European Competition Law (IIII)2017

Housekeeping

Objectives

1. Generally examine the responsible institutions incompetition law;

o Appreciate the institutional balance in the Union;o Understand the jurisdiction of the European rules.

2. Evaluate the case law surrounding the competencebalance in competition law.

Reading

The following reading is essential:

Richard Whish, David Bailey, Competition Law (8th Edition), pages 176-182

Bellamy and Child: European Union Law of Competition (7th Edition), Chapter 1 (Market Definition 1.060-1.081)

Alison Jones, Brenda Sufrin, EU Competition Law: Text, Cases, and Materials (6th Edition), Chapter 2

• C-94/04 Federico Cipolla v Rosaria Fazari (Must read)

• C-127/73 Belgische Radio en Televisie v SABAM (Must read)

• C-557/12 KONE AG and others v ÖBB-Infrastruktur AG (Must read)

• C-344/98 Masterfoods Ltd v HB Ice Cream Ltd (Must read)

Lecture IIIIEUROPEAN COMPETENCE

System of competences

Article 2 TFEU

1. When the Treaties confer on the Union exclusivecompetence in a specific area, only the Union may legislateand adopt legally binding acts, the Member States beingable to do so themselves only if so empowered by theUnion or for the implementation of Union acts.

Exclusive competence

Article 3 TFEU

1. The Union shall have exclusive competence in the following areas:

(a) customs union;

(b) the establishing of the competition rules necessary for thefunctioning of the internal market;

(c) monetary policy for the Member States whose currency is the euro;

(d) the conservation of marine biological resources under the commonfisheries policy;

(e) common commercial policy.

Enforcement

• The primary method of enforcement of the EU rules ispublic enforcement by DG Competition and thecompetition authorities of the Member States.

Historically

• Competition rules have long been part of the treaties.

• Competence to enforce the rules was often less clear.

• When Regulation 17 was adopted in 1962, it was decidedthat the Commission should become the centralcompetition authority in the Community.

Regulation 17

Companies were expected to notify agreements which wereliable to infringe Article 101 TFEU to the Commission, asthe Commission was the only authority which could grantexemptions under Article 101(3).

This would allow the Commission to ensure the integrationof the internal market and to create a culture of competitionin the EU.

Institutional balance

In this framework, Member State competition authorities only played asecondary role in the enforcement of EU competition law.

Pursuant to Article 9(3) of Regulation 17, the national competitionauthorities remained competent to apply Articles 101(1) and 102 as longas the Commission had not ‘initiated any procedure’, but in nocircumstances could they apply Article 101(3).

As a result, if a national authority found that an agreement infringedArticle 101(1) and had not been notified to the Commission, it could onlyrule it to be void under Article 101(2) even if it met the criteria forexemption under Article 101(3).

BRT v. SABAM (I), [1974] ECR 51

16. As the prohibitions of Articles [101] (1) and [102] tendby their very nature to produce direct effects in relationsbetween individuals, these Articles create direct rights inrespect of the individuals concerned which the nationalcourts must safeguard.

17. To deny…the national courts' jurisdiction to afford thissafeguard, would mean depriving individuals of rights whichthey hold under the Treaty itself.

Individual Rights

The Court of Justice made it clear that both provisions create direct rights inrespect of the individuals concerned which the national courts must safeguard.Hence, a private action could always be brought in respect of a breach of Article101(1) or 102 in a national court or arbitration tribunal.

The power of the national courts to apply Article 101(1) necessarily included thepower to apply Article 102 (2), and thus to declare void any agreements prohibitedpursuant to Article 10(1).

Article 101(3) was not granted direct effect, and individual exemptions remainedwithin the exclusive jurisdiction of the Commission. (Some exception, seeFonderies Roubaix-Wattrelos v. Société Nouvelle des Fonderies A. Roux &Société des Fonderies JOT, [1976] ECR 111).

Van Bael and Bellis (ch.1)

THE EU

MEMBER STATE

THE EU

MEMBER STATE

Case 14/68 Walt Wilhelm and Others

The Bundeskartellamt found that with other manufacturersof dyestuffs from other Member States as well as from thirdcountries, the applicants raised the price of aniline by 8 %from 16 October 1967.The Commission had on its own initiative commencedproceedings under Articles 9(3) and 3 of Regulation No 17of 31 May 1967, against four of the German undertakingsaffected by the order of the Bundeskartellamt, as well asother aniline manufacturers from the Community and thirdcountries.

Case 14/68 Walt Wilhelm and Others

National authorities may take action against an agreementin accordance with their national law even when anexamination of the position with regard to that agreementfrom the point of view of its compatibility with Communitylaw is pending before the Commission, subject however tothe condition that the application of national law must notprejudice the full and uniform application of Community lawor the effects of measures taken or to be taken toimplement it.

C-344/98 Masterfoods Ltd v HB Ice Cream LtdIn parallel with the Irish court proceedings, Master foods lodgeda complaint with the Commission against HB. Following aninvestigation, the Commission concluded that the exclusivityprovisions in the agreement and HB’s inducement of retailers inIreland to enter into the agreements infringed Articles 101 and102 TFEU (Case Nos IV/34.073, IV/34.395 and IV/35.436 Vanden Bergh Foods Limited ). HB appealed the decision to theGeneral Court.

C-344/98 Masterfoods Ltd v HB Ice Cream Ltd

‘The answer to Question 1 must therefore be that, where anational court is ruling on an agreement or practice, thecompatibility of which with [Articles 101(1) and 102 TFEU] isalready the subject of a Commission decision, it cannot take adecision running counter to that of the Commission, even if thelatter’s decision conflicts with a decision given by a national courtof first instance. If the addressee of the Commission decision has,within the period prescribed in the fifth paragraph of [Article 263TFEU], brought an action for annulment of that decision, it is forthe national court to decide whether to stay proceedings pendingfinal judgment in that action for annulment or in order to refer aquestion to the Court for a preliminary ruling.’ (para 60)

Supremacy of law

• In Costa/Enel and then in Walt Wilhelm as to thecompetition rules, the Court established the clearprinciple that national authorities may not contradictEuropean law irrespective of whether the latter may belaid down in a Treaty provision, in the case law of theCourt of Justice, Community legislation or a Commissiondecision.

Lecture IIII2004 RESTRUCTURING

Modernisation

After an extensive consultation exercise the Commission’sproposal to abolish notification, render Article 101(3) adirectly applicable exception, and decentralise theapplication and enforcement of the competition rules wasaccepted. The Council adopted Regulation 1/2003 on 16December 2002 and it replaced Regulation 17 on 1 May2004. Its adoption was accompanied by a number ofNotices which flesh out the bare bones of the Regulation.(Jones and Sufrin, ch. 13)

Chief Economist

• More economic approach• Economic Advisory Group on Competition Policy

(EAGCP)

• Review of Industrial Organization December 2016,Volume 49, Issue 4, pp 585–611 Recent Developments atDG Competition: 2015/2016

Lecture IIIIREGULATION 1/2003

Regulation 1/2003

Broadly, Regulation 1/2003 deals with two matters.

First, it renders Article 101(3) directly applicable and lays down the basic framework for the Commission, the national competition authorities (NCAs), and the national courts to cooperate in the decentralised system. It effects the shift from ex ante to ex post control.

Secondly, it provides for the powers and procedures of the Commission in the investigation of competition matters.

Duality of competition lawArticle 3 Relationship between Articles 81 and 82 of the Treaty and national competition

laws.

1. Where the competition authorities of the Member States or national courts apply nationalcompetition law to agreements, decisions by associations of undertakings or concertedpractices within the meaning of Article 81(1) of the Treaty which may affect trade betweenMember States within the meaning of that provision, they shall also apply Article 81 of theTreaty to such agreements, decisions or concerted practices. Where the competitionauthorities of the Member States or national courts apply national competition law to anyabuse prohibited by Article 82 of the Treaty, they shall also apply Article 82 of the Treaty.

2. The application of national competition law may not lead to the prohibition of agreements,decisions by associations of undertakings or concerted practices which may affect tradebetween Member States but which do not restrict competition within the meaning of Article81(1) of the Treaty, or which fulfil the conditions of Article 81(3) of the Treaty or which arecovered by a Regulation for the application of Article 81(3) of the Treaty. Member Statesshall not under this Regulation be precluded from adopting and applying on their territorystricter national laws which prohibit or sanction unilateral conduct engaged in byundertakings.

3. Without prejudice to general principles and other provisions of Community law, paragraphs1 and 2 do not apply when the competition authorities and the courts of the Member Statesapply national merger control laws nor do they preclude the application of provisions ofnational law that predominantly pursue an objective different from that pursued by Articles81 and 82 of the Treaty.

Article 5 Reg. 1/2003

Power of the competition authorities of the Member States

The competition authorities of the Member States shall have the power to apply Articles 81and 82 of the Treaty in individual cases. For this purpose, acting on their own initiative or on acomplaint, they may take the following decisions:

- requiring that an infringement be brought to an end,

- ordering interim measures,

- accepting commitments,

- imposing fines, periodic penalty payments or any other penalty provided for in their nationallaw.

Where on the basis of the information in their possession the conditions for prohibition are notmet they may likewise decide that there are no grounds for action on their part.

Scope of Article 5

An interesting question that arises from the parallelcompetence of the Commission and National CompetitionAuthorities is whether the National Authorities can reach afinal decision that Article 101 or 102 TFEU were notinfringed, or whether they are precluded from suchconclusion and can only adopt a decision stating that thatare no grounds for action. In Case C-375/09 Prezes UrzęduOchrony Konkurencji Konsumentow v Tele2 Polska theCourt of Justice supported the latter proposition. (Erazachi– casebook)

Article 6

Article 6 Powers of the national courts National courts shall have the power to apply Articles 81and 82 of the Treaty.

KONE AG and others v BB Infrastruktur AG

A request for a preliminary ruling from the Austrian Court inwhich the Court asked whether Article 101 TFEU may allowany person to claim ‘umbrella damages’ from members of acartel for loss caused by an undertaking not party to thecartel, but which benefited from the protection of theincreased market prices due to the cartel activity and wasable subsequently to raise its own prices above pre-cartellevels. Austrian law categorically excludes such a right to‘umbrella damages’ owing to the fact that, in the absence ofa contractual relationship, the causal link between the lossand the cartel is considered to have been broken.

KONE AG and others v BB Infrastruktur AG

‘The full effectiveness of Article 101 TFEU would be put atrisk if the right of any individual to claim compensation forharm suffered were subjected by national law, categoricallyand regardless of the particular circumstances of the case,to the existence of a direct causal link while excluding thatright because the individual concerned had no contractuallinks with a member of the cartel, but with an undertakingnot party thereto, whose pricing policy, however, is a resultof the cartel that contributed to the distortion of priceformation mechanisms governing competitive markets.’(para 33)

Article 16

Article 16 Uniform application of Community competition law.

1. When national courts rule on agreements, decisions or practices under Article81 or Article 82 of the Treaty which are already the subject of a Commissiondecision, they cannot take decisions running counter to the decision adopted bythe Commission. They must also avoid giving decisions which would conflict witha decision contemplated by the Commission in proceedings it has initiated. To thateffect, the national court may assess whether it is necessary to stay itsproceedings. This obligation is without prejudice to the rights and obligationsunder Article 234 of the Treaty.

2. When competition authorities of the Member States rule on agreements,decisions or practices under Article 81 or Article 82 of the Treaty which arealready the subject of a Commission decision, they cannot take decisions whichwould run counter to the decision adopted by the Commission.

Article 11

3. The competition authorities of the Member States shall, when acting under Article 81 or Article 82 of theTreaty, inform the Commission in writing before or without delay after commencing the first formalinvestigative measure. This information may also be made available to the competition authorities of the otherMember States.

4. No later than 30 days before the adoption of a decision requiring that an infringement be brought to an end,accepting commitments or withdrawing the benefit of a block exemption Regulation, the competitionauthorities of the Member States shall inform the Commission…

5. The competition authorities of the Member States may consult the Commission on any case involving theapplication of Community law

6. The initiation by the Commission of proceedings for the adoption of a decision under Chapter III shallrelieve the competition authorities of the Member States of their competence to apply Articles 81 and 82 of theTreaty. If a competition authority of a Member State is already acting on a case, the Commission shall onlyinitiate proceedings after consulting with that national competition authority.

DG Comp

EU Courts

NCAs

MS Courts

Lecture IIIINCAS

Network of Competition Authorities

Article 5, Regulation 1/2003 sets out the powers of thecompetition authorities of the Member States.Articles 11 and 12, Regulation 1/2003 set out theframework for the cooperation and exchange of informationbetween the Commission and the competition authorities ofthe Member States. The cooperation frame work is furtherelaborated upon in the Commission Notice on Cooperationwithin the Network of Competition Authorities.

Commission Notice on Cooperation within the Network of Competition Authorities

The network formed by the competition authorities shouldensure both an efficient division of work and an effectiveand consistent application of EC competition rules. TheCouncil Regulation together with the joint statement of theCouncil and the Commission on the functioning of theEuropean Competition Network sets out the main principlesof the functioning of the network. This notice presents thedetails of the system.

Shared duties – but supremacy

51. Article 11(6) of the Council Regulation states that the initiation by the Commission ofproceedings for the adoption of a decision under the Council Regulation shall relieve all NCAsof their competence to apply Articles 81 and 82 of the Treaty. This means that once theCommission has opened proceedings, NCAs cannot act under the same legal basis againstthe same agreement(s) or practice(s) by the same undertaking(s) on the same relevantgeographic and product market.

The initiation of proceedings by the Commission is a formal act by which the Commissionindicates its intention to adopt a decision under Chapter III of the Council Regulation. It canoccur at any stage of the investigation of the case by the Commission. The mere fact that theCommission has received a complaint is not in itself sufficient to relieve NCAs of theircompetence.

Two situations can arise. First, where the Commission is the first competition authority toinitiate proceedings in a case for the adoption of a decision under the Council Regulation,national competition authorities may no longer deal with the case. Article 11(6) of the CouncilRegulation provides that once the Commission has initiated proceedings, the NCAs can nolonger start their own procedure with a view to applying Articles 81 and 82 of the Treaty to thesame agreement(s) or practice(s) by the same undertaking(s) on the same relevantgeographic and product market.

DG Comp

EU Courts

NCAsMS Courts

Indv.