European Competition Law is the set of laws and regulations governing market behaviour, particularly agreements and practices that restrict competition and the acquisition and use of market power. Its aim is to encourage competition by having one common harmonized market in the EEA.

EC competition law is based on Article 81 and Article 82 of the EC Treaty, supplemented by Council Regulation 1/2003 and the EC Merger Regulation. UK competition law is based on the Competition Act 1998 and the Enterprise Act 2002 (the Fair Trading Act 1973 has now been repealed in its entirety).

The following are notes compiled in 2007 for revision purposes on Article 81 and Article 82. It might not be complete or accurate and should only be used for educational or reference purposes only.

Article 81

To infringe article 81(1) 3 conditions must be satisfied. There must be:

1)      some form or collusion between undertakings

2)      which may affect trade between member states

3)      which has the object or effect of restricting competition within the common market.

Anything that falls under 81(1) and is not exempted by 81(3) will be void and null according to 81(2)

Collusion between undertakings

Article 81(1) prohibits incompatible with the common market

• all agreements between undertakings, decisions by associations of undertakings and concerted practices

Undertakings

Hofner and elser v macrotron

• an employment office owned and organized by the state was held to be an undertaking when head hunting for clients even though it made no charges

• ECJ said:

  • “the concept of an undertaking, in the context of competition law, covers any entity engaged in an economic activity, regardless of the legal status of the entity or the way it is funded”

The concept of undertaking embraces a company, partnership, sole trader or an association. A trust company authroised to police a cartel was held by the commission to be an undertaking. (Italian cast glass)

Aeroports de paris v commission

• ECJ held that ADP operated under official powers and occupied government land did not prevent the application of article 82.

Christian Poucet v Assurances Generals de france (AGP)

• ECJ held that a French regional office administering a compulsory social security scheme was not an undertaking because the contributions were based on social solidarity and proportional to income.

• They bore no relationship risk and could not have been carried on the private sector.

FENIN

• CFI confirmed the commission’s rejection of a complaint on the ground that hospitals buying from the private sectors were not undertakings when acting in the exercise of public activities even if they bought large quantities in favourable terms and enjoyed substantial market power.

• They did not resell what they bought but used it to perform a public function.

• That judgment is contrary to the one in UK Better Care case

  • CFI stated in principle, the act of purchasing itself is not sufficient to turn a public body into an undertaking when the product is not acquired for an economic activity.

Bodson Case

• ECJ ruled that concessions granted by communes acting as public authorities were not agreements between undertakings

• The local authorities were not carrying on an economic activity but an administrative activity.

Custom agents in Italy are classified by Italian law as liberal professions, but are still undertakings. They provide services for pay and accept commercial risks. Their activities have commercial character.

Viho v Commission

• the ECJ confirmed that the corporate group fell outside of art 81(1)

• Export bans imposed on a subsidiary did not infringe article 81 although those imposed on dealers independent of viho had been held to do so and attracted a fine.

• The case law is on wholly owned subsidiaries and partly owned companies has not been worked out yet.

Commercial Solvents

• the conduct of a 51% subsidiary was attributed to its parent when the subsidiary had followed the policy decided by the parent.

• A fine was imposed jointly and severally on the Italian subsidiary and its us parent

Where a subsidiary disobeyed instructions not to discourage imports, the parent had done nothing wrong and that the ECJ decided that it was the subsidiary that should be fined. (BMW Belgium v Commission)

Irish Sugar

• held over 51% of shares in SDL and had the power to adopt a common policy.

• The commission treated the companies as jointly dominant.

Should one infer that a parent and the affiliate more than half owned that does not control day to day is not a single undertaking?

• answer is, sorta… as long as there’s an economic link between them it can arguably be one undertaking

A state owned company that is privatized and no longer subject to control by its former parent, agreements between them may become subject to art 81.

Where a subsidiary sold by a company in the private sector, a geographic restriction of competition between it and another member of the former group of companies may start to infringe art 81(1) (Quantel International)

Agreements

ACF Chemiefarma v Commission

• a contract fixing price and quotas for supplying quinine to much of the world expressly excluded the common market but the parties entered into a written ‘gentleman’s agreement’ enforceable by arbitration, to extend its application to the common market

• the implementing of oral and written arrangements were held to amount to agreements within art 81(1) even after they were discarded since they intended the prices fixed previously to continue in the common market

BP Kemi

• an agreement that had never been signed was held by the commission to be part of an ‘agreement’ since it had been implemented by the parties

• the commission held that the 2 separate contracts, one signed and the other implemented, each dependent on the other, formed part of the same agreement

The exact term ‘agreement’ is not that important because the category of ‘concerted practices’ catches less formal agreements.

Cartel arrangements may involve multiple meetings over a period. The courts have confirmed in Anic Participazioni that an undertaking which attended only some of the meeting, and did not abide by the prices fixed, may be fined.

• the commission infers an agreement and/or concerted practice from conduct and might do so from the exercise of an option

Polypropylene

• the CFI approved the commission’s finding of a single infringement consisting of an agreement and concerted practices where it would have been artificial to split a single course of conduct to raise prices collusively into separate agreements and concerted practices.

Enichem v Commission

• in the context of an international cartel, there is no need to establish anti competitive effects as the object was to restrict competition

  • ‘The liability of a particular undertaking ins respect of the infringement is properly established where it participated in those meetings with knowledge of their aim, even if it did not proceed to implement an of the measures agreed…’

The commission and courts have extended the concept of collusion:

AEG Telefunken v Commission

• it was argued that even if AEG had consistently refused to supply dealers operating on narrow margins in order to maintain resale prices for the legitimate trade, it would be unilateral conduct on its part

  • ‘In the case of the admission of a distributor approval is based on the acceptance, tacit or express, by the contracting parties of the policy pursued by AEG which requires the exclusion from the network of distributors who are qualified for admission but are not prepared to adhere to that policy’

Unilateral conduct in the context of a long term contract with selected dealers

In cases AEG and FORD, the ECJ said that in the absence of any express export ban, treated unilateral action as collusive in view of the underlying selective distribution agreement between the supplied and approved dealer.

• the dealers where required to promote its products by providing technical services and the fact that the dealers had implanted the conduct required

Tenuous evidence on which collusion is sometimes found

Italian Flat Glass

• the commission’s decision were quashed in part and the fines reduced or quashed when the CFI, of its own motion, read several hundred handwritten notes in Italian

• When transcribed by the commission as part of its evidence, a significant part of one document that favoured one of the parties had not been included and that not all the conduct alleged had been established.

Decisions by associations of undertakings

Vereeniging v Commission

• ECJ held that the words included recommendations by a trade association to its members even if they are not binding

• Such recommendations have been treated by ECJ as agreements between the members who implemented them after attending general meetings where they were discussed.

  • Belasco

    • ECJ confirmed the Commission’s decision fining the members and not just the association

Compagnie Maritime Belge v Commission

• the commission was entitled to address the statement of objections and decision to the members of a shipping conference that had no legal personality.

• The fines were based on the turnover of each member

FRUBO

• 2 trade associations made an agreement which was not enforceable except by each association requiring its members to comply

• ECJ held that there was an agreement between undertakings

Concerted Practices

Economic Considerations

• hardcore cartels are anti competitive and contrary to the public interest because prices are likely to be higher than they would be under free competition

The question is whether parallel conduct that is not collusive such as reacting to price changes but has much the same effect as price fixing agreement infringes article 81(1)?

• market behaviour, adopted in the knowledge and hope that competitors will follow it, a concerted practice if, in fact competitors do follow?

• Enabling competitors to learn of a price rise plus the hope that they would follow or maintain it might be treated as an offer to collude accepted when competitors follow

  • However this is hard to do considering markets do go up and down.

  • Most reliable way is to wait for a complaint or something that’s really obvious

Dyestuffs Case

• ECJ observed that Article 81 distinguishes concerted practices from agreements and decisions in order to bring within the competition rules

  • ‘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’

• In this case and in Sugar Cartel, the ecj said that for the few firms in a concentrated market to take account of each other’s market behaviour does not amount to a concerted practice.

• The  ECJ suggested that ‘co ordinated course of action’ might be broader than collusion.

  • Facilitating devices, acting in a way that makes it easier for suppliers or buyers not to compete, for instance by giving considerable notice of price increases in a trade journal might amount to a concerted practice if competitors followed the rise.

• The commission had found  that the price increases on 3 occassions were ‘concerted’ partly because the producers had met and discussed price and partly because of various other items of circumstantial evidence of collusion.

  • On the first occasion, 6 of 10 firms were fined and which supplied about 85% of the dyestuffs in the common market had sent notices of increases to their subsidiaries and dealers.

• The ECJ pointed out that the 3 increases showed progressive coordination which consisted mainly of the leader announcing its intended price rise for a particular country further in advance.

• The final increase was announced 3 months in advance at a meeting of the producers. The others followed.

Polypropylene

• commission had found ample documentary evidence that 15 companies had worked out a complex scheme of arrangements with the purpose of setting and implementing target prices and quotas

• clear evidence of collusion but there were hardly any effects on the market.

• The CFI held that the existence of an intent to concert is sufficient to establish a concerted practice even if there are no actual effects.

Cartonboard case

• the producers who without objection attended meetings which they knew were intended to reduce price competition and impose quotas were liable to fines even if they said nothing, missed meetings or cheated in the cartel

Where there is another reasonable explanation for parallel conduct, collusion will not be inferred as in SACEM.

SACEM

• SACEM replied that it would be difficult for each of the copyright societies to grant such licences abroad as they would have to negotiatie them and check what was being played.

• Since there was another explanation of parallel conduct, the ECJ ruled that it was not collusive.

Agreements to exchange information

• agreements between competitors to exchange detailed information about price or output changes may well be treated as having the object of restricting competition

Which may affect trade between member states

The condition that trade member states be affected is easily satisfied.

• trade covers all economic activities relating to goods or services, even the right of a trader in one member state to set up business in another.

Market integration

The condition between trade between member states may be affected has been construed in the light of the need to establish and maintain a single market: export boosters distort trade as much as import deterrents.

Consten and Grundig

• what is important is whether the agreement is capable of constituting a threat, either direct or indirect, actual or potential, to freedom of trade between the MS in a manner which might harm the attainment of the objectives of a single market between states.

• The fact that an agreement encourages an increase, even a large one, in the volume of trade between states is not sufficient to exclude the possibility that the agreement may ‘affect’ such trade in the above mentioned manner.

• The contract between consten and grundig, on the one hand by preventing undertakings other than consten from importing grundig products into france and on the other hand by prohibiting consten from re exporting those products to other countries of the common market, indisputably affects trade between member states

There is no need to prove an actual effect on trade between states: a potential effect is enough.

The goods subject to an agreement may not move between MS but if there is or may be trade between MS in the products of which they form part, the condition is fulfilled

• BNIC v Clair

  • An agreement relating to a cognac was held to infringe art 1, although little was exported, since the cognac made from them was sold throughout the community.

It is not necessary to show that the effect is adverse.

• Cimbel
  

  • The agreement was intended to increase exports from Belgium , but it discriminated along state boundaries and infringed art 81(1)
    

• Consten and Grundig
  

  • Stress was laid on the isolation of the French market
    

Condition often fulfilled even if agreement is confined to a single member state

An agreement confined to activities in a single member state may infringe art 81(1).

• Vereeniging van cementhandelaren v Commission
  

  • Dutch cement dealers were members recommended the prices and its in the Nederland ’s, and since it did not export, it did not ‘affect member states.’
    

  • ECJ: an agreement extending over the whole of the territory of a member state by very nature has the effect of reinforcing the compartementalization of markets on a national basis, thereby holding up the economic inter penetration which the treaty is designed to bring about and protecting domestic production.
    

  • ECJ is concerned that the common market should be treated as a unit and price fixing throughout the Netherlands affects the pattern of trade by creating a distortion along the dutch border.
    

  • Belasco v Commission  confirms this too
    

The comparable provision in art 82 is similarly construed

Commercial solvents v commission

• when an undertaking in a dominant position within the common market abuses its position in such a was that a competitor in the common market is likely to be eliminated, it does not matter whether the conduct relates to the latter’s exports or its trade within the common market.

• Once it has been established that this elimination will have repercussions on the competitive structure within the common market

Have as their object or effect the prevention, restriction or distortion of competition within the common market

To be caught, the arrangements must have ‘as their object ‘or effect’ the prohibited effects on competition.

• consten and grundig
  

  • ECJ held that there is no need to examine the effects of an agreement if its object is to restrict competition.

• Delimitis v Henninger Brau

  • A tenant agreed to acquire from its landlord all the beer to be consumed in its bar

  • ECJ pointed to the benefits to both parties and concluded that the restriction did not have the ‘object of restricting competition’

  • It required the national court to make a full analysis of the market to appraise its effects

    • Is it easy to enter at retail level, and many other factors.

  • If analysis shows that there is no denial of access to the market, an agreement cannot be found to restrict competition

    • Conversely, if access is inhibited it must then be assessed whether the agreement in question contributes appreciably to that situation.

Restrictions by object

• Consten and grundig
  

  • Absolute territorial protection has the object of restricting competition and there is no need to make a market analysis
    

  • Same has been held of price fixing agreements
    

    • All that needs to be established is collusion and that the agreement may affect trade between MS appreciably
      

• Restrictions by object’ are often referred to as hard core constraints
  

• Societe la technique miniere v maschienbau ulm
  

  • An exclusive distriubtion was infringed and the defence was that the exclusive provisions infringed art 81.
    

  • Unlike Consten and grundig there was no export bans
    

  • ECJ said that if an agreement, considered in its economic and legal context, does not have the object of restricting competiton:
    

    • The agreement should be considered and for it to be caught b the art, it is necessary to find that competition has in fact been prevented or restricted or distorted to an appreciable extent.
      

Ancillary restraints

Nungesser v Commission

• ECJ held that an open exclusive licence of plant breeders’ rights, one not granting absolute territorial protection, did not in itself infringe article 81 (1) because it was needed to induce he investment of both parties

Coditel (II)

• in light of the practice of the industry, exclusive licenses of performing rights did not infringe, even in the circumstances they conferred absolute territorial protection

Pronuptia

• many restrictions on conduct do not infringe art 81 (1) where they are necessary to make a distribution network viable

‘appreciable effects’

• ECJ implied that in order to infringe art 81, the restriction of competition and the possible effect on trade between MS should be appreciable

  • Volk v Veraecke

    • Volk made less that 1% of the market and even granting absolute terriotiral protection to its exclusive distributor in different MS, it would not infringe art 81

• The de minimis rule (notice)

  • Under 10% of relevant market (competitors) or under 15% of relevant market (non competitors)

Nullity

• art 81 (2) says that any agreements or decisions prohibited by 81 (1) shall be automatically void

  • It is not the whole of an agreement that is rendered void.

  • Consten and grundig

    • ECJ quashed the decision for not specifying how much of the agreement was contrary to art 81

    • It is up to the national law

Assessment criteria for article 81 (3)

Cooperation agreements may be exempted provided that the following conditions are met:

Economic benefits

• Economic benefits, such as improvements in the production or distribution of products or the promotion of technical or economic progress, may outweigh restrictive effects on competition. The parties must demonstrate that the efficiency gains are likely to be caused by the cooperation and cannot be obtained by less restrictive means.

Fair share for consumers

• The economic benefits must favour not only the parties to the agreement but also consumers.

Indispensability

• If there are less restrictive ways of achieving similar benefits, the claimed efficiency gains cannot be used to justify restrictions of competition.

No elimination of competition

• The criterion of "no elimination of competition" for a substantial part of the products in question is related to the concept of dominance. Where a dominant position exists, a horizontal agreement which produces anti-competitive effects cannot be exempted.

Article 82

Dominant position

Continental Can

• the concept of a dominant position is when they have the power to behave independently, which puts them in a position to act without taking into account their competitors, purchasers or suppliers

• it happens because of their share of market, share of market combined with technical knowledge, raw materials or capital
  

• have to determine prices or to control production or distribution for a significant part of the products in question
  

United Brands

• a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, costumers and ultimately consumers

Market Definition

In Continental Can, it defined two tests:

• First, it has to define the relevant market and give reasons for its selection

  • The product or service

    • SSNIP test

      • Raise prices by 5/10% and if so many customers would switch to other products that the original price rise would be unprofitable, then it’s not in the market.

    • Relevant market is defined by substitutes

    • United Brands

      • Narrowly defined it as bananas only as other products are not substitutable

  • The geographic area

    • The geographic market must be wide enough to include ‘a substantial part of the common market’

    • Michelin I

      • Fined the dutch subsidiary just in Netherlands

      • ECJ said since:

        • I) its activities were concentrated in the Netherlands

        • Its main competitors also carried on activities there through local subsidiaries

        • The alleged abuse related to discounts given to dealers there

        • Dealers there obtained their supplies only from suppliers operating there

    • Can use SSNIP here to if they buy from elsewhere

• Assess the firm’s dominance therein

  • Barriers to entry is everywhere

  • Vitamins
    

    • A finding of dominance solely on the basis of market % in the 80s
      

  • Akzo
    

    • A stable market share of 50% or more raised a rebuttable presumption of dominance, although it added that the commission was right to consider other factors.
      

Joint Dominance

Joint dominance is a legal concept with no direct equivalent in economics. Broadly speaking, joint dominance can be thought to occur when a small number of large firms in a market are able to coordinate their actions and maintain prices above the competitive level. The coordination need not be explicit (tacit collusion). Successful co ordination requires not only being able to reach agreement on prices or output levels and to monitor them but also that some punishment strategy is available to deal with ‘cheating’.

There is no agreed test for JD. The commission view the following factors are typically thought to facilitate coordination

a)      high concentration levels

b)      stable and symmetric market shares

c)      similarity of cost structures

d)     stagnant demand

e)      inelastic demand

f)       homogenous products

g)      low levels of technological change

Collective Dominance

In the EU competition policy newsletter, it states ‘the question to assess in cases concerned with collective dominance is likelihood or tacit co ordination in the market’

a)      It is sufficient for oligopolists to act, independently, in ways which reduce competition

b)      Collective dominance is an important instrument in merger control.

Article 82 refers to an abuse ‘by one or more undertakings’ of a dominant position (Italian flat glass)

• The need to establish economic links would make it difficult for the commission to use the concept of joint dominance where it is most needed where there are no links of ownership, contract or concerted practices but each of a very small number of suppliers realizes.
  

France v Commission

• ECJ confirmed that there might be a joint dominance when two firms, merged undertaking and one independent of it, became  single entity in view of the links between them.

• There was a strong burden of proof to show that the merging firms would act as a single entity with its competitors

Gencor

• the commission condemned a merger that would lead immediately to the merging firms selling 30/35% of the world of the platinum and precious metals.

• On appeal CFI confirmed the commission’s finding of collective dominance when the two remaining firms were likely to act as a single entity, whether or not there were links between them.

Substantial part of the common market

Art 82 prohibits an abuse of a dominant position within a substantial part of the common market.

• even if dominance is established in a global market, abuse only within the common market is forbidden

Abuse in a linked market

• commission condemned an abuse in a market over which tetra pak was not found to be dominant when the market was linked to one over which it was found to be dominant

• Tetrapak was found to be dominant over the supply of cartons for milk and juice and machinery

• It also supplied 55% of the cartons for other milk and juice and the machines but was not found to be dominant even though AKZO said it is presumed dominance at 50%+.

Article 82 give 4 examples of abusive exploitation

• directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions

• limiting production, markets or technical development to the prejudice of consumers

• applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage

• making 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

Vitamins (Roche)

• the concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which influences the structure of a market where the degree of competition is weakened…

Reduction of competition prohibited by art 82

Continental can  , ECJ said that conduct leading to substantial reduction of competition might infringe art 82.

Discrimination

Single branding to exclude competitors of the dominant firm

The extreme example of a single branding is agreeing to obtain a product only from a single supplier or to handle only in a single brand.

Hoffman la roche (vitamin) v Commission

• obligations to buy a firm’s total requirements or a large part of them and loyalty discounts foreclose competition

  • they make it harder for smaller makers of vitamins, who cannot supply a large percentage of a large customer’s requirements, to compete

• they come within the examples of abuse listed in art 82

  • an undertaking that is dominant on a market and ties purchases (even at their request) by an obligation or promise to obtain all or most of their requirements exclusively from the undertaking is abuse of dominant position.

  • They are applying dissimilar conditions to equivalent transactions… etc.

• ECJ distinguished quantity discounts, which were legal, from loyalty rebates which are not.

Michelin II

• A system of non individualized, linear volume rebates offered by Michelin on the French Market.

  • As an extra bracket of discount was reached, the higher discount was applied to all the dealer’s sales over the period, including those made months before.

• the CFI denied that all loyalty discount schemes with a reference period exceeding 3 months were abusive but added that the longer the period of reference, the more the scheme was likely to foreclose.

• “For the purposes of establishing an infringement of Article 82 EC, it is sufficient to show that the abusive conduct of the undertaking in a dominant positin tends to restrict competition or in other words, the conduct is capable of having that effect”

Van den bergh foods

• supplier dominant in the manufacture and supply of ice cream, supplied small retailers with freezer cabinets free of charge but required them to be used only for its brand of ice creams

• at first allowed (comfort letters) then revoked when they didn’t comply and let them use the fridge or buy from others

British Airways v Commission

• the commission condemned another system of discounts where the incentives increased exponentially if a travel agent increased it sales over those in an earlier period because the additional bonus would apply not just to additional sales but to all sales.

  • “it is sufficient to demonstrate that the abusive conduct of the undertaking in a dominant position tends to restrict competition, or  that the conduct is capable of having or likely to have, such an effect”

Discrimination against competitors downstream

A firm dominant in the upstream market, A, competes with its customers downstream in market B.

Irish Sugar

• dominant supplier of industrial sugar gave a discount to customers who did not compete with it downstream in selling retail sugar but did not give the discount to competitors in the retail market

Discrimination by firms enjoying special or exclusive right

Portuguese airports

• accepted that quantity discounts might be acceptable but

  • “as a result of the thresholds of the various discount bands, and the levels of discounts are enjoyed by only some trading parties, giving them an economic advantage which is not justified by the volume of business they bring or by any economies of scale they allow the supplier to make compared with their competitors a system of quantity discounts leads to the application of dissimilar conditions to equivalent transactions”

• Court added that only 2 Portuguese carriers could benefit from the discounts and concluded that they were discriminatory and infringed article 82.

Even though in Hoffman la roche  and in Michelin II  it suggests that loyalty discounts are a per se offence, some judgments and decisions have said that where exclusive or near exclusive supply has neither an actual or potential effect on the market, it is not abusive. (Virgin/BA case)

Tying

Extending market power to another market

Microsoft Corporation

• the commission used  a wide definition of tying

• commission found that it had abused the dominant position by selling its pcs with a streaming media player already built in it

  • this closed other markers of streaming media players, which are different products from the operating system

• Commission not consider the efficiencies alleged by Microsoft

Compatible consumables

Commission accepted that it is not abusive to preserve the reputation of complex machines by ensuring that it used only with compatible consumables.

• ties to ensure a technically satisfactory exploitation of licensed technology are not contrary to Article 81 (1) (Exemption from TTBER)

Hilti

• the commission condemned unilateral tying under article 82

• it alleged that the nail gun, the nails and the cartridges that enabled them to be inserted easily were in 3 distinct markets and that they have extended its dominance over the gun to the nails and cartridges.

Telemarketing

• after hilti’s decision the ECJ gave a ruling on telemarketing
  

• CLT stopped accepting spot advertisements that indicated  phone # to be used by the public to obtain further info, unless the answering service being used given for Belgium was that of its own subsidiary

• CLT’s alleged conduct can be analyzed as a tie.

Commercial Solvents

• an unjustified refusal by a dominant firm to supply raw materials to a former competitor down stream in order to reserve for itself the market for a final product may infringe Art 82.

Tetra Pak II

• Commission found that tetra pak was dominant over for many different types of cartons and one type they’re not dominant in

• They required customers to who it supplied machines to use only tetra pak cartons and to obtain them from the tetra pak subsidiary within the MS

Refusal to deal

Commercial Solvents

• they enjoyed a dominant position in the common market and they are the only producer in the world to make something important

• refused supply to competitor in the common market

• infringed, forced them to supply

United Brands

• united brands reduced supplies to a distributor

  • the distributor selling competitors product and UB say they are selling fewer and fewer of theirs

• ECJ considered that UB’s conduct had interfered seriously with the independence of small and medium sized firms. It would discourage new entry and so on.

Obligation to license

Volvo

• independent repairers wanted to import from Italy spare body parts for Volvo cars but Volvo held a registered design in the UK and was not prepared to grant a license for royalty

• It seems that the proprietor of an exclusive right who is held to enjoy a dominant position may be required either to license third parties or to supply them with the protected product on terms that are not ‘unfair’… whatever that means.

Magill

• 3 television stations transmitting programmes

• Magill started to publish a comprehensive guide to the 3 stations, all 3 sued it

• Commission adopted a decision that this amounted to an abuse of a dominant position and required each to grant magill a copyright licence.

Bronner

• the duty to supply under the community law is often referred to by the courts as the essential facilities doctrine. Jacbos said it should be as narrowly construed as possible. He said:

  • First, an obligation to supply even when it is possible for 2 undertakings to use a facility, reduces the incentive to make the original investment

  • Secondly, it reduces the incentive to duplicate when this is practicable

  • Thirdly, since the holder does not want to grant access, someone will have to establish the amount of compensation.

• Only use it when there is a serious bottleneck and no competition downstream that there should be a duty to supply.

• Bronner wanted mediaprint’s home delivery service for its paper

  • ECJ held it is not enough to show that use of the facility would be desirable, it must be necessary

  • They can sell it in many ways and even though home delivery is desirable, it is not necessary.

Predatory Pricing

Pricing is treated as predatory only prices that are very low. They have mostly accepted the Areeda/Turner test of predation which is: sales below average variable cost are usually predatory.

• Average variable cost is the average cost of taking on a new customer.

Concrete roofing tiles

• they did not sell at below average variable cost

• its market was local and it reduced prices locally whenever a new firm started to supply.

• Even its most discounted areas, it is not selling below AVC

• The commission still concluded that there was still predation because it was selective price cutting jut where a new competitor entered the market with an intent to exclude and discourage others.

Akzo

• condemned predatory pricing largely on the basis of internal memoranda and threats by akzo to deter a smaller firm

In cyclical industries, it is normal to sell at below average total costs during the downturn of business cycle and recoup during the upturn.

Tetra pak II

• commission followed the statement that prices below average variable costs are predatory without taking into account the reasons for the rule

Unfair competition

Unfair prices

United Brands

• the commission found that UB prices for certain countries were excessive on 3 grounds:

  • exceeded prices in different countries

  • they were 20-40% higher than unbranded bananas and only about half of this difference could be justified by differences in quality and advertising

  • prices for the bananas were higher than for other brands

Integration of the common market

United Brands

• their price discrimination enabled them to be dominant to maximize its profits by charging what each geographic market will bear.

• An example of the unfair exploitative prices which article 82 was originally intended to control.

Article 82 also has to affect trade between MS

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