Competition Law Notes - European Community institutions

• Treaty of Rome (1957) now Treaty establishing the European Community
• Treaty of European Economic Area (1991) and EEA Agreement (1994)

-aim to strengthen relationship between the EU and European Free Trade Association (EFTA) (Norway, Iceland, Liechtenstein)

-contains competition provisions based on the EC treaty and ECMR

• EC Treaty

Article 2  Integration

Article3(1)(g) refers to ‘a system ensuring that competition in the internal market is not distorted’

• Article 81

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which:

(a) directly or indirectly fix purchase or selling prices or any other trading conditions;

(b) limit or control production, markets, technical development, or investment;

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

• Article 81 Cont.

1. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
2. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

- any agreement or category of agreements between undertakings,

- any decision or category of decisions by associations of undertakings,

- any concerted practice or category of concerted practices,

• Article 81 (3) cont.

which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:

(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

• Article 82

Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.

Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

(d) 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.

• EC Treaty

Articles 81-86 rules on undertakings

Articles 87-89 state aid

Mergers:  ECMR Formally Regulation 4064/89 now replaced by Regulation 139/2004

• The Community Institutions

The European Parliament

Standing Committee on Economic and Monetary Matters and the Economic and Social Committee ECOSOC are consulted on competition policy matters

Council of the European Union (referred to as the Council of Ministers)

Main legislative body of EC

European Commission

• European Commission
• Main enforcement role in competition policy, investigations, adopts decisions, fines, imposes injunctions, adopts block exemptions
• DGComp for Competition (formally DGIV)
• Competition Commissioner is Neelie Kroes
• Competition DG is Philip Lowe
• Chief Competition Economist

Enforcement by the Commission

In 1962 the Council adopted Regulation 17 implementing Articles 85 and 86 (as they then were)

• The EU Courts

Court of First Instance

The European Court of Justice

Court of appeal from CFI decisions on points of law

Points of law referred to it by national courts under Article 234

ECJ is assisted by an Advocate General, who delivers an opinion on each case that comes before it

• National Courts
• Article 81(1) and 82 Direct Effect in national states – breach may give rise to tort actions
• Co-existence of national Competition rules
• Regulation 1/2003 now replaces Reg 17
• Notice on Co-operation between National Courts and the Commission 1997

• UK Competition Law

Old provisions

• Fair Trading Act 1973 (competition provisions)
• Restrictive Trade Practices Act 1976
• Resale Prices Act 1976
• Competition Act 1980

• UK Competition Law

UK Competition Act 1998 – chap I (based on Art 81) and chap II (Art 82)

Enterprise Act 2002 – cartels (leniency and cartel offence; Part 6) and mergers (Part 3) and Market-wide investigations (Part 4)

• Authorities & Courts
• Secretary of State for Business, Enterprise and Regulatory Reform
• Office of Fair Trading
• Competition Commission (referrals on mergers and decision on market investigations) formally Monopolies and Mergers Commission
• Concurrent jurisdiction with utility regulators: OFWAT, OFCOM, OFGEM (gas, electricity), ORR (Rail Regulation)
• Competition Appeals Tribunal (CAT)
• High Court – issues warrants to enter premises
• Criminal Court – cartel offence, destroying documents, obstruct investigations

EC Competition Law and National Competition Laws

• Domestic law modelled on EC Competition law
• Community law takes precedence over national law
• Members states require that domestic law should be interpreted consistently with EC rules.
• The Commission shares competence to apply Articles 81 and 82 with national competition authorities and national courts
• OFT and sector regulators has been designated as NCAs

• Modernisation Regulation, Recital 8

Where national competition law applied also necessary to apply Article 81 or 82

If an agreement is not prohibited under EC competition law, Article 81, it should not be possible for an NCA or national court to apply stricter national competition law to it

Does not prevent Member States from adopting and applying on their territory stricter national competition laws than that which applies to unilateral conduct under Article 82  (e.g. regulation of firm as a result of market investigation or sector-specific regulation)

Recital 9: Protection of other legitimate interests

Member states can apply national legislation that protects legitimate interests other than the protection of competition as long as compatible with the general principles of Community law

i.e. public interest in media ownership, national security

Other provisions

Article 10 EC Treaty requires Member States to take all appropriate measures to ensure fulfilment of the obligations arising out of the Treaty. Abstain from any measure which would could jeopardise the attainment of the objectives of the Treaty