Part III
Substantive Law

17. Competition Law I: Private Undertakings  

Introduction

Competitive markets are markets in which economic rivalry enhances efficiency. Market ‘forces’ determine the winners and losers of this rivalry, and competition will – ultimately – force inefficient losers out of the market.

Who, however, forces the winner(s) to act efficiently? By the end of the nineteenth century, this question was first raised in the United States. After a period of intense competition ‘the winning firms were seeking instruments to assure themselves of an easier life’; and they started to use – among other things – the common law ‘trust’ to coordinate their behaviour within the market. To counter the anticompetitive effects of these trusts, the US legislator adopted the first competition law of the modern world: the Sherman Antitrust Act (1890). It attacked the two cardinal sins within all competition law: anticompetitive agreements, and monopolistic markets. The meaning of what ‘competition’ is has nonetheless remained controversial; and two basic ‘schools’ have here traditionally ‘competed’ with each other. Following the ‘Harvard School’, competition law is to prevent harm to consumers (exploitative
offences) as well as harm to competitors (exclusionary offences), whereas the ‘Chicago School’ sees the enhancement of ‘consumer welfare’ as the sole objective of competition law.

The US experience has significantly shaped the competition law of the European Union; yet the inclusion of a EU Treaty chapter on competition law was originally rooted not so much in competition concerns as such. It was rather the ‘general agreement that the elimination of tariff barriers would not achieve its objectives if private agreements of economically powerful firms were permitted to be used to manipulate the flow of trade’. The primary function of EU competition law was therefore originally seen in the removal of private party actions that would
tend to restore the national divisions in trade between Member States [and] might be such as to frustrate the most fundamental objectives of the [Union]. The Treaty, whose preamble and content aim at abolishing the barriers between States, and which in several provisions gives evidence of a stern attitude with regard to their reappearance, could not allow undertakings to reconstruct such barriers.EU competition law was thus – at first – primarily conceived as a complement to the internal market. This also explains the position of the competition provisions within the EU Treaties. They are found in Chapter 1 of Title VII of the TFEU that deals principally with internal market matters. The chapter is divided into two sections – one dealing with classic competition law, that is: ‘[r]ules applying to undertakings’; the other with public interferences in the market through ‘[a]ids granted by States’. Table 17.1 provides an overview of the various competition rules within the EU Treaties. Both sections contain one or two (directly effective) prohibitions, as well as a Union competence for the adoption of Union secondary law. The legislative competence(s) have been used to some extent, yet EU competition law is equally governed by a wide range of soft-law instruments adopted by the executive.

This chapter concentrates on private undertakings. The relevant Treaty section here is built upon three pillars. The first pillar deals with anticompetitive cartels and can be found in Article 101. The second pillar concerns situations where a dominant undertaking abuses its market power and is dealt with in Article 102. The third pillar is unfortunately invisible, for when the Treaties were concluded, they did not mention the control of mergers. This constitutional gap has never been closed by subsequent Treaty amendments; yet it has received a legislative filling in the form of the EU Merger Regulation (EUMR). Let us discuss, step by step, these three pillars of ‘private’ competition law.

Cartels I: Jurisdictional Aspects

  1. The Concept of ‘Undertaking’
  2. The ‘Single Economic Unit’ Doctrine
  3. Forms of Collusion: Agreements and Beyond
    1. Agreements I: Horizontal and Vertical Agreements
    2. Agreements II: ‘Tacit Acquiescence’ versus ‘Unilateral Conduct’
    3. Concerted Practices and Parallel Conduct
  4. (Potential) Effect on Trade between Member States

Cartels II: Substantive Aspects

  1. Restrictions of Competition: Anticompetitive Object or Effect
    1. Two Dimensions; Inter-brand and Intra-brand Competition
    2. Restrictions by Object: European ‘per se Rules’
    3. Restrictions by Effect: A European ‘Rule of Reason’?
    4. Non-appreciable Restrictions: The de minimis Rule
  2. Article 101(3): Exemptions through Pro-competitive Effects
    1. Direct Exemptions under Article 101(3)
    2. Exemptions by Category: Block Exemption Regulations
  3. In Particular: (Horizontal) Cooperation Agreements
  4. In Particular: (Vertical) Distribution Agreements
    1. Exclusive and Selective Distribution Agreements
    2. ‘Vertical’ Block Exemption Regulation

Dominant Undertaking(s): Market Abuse

  1. The ‘Market’: Product and Geographic Dimensions
  2. Market Dominance
    1. General Considerations
    2. Collective Dominance
  3. Abuse of Market Dominance
    1. Article 102[2](a) and ‘Predatory Pricing’
    2. Article 102[2](b) and ‘Refusal to Supply’
    3. Article 102[2](c) and ‘Discretionary Pricing’
    4. Article 102[2](d) and ‘Tying or Bundling’

EU Merger Control

  1. Judicial Origins: Merger Control ‘by Other Means’
  2. Legislative Foundations: The EU Merger Regulation
    1. Jurisdictional Scope: The ‘Union’ Dimension
    2. Substantive Compatibility: Dominance and SIEC Tests
    3. Merger Defences: Objective Justifications?
    4. National Derogations: Public Policy Justifications

Footnotes

  1. G. Amato, Antitrust and the Bounds of Power: The Dilemma of Liberal Democracy in the History of the Market (Hart, 1997), 8. 
  2. The Act was named after Senator John Sherman, who proposed it. Section 1 here states: ‘Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal[.]’ And section 2, by contrast, states: ‘Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony[.]’ 
  3. For a presentation of the two schools, see G. Monti, EC Competition Law (Cambridge University Press, 2007), 57–68. 
  4. On the direct influence of US law and its indirect influence via German law, see D. Gerber, Law and Competition in Twentieth-century Europe: Protecting Prometheus (Oxford University Press, 2001). 
  5. Ibid., 343. 
  6. Case 56 and 58/64, Consten and Grundig v. Commission [1964] ECR 299 at 340. 
  7. This link between the internal market and EU competition law continues to be textually anchored in the Treaties. According to Art. 3(3) TEU (emphasis added), ‘[t]he Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, [and] a highly competitive social market economy, aiming at full employment and social progress’. The meaning of the provision is clarified in Protocol No. 27 On the Internal Market and Competition, according to which ‘the internal market as set out in Art. 3 of the Treaty on European Union includes a system ensuring that competition is not distorted’ (emphasis added). And within the Treaty on the Functioning of the European Union, Art. 3(1)(b) grants the Union an exclusive competence for ‘the establishing of the competition rules necessary for the functioning of the internal market’ (emphasis added).