competition. More specifically:

✓ Is the creation of a dominant position by state act prohibited per se? It seems that by principle no, given the fact that the simple possession of a dominant position is not prohibited [CJ, Case 155/73, Sacchi, paragraph 14].

✓ However, articles 106 paragraph 1 and 102 TFEU prohibit a Member State to incite or oblige a public undertaking or an undertaking vested with exclusive/special rights that is dominant to abuse of its market power. There is a presumption of abuse when:

o The dominant firm is unable to meet the demand on the market (théorie du monopole défaillant), [CJ, Case C-41/90, Höfner Macroton].

o The State creates for the dominant firm a situation of conflict of interest [See CJ, Case C-260/89, ERT]. This is particularly the case when according to the applicable national legal framework, the dominant firm holds regulatory tasks and in the same time acts as commercial operator in the market [See CJ, Case 202/88, France v. Commission and CJ, Case C-49/07, MOTOE].

o The State act creates a situation of leverage in favor of the dominant undertaking [CJ, Joint Cases C-271/90, C-281/90 and C-289/90, Spain and others v. Commission, paragraph 36].

✓ Causation: The CJ [CJ, Case C-323/93, Centre d’ insémination de Crespelle] seems to require a direct causal link between national legislation (or in general the state measure) and the alleged abuse.

✓ Structural abuse: the application of articles 106 paragraph 1 and 102 TFEU does not require an accomplished (established) act of abuse on behalf of the dominant undertaking. Even a potential abuse will be sufficient. That become clear with the PPC case [CJ, Case C-553/12 P, Commission v. PPC, paragraphs 41-46].

II.3.3 Concurrent responsibility of undertakings

The responsibility of the Member States for preserving the effet utile of articles 101 and 102 TFEU does not a priori exclude the responsibility of undertakings [See indicatively CJ, Case 229/83, Leclerc and CJ, Case 231/83, Cullet]. That will depend on assessing whether in the light of the national applicable regulatory framework, some margin of autonomous action has been left to the undertakings concerned. The form of the State measure will be a critical parameter. If this has the form of a legally binding act, most probably the subject undertakings will be immunized from any responsibility of violating articles 101-102 of the TFEU. In general when no space for autonomous action is left by the legislation to the undertakings articles 101-102 do not apply to them [See indicatively

CJ, Joint Cases C-359/95 P and C-379/95 P, Commission v. Ladbroke Racing, paragraph 33].

II.3.4 Summary

The following table summarizes the situation of responsibility for State driven restrictions of competition:

Table 1: State driven restrictions of competition

II.4 Group of companies – no Ιntra-Enterprise conspiracy in EU Law

Adopting the concept of Single Economic Unit (SEU), the GJ ruled that article 101 TFEU cannot be applied to intra-group agreements. This case-law applies primordially in the case of the relations of a parent company with its controlling subsidiaries [See CJ, Case

C-73/95, Viho]. The Court held that article 101 TFEU could not apply where a subsidiary did not freely determine its conduct on the market, but instead carried out the instructions given to it directly or indirectly by its parent company. Control can be inferred by shareholding or other (contractual) arrangements permitting to the parent company to define the commercial conduct of its subsidiary in the market. Two possible situations must be outlined:

✓ The subsidiary is a Wholly-Owned (100%) or almost Wholly-Owned subsidiary: in that case a rebuttable presumption of control is applied [See CJ, Case C-97/08 P, Akzo Nobel and others v. Commission, paragraph 58]. The Commission relies on the shareholding criterion and the parent company needs to adduce consistent evidence showing that the subsidiary determines autonomously its conduct on the market. However, if the Parent fails to adduce such elements, the Commission does not need to prove that the decisive influence of the Parent over the Subsidiary has been actually exercised. The Court found (in Akzo op.cit) that the application of a rebuttable presumption does not violate article 6 of the European Convention of Human Rights (ECHR)

✓ The Parent has a majority shareholding in the Subsidiary: in that case no presumption applies and the Commission needs to show that the Parent has determined the incriminated action of its subsidiary on the market having in particular regard to the economic, organizational and legal links between the two entities [See CJ, Case Joined Cases C-628/10 P and C-14/11 P, Alliance One International, paragraph 43].

The rationale is that as the group of companies behaves in the market as a unity and, consequently, the subsidiary does not have the possibility of any autonomous course of action, the internal relations of the group escape from the ambit of article 101 TFEU, which implicitly requires an autonomous conduct of at least two independent undertakings.

However, it must be stressed that the behavior of the group as a whole (as a SEU) still may be subject to article 102 TFEU and the prohibition of abuse of dominance (See infra). Moreover, the behavior of a company situated outside the EU could be apprehend by article 101 TFEU, if this behavior has been exercised by means of controlling subsidiaries within the EU.

II.5 Article 101 TFEU – Prohibited Collusions

II.5.1 Forms of Collusions

Article 101 TFEU prohibits: a) any restrictive agreement between at least two undertakings, b) any decision of association of undertakings to that effect and c) any restrictive concerted practice between at least two undertakings. The scope of these concepts must be successively examined:

II.5.1.1 Agreements

The notion of agreement for the purposes of competition law is broader than this of a civil contract and encompasses any form of concurrence of wills between at least two independent undertakings to conduct themselves in a specific manner in the market [GC, Case T-7/89, Hercules Chemicals v. Commission, paragraph 2]. Thus, the notion of agreement can comprise several informal ways of establishing the common will between at least two autonomous undertakings:

✓ Oral agreements [CJ, Case 28/77, Tepea v. Commission]

✓ Unsigned but executed contracts [Commission, BP Kemi-DDSF, OJ 1979, L 286/32]

✓ Gentlemen’s agreements

✓ Memoranda of understanding

✓ Guidelines concerning the behavior of undertakings on the market

✓ Formal termination of the agreement is not sufficient for article 101 TFEU not to apply, if the agreement continues to produce its effects on the market [CJ, Case 51/75, EMI Records v. CBS United Kingdom, paragraph 30].

The broadness of definition of the notion of agreement for the purposes of article 101 TFEU has as a consequence that an agreement can also be established in a “passive” way. Examples:

✓ Meetings of competitors: In Anic [CJ, Case C-49/92 P, Commission v. Anic Partecipazioni, paragraph 96] the Court held that : “the Commission had been able to establish that Anic had participated in the meetings at which price initiatives had been decided on, planned and monitored, it was for Anic to adduce evidence that it had not subscribe to those initiatives”. In order to establish that distance from the agreement, the undertaking must prove that it did not allow the received information to influence its business actions [See CJ, Case C-199/92 P, Hüls v. Commission, paragraph 162] – (however such a finding will be in most cases impossible to establish in practice) or publicly distant itself from what it was discussed, so as not to give the other participants the impression that it subscribed to the agreement [See CJ, Case C-204/00 P, Aalborg Portland and Others v. Commission, paragraphs 55, 81-84].

✓ In vertical relations: when the Commission has adduced evidence of the existence of an agreement, it is for the dealer to adduce evidence that it distanced itself from that agreement [CJ, Joined Cases C-2/01 P and C-03/01 P, Bundesverband der Arzneimittel –Importeure and Commission v. Bayer, paragraph 82].

Single Continuous Infringement Doctrine: applicable in long lasting complex cartels. It is important for determining the parties to and the duration of an infringement and consequently the amount of the fine. A single infringement can be established to the detriment

of one undertaking under the following conditions [GC, Joined Cases T-204/08 and T-212/08, Team Relocations and Others v. Commission, paragraphs 32 and 37]:

✓ The existence of an overall plan of the parties pursuing a common objective,

✓ An intentional contribution of the undertaking to that plan

✓ The awareness of the undertaking (proven or assumed) of the restrictive conduct of the other participants

II.5.1.2 Decisions of associations of undertakings

Decisions of associations of undertakings are also conceived not only as formal decisions (legally binding the members of the association), but also unformal ones, such guidances, circulars or memoranda [GJ, Case 45/85, Verband der Sachversicherer]. This extension of the scope of article 101 TFEU aims at encompassing all possible forms of cooperation between undertakings not only direct ones (agreements, concerted practices), but also institutionalized forms through collective structures or common bodies [GC, Case T-111/08, MasterCard, paragraph 243]. Such bodies can be:

✓ Trade associations

✓ Agricultural Cooperatives

✓ Associations entrusted with statutory functions

✓ Other bodies or entities

II.5.1.3 Concerted Practices

II.5.1.3.1 In General

A concerted practice is a form of cooperation where undertakings without concluding any sort of agreement or establishing a plan of action knowingly substitute cooperation between them for the risks of competition [CJ, Case 48/69, ICI v. Commission, paragraph 64, CJ, Case C-8/08, T-Mobile and Others, paragraph 26]. In Suiker Unie [CJ, Case 40/73] the Court clarified that, although article 101 TFEU does not preclude undertakings from intelligently adapt themselves to the conduct of their competitors, it forbids any direct or indirect contact between competitors. The notion of concerted practice does not presuppose necessarily the existence of an overall plan of action.

A concerted practice to be established needs the following elements:

✓ Some form of conduct between the undertakings concerned. However the standard for this condition to be fulfilled is low. E.g. it can be considered as “contact” even a public announcement of an undertaking knowing that its competitors will take notice and adapt their conduct to its lead, or similar instructions to downstream clients within a specific time period.

✓ There must be some kind of “meeting of minds” [See GC, Case T-25/95, Cimenteries CBR v. Commission, paragraph 1389]. Again this is a low standard condition

The above conditions constitute the element of concertation + causal link + conduct in the market [See CJ, Case C-199/92 P, Hüls, paragraph 161]. However, if contact between undertakings is established, the fact that their conduct in the market will be accordingly influenced can be presumed. However, this is a rebuttable presumption and undertakings can adduce evidence that their conduct has been irrelevant to the concertation [See CJ, Hüls, paragraph 167 and GC, Cimenteries, paragraph 1865].

II.5.1.3.2 Parallelism and concerted practice

More than a simple parallelism of conduct, less than an agreement.

Parallelism of conduct + will of coordination

CJ “Wood pulp II” [C-89/85, paragraphs 61-72] → simple parallelism can suffice for the establishment of a concerted practice, if there is no other plausible economic explanation for the parallelism.

In doctrine it is suggested that also conscious parallelism should be caught by article 101 TFEU. However, this position is not up to now upheld by the Court.

II.5.1.3.3 Concerted practices in vertical relations

Although it has been suggested by doctrine to limit the application of the notion of concerted practice only to horizontal relations (between competitors), the Court applied the notion also to vertical relations [See CJ, Joined Cases 100/80, SA Musique Diffusion française and Others v. Commission and CJ, Case 86/82, Hasselblad v. Commission].

II.5.2 Restriction of competition – per se restrictions (restrictions by object) v. restrictions by effect

II.5.2.1 Restrictions by object

II.5.2.1.1 In general

An agreement or a collusive practice in general can restrict competition either by object or effect. Consequently, these notions apply alternatively and not cumulatively.

First, on should examine whether the agreement in question restricts competition by its object. Such is the case if the agreement by its very nature has the potential of restricting competition [See among other CJ, Case C-226/11, Expedia v. autorité de la concurrence and others, paragraph 36]. If an agreement or a collusive practice is restrictive by object, there is no need to examine its concrete effects in the market, in order to establish the infringement.

Examples:

Horizontal relations (between competitors) – cartels

✓ Price fixing

✓ Partitioning of the markets – market sharing

✓ Collective exclusive dealing – boycott

✓ Exchange of commercially sensible information

Vertical relations

✓ Resale Price Maintenance (RPM)

✓ Restriction of the parallel trade

However, note that no agreement is assessed in vacuum. According to a settled case-law agreements must be assessed in light of their content, their objectives, their legal and economic context and the way they are actually implemented [See among other CJ, Case C-501/06 P, GlaxoSmithKline, paragraph 58].

II.5.2.1.2 Appreciability

Following the Völk case [CJ, Case 5/69], it was initially suggested that even in object restrictions article 101 TFEU could not apply, if it is established that the parties are not able to restrict appreciably competition because of their small market shares. The Commission was keen of a more strict approach pleading in favor of the applicability of article 101 TFEU. Notably in its de minimis Notice, the Commission stated expressly that the de minimis objection could not apply to hardcore restrictions. Finally, in Expedia [CJ, Case C-226/11] the Court reviewed its previous position and accepted that agreements that a) may affect trade between Member States and b) have an anti-competitive object are deemed to appreciably restrict competition, notwithstanding of whether they have concrete effects. Practically the previous Völk judgment was set aside.

II.5.2.2 Restrictions by effect

If an agreement or collusive practice is not restrictive by object, it still may be restrictive by effect. For an agreement to be restrictive by effect, it must be capable of affecting competition to such an extent that negative effects on prices, output, innovation, or the variety of goods and services can be expected on the relevant market with a reasonable

degree of probability (e.g. exclusivity agreements). In this context the focus on the process of rivalry between competitors and the foreclosure effect (capacity of the competitors to gain access to the market and /or increase their market shares) is primordial [See CJ, Case C-234/89, Sergios Delimitis, paragraph 27].

II.5.3 Level of production

Agreements and collusive practices under article 101 TFEU include arrangements between in line competitors (horizontal agreements), but also arrangements between undertakings acting in different level of the production chain (vertical agreements).

II.5.3.1 Horizontal Agreements / collusions – Cartels

Horizontal agreements / collusions encompass agreements between in line competitors. Horizontal agreements are considered in general as the more harmful for competition (hardcore cartels: price fixing, limitation of production outlets, markets allocation etc.). However some horizontal agreements are considered as compatible with the single market (e.g. cooperation or research agreements) and are block exempted [See Commission Regulation No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the functioning of the European Union to categories of research and development agreements, Official Journal L 335, 18.12.2010, p. 36 and Commission Regulation No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty to categories of specialization agreements, Official Journal L 335, 18.12.2010, p. 43].

II.5.3.2 Vertical Agreements – The Regulation (EC) 330/2010 – Block Exemption Regulation (BER)

The new EU competition policy takes the position that vertical agreements can be more easily tolerated than horizontal ones, because they are capable of intensifying the so-called inter-brand competition. Therefore, the vertical agreements are block exempted: The current Block Exemption Regulation (Regulation 330/2010) provides that all vertical agreements are block exempted provided that the supplier and the reseller hold in the relevant markets a market share that does not exceed 30%. However, the benefit of the block exemption is disapplied to agreements containing serious restrictions (article 4 of the BER), such as Resale Price Maintenance – RPM (imposition of fixed or minimum prices to the reseller) or absolute territorial protection (prohibition to the reseller to proceed with passive sales outside its conceded territory).

II.5.4 Article 101 paragraph 3 TFEU

II.5.4.1 In general

Article 101 paragraph 3 TFEU contains an exception to the prohibition of restrictive agreements provided by article 101 paragraph 1 TFEU based on the assumption that the positive effects of such agreements overturn the negative effects on competition. The exception applies automatically without being necessary that a prior decision of any competition authority grants the benefit of the exception to the undertakings concerned. These agreements are fully binding and enforceable.

The application of article 101.3 TFEU is subject to four cumulative conditions:

✓ The agreement must contribute to improving the production or distribution of goods (or services) or contribute to promoting technical or economic progress (1st condition).

✓ Consumers must receive a fair share of the resulting benefits (2nd condition).

✓ The restrictions must be indispensable for attaining the goals pursued (3rd condition)

✓ The agreement must not permit to the parties to eliminate competition in respect of a substantial part of the products or services concerned (4th condition).

Article 101.1 TFEU should be applied in conjunction with article 101.3. Theoretically all kind of restrictive agreements can be exempted on the basis of article 101.3 TFEU. Article 101 does not contain a per se rule. However, in practice hardcore restrictions (such as price fixing or market allocation cartels) are very unlikely to fulfil the conditions of application of article 101.3 TFEU.

These conditions will be now analyzed in more detail.

II.5.4.2 The 1st condition. Efficiency gains

The purpose of the first condition is to identify all possible effects that can be considered as stemming from the agreement in question. As the General Court stressed: “the improvement must display appreciable objective advantages of such a character as to compensate for the disadvantages which they cause in the field of competition” [See GC, Case T-65/98, Van den Bergh Foods v. Commission, paragraph 139 and GC, Case T-168/01, GlaxoSmithKline Services Unlimited paragraphs 247 and 304-307]. It is however controversial whether a balancing exercise is needed in the frame of application of the first condition of article 101.3 TFEU.

Examples:

✓ Cost efficiencies → synergies between undertakings that adopt a combination of their assets involving an output structure resulting at cost savings that otherwise would be impossible to achieve (e.g. technological advances).

✓ Qualitative efficiencies → synergies that permit the production of more sophisticated products or services (e.g. a R&D Joint Venture or the grant of IP license etc.)

II.5.4.3 The 2nd condition: a fair share to consumers (the welfare condition)

By the world “consumers” we identify the users of the products or services. Thus, the concept of consumers is not synonym of “end consumers”. If a fair share is passed on to the buyers of the products, but for whatsoever reason the benefit is not further passed on the subsequent users (the buyers of the buyer) article 101.3 stills of application.

The second condition requires a balancing between the consumers’ welfare resulting from the agreement and the negative effects of the agreement. If an agreement has no negative effects for consumers’ welfare it should not be prohibited.

A fair share does not imply that consumers obtain a share of every efficiency created by the agreement, but that consumers obtain a fair share of the overall benefits [See CJ, Case 26/76, Metro SB, paragraph 48].

II.5.4.4 The 3rd condition: indispensability

The 3rd condition implies that the agreement as a whole and every individual restriction provided thereof is necessary for the attainment of the efficiencies in question. That would be a test of “reasonable” necessity” [See Guidelines on the application of Article 81(3) of the Treaty, 2004/C 101/08, point 73]. In a world of imperfect information a margin of error is considered justified. Consequently, it must be shown that in the absence of the agreement and of every specific restrictive clause of it, the efficiencies in question would not predictably be attained. Thus, the examination of the condition of indispensability implies a two-fold test:

✓ First, it must be established that the agreement as a whole (as such) must be reasonably necessary for achieving the efficiencies in question and

✓ Secondly, the individual restrictions of competition that flow from the agreement must also be reasonably necessary for the attainment of the efficiencies.

That means that a causal link must be established between the restrictions and the efficiencies claimed. In some cases the indispensability verification implies a proportionality test. Thus, the parties to the agreement must show why less restrictive and realistic alternatives would be significantly less efficient.

II.5.4.5 The 4th condition: no elimination of competition

According to this condition, the agreement must not afford the parties the possibility of eliminating competition for a substantial part of the products covered by the agreement. Some clarifications are necessary:

✓ Elimination of competition is not identified to the existence or the creation of a dominant position. Thus, 101.3 may apply even in the case that a dominant position is created as a result of the agreement [GC, Joined Cases T-191/98, T-212/98 and T-214/98, Atlantic Container Line (TACA), paragraph 939 and GC, Case T-395/94, Atlantic Container Line, paragraph 330].

✓ The concept of elimination of competition will depend on the degree of competition existing in the market before the agreement. The more weakened this competition, the slighter is the restriction caused by the agreement that needs to be established in order to consider that competition is eliminated. Furthermore, the more the agreement is restrictive, the more likely is to consider that competition is eliminated. The question will be whether the remaining competition is significant or not.

✓ The condition of “substantial part of the products” presupposes a product and geographic definition of the relevant market of the agreement. The notion of substantial part permits to assess the restriction in case the undertakings offer differentiated products. The more substitutable these products, the more likely is to consider that the agreement eliminates competition for a substantial part of them.

II.5.5 Nullity (article 101.2 TFEU)

Agreements or decisions violating article 101.1 TFEU and not covered by article 101.3 TFEU are according to article 101.2 TFEU automatically void. The nullity sanction applies only to restrictive clauses of an agreement and not the entire agreement if the remainder can be separated from the restrictive clauses. The question of severability is a matter of national contract law, as long as the requirement of EU Law not to give effect to restrictive clauses is respected.

Nonetheless, in Allianz Hungary [CJ, Case C-32/11, paras 11-12], the Court held that vertical agreements concluded in execution of a market sharing cartel were also null and void. These judgement can have far-reaching effects on national contract as it could be considered that sales contracts of the members of a cartel should be also automatically void.

II.6 Article 102 TFEU – Abuse of Dominance

Article 102 TFEU prohibits the abuse of dominant position. Where article 101 TFEU presupposes a concerted action on behalf of at least two independent undertakings, article 102 covers the unilateral conduct of a single undertaking. However, it is worth noting that an abuse can be caught by article 102 TFEU even if it is committed by several undertakings holding a dominant position collectively.

According to a settled case-law, the possession of a dominant position is not prohibited per se [See CJ, Case 322/81, Nederlandsche Banden Industrie Michelin v. Commission,

para 57, CJ, Joined Cases C-395/96 P and C-396/96 P, Compagnie Maritime Belge Transports v. Commission, para 37 and CJ, Case C-52/09, Konkurrenzverket v. TeliaSonera Sverige, para 24]. Is its abuse that it is not permitted. The dominant position can be affirmed only after having define the so-called relevant market. Consequently, in order to conclude of an abuse of dominance a three steps reasoning must be applied: a) defining the relevant market [See CJ, Case 27/76, United Brands and United Brands Continentaal v. Commission, para 10], b) measure the dominance in the so defined relevant market and c) examine whether an abuse of dominance has or not taken place.

II.6.1 Definition of the Relevant Market

Generally, interchangeability is the criterion for defining relevant markets.

Econometricians forward some methods for assessing the relevant market:

✓ Price correlation Analysis→ this method is based on the assumption that prices of products belonging to the same market would present a trend to move in the same direction. If the correlation coefficient is positively high (close to 1) the products would be classified in the same relevant market.

✓ Analysis of Price Elasticities of Demand (SSNP test)→ how demand reacts to an increase of prices of a given product.

✓ Critical Loss Analysis → addresses the SSNP test from a supply side angle. When an increase of prices still being profitable?

✓ Upward pricing pressure (UPP) method → this method tries to observe how price incentives change in differentiated markets if products are sold by one firm (the merged entity) instead of being sold by individual firms.

✓ Event analysis → this method tries to examine the past events repercussions and draw conclusions. An event can be for instance a market entry: if firm A entered the market and reactively firm B lost many clients, but firm C no, we may assume that products of the firms A and B belong to the same relevant market

✓ Price Concentration Analysis → This method makes the correlation between the concentration in the markets and the move of prices. If there is a positive relation between concentration and prices, this is a signal of existence of one relevant antitrust market. If no, this would indicate that the products do not presumably belong to the same market.

✓ Direct evaluation of competitive constraints → is a variant of the previous method focusing not only to the number of market players, but also to the identity of them (e.g. compare the prices applied from firms A and B).

✓ Analysis of Bidding Data → especially applicable to bidding markets (e.g. public procurement)