Competition Policy Questions

Competition policy questions
Art. 101 question

Facts
The issue pertaining to this scenario is to advise whether this agreement breaches
EU competition policy.
First, it must be determined whether the competing companies are “undertakings”.
This term was defined in Hofner and Elser as an organization partaking in economic
activities. Accordingly, C and K are undertakings because although they are
charities, they sell hats in exchange for monetary compensation.
The issue requires assessing the legality of ‘agreements’, thus it falls under Art. 101
of The Treaty of Functioning of the European Union (TFEU).
Subsequently, it must be determined whether this agreement is recognized.
A gentleman’s promise or an informal verbal agreement as per ACF Chemie
farma NV and a written agreement as per Consten and Crundig, is a recognized
agreement in competition law. The facts do not specify the mode of the agreement
although it is understood that it was done explicitly, which would reasonably be
either a written or a verbal agreement, both which are recognized by law.
There is no requirement that an agreement be a one-off event as in Hercules
Chemicals, multiple dealings of cartel were held to form a single agreement.
(Tacit agreement: According to Volkswagen, a distributor following the anti-
competitive terms of a manufacturer will be deemed to have consented to the
agreement. However, where suppliers do not have a choice or there is “no common
interest” such as in Bayer v Commission where Bayer stopped the re-export
business of his wholesaler’s, the suppliers are not liable.)
(Concerted Practices: In Dyestuffs, a concerted practice was defined as a
situation where there was “practical co-operation” between undertakings but an
explicitly made agreement could not be proved. In this case, meetings amounted to
an agreement when there was a simultaneous increase in prices. In the Sugar Cartel
case, contact and conscious cooperation was sufficient although no actual plan was
proved.
Competition operating illegally: In Protimonopolny v Slovenska, article 101 was
breached when an agreement to exclude competition operating illegally in the
market was made.
In Tate and Lyle, sharing commercially useful information as to an undertaking’s
future strategy amounted to a concerted practice. It is not necessary for the
strategy to take effect.
In Huls AG v Commission, it was held that proving the effects of the concerted
practice was not required.)
As per IAZ International, when a member of an association of undertakings
complies with its decisions, recommendations, or codes of practice it will be held
liable regardless of whether the decisions were binding.
The EU commission has jurisdiction to look into the matter because the effect of the
agreement/… is on trade between _______ and ________ that are different member
states (consten).
Next, the object of the agreement (i.e., to restrict, distort, prevent competition)
must be assessed to satisfy article 101(3). In Consten and Crundig, the statute was
interpreted such that ‘object’ and ‘effect’ are alternative requirements. In T-mobile,
it was re-affirmed that proving an agreement’s potential to affect competition was
sufficient. APP: This is true because the reason CH wants KH to stop trading in
Germany is to restrict competition so that consumers have no choice but to
purchase knitted hats from CH which would allow their sales to increase and save
their undertaking from being wound up. Thus, an anti-competitive object has been
established.
Subsequently, it must be determined whether the issue falls under the jurisdiction
of the EU commission i.e., there is an effect on trade between member states of the
article. As per Consten v Grundeg, it is objectively determined whether an
agreement directly/indirectly distorts trade between member states in an actual or
potential manner. *(As per Woodpulp, if the distortion is within the EU, the
undertaking need not be within the EU.) * This agreement does have an effect on
trade as it reduces competition by reducing the choice consumers have as they are
now forced to buy knitted hats from one company rather than the one that better
serves them.
The above analysis proves that there has been infringement of Article 101(1). As
per the Metropole Television Case, the last stage is to determine whether the pro-
competitive benefits outweigh the anti-competitive effects such that the agreement
can be exempted under article 101(3) and it is not void under article 101(2).
As for article 101(3), three conditions must be satisfied. Firstly, whether the
agreement/concerted practice/ decision of association of undertakings improves the
production or distribution of goods and leads to technical or economic progress
whilst benefiting consumers. ___________________ Secondly, whether the
agreement/…/… is indispensable to achieve the desired outcomes/ _____________
Thirdly, whether the agreement/…/… this leads to eliminating competition in the
substantial market. _______
There are no pro-competitive benefits as consumers are being given limited choice
so that they do not choose on the basis of quality of the knitted hats. Thus, the
agreement is void.
However, it must be determined if the issue falls within the De Minimis exemption
i.e., where the agreement is of minor importance having negligible effects. This is
the case where the aggregate share of the undertakings in concern is 10% for
horizontal agreements (and 15% for vertical agreements or where they are difficult
to identify). _____Although the aggregate share is below 10% satisfying these
conditions, the object of the agreement is anti-competitive as proved above
therefore this exception is not applicable.
Additionally, the defense of oligopoly should be considered. This applies when there
is a small number of undertakings selling homogenous products which leads to
‘interdependence’ between them. A price change in one means a similar price
change in all of them (price following) as a rational response to the market
structure. In Re Woodpulp, the oligopoly defense applied when different
manufacturers around the world simultaneously increased the price of their
products.
Article 102
Facts
The issue pertaining to this scenario is to advise whether this agreement breaches
EU competition policy.
First, it must be determined whether the competing companies are “undertakings”.
This term was defined in Hofner and Elser as an organization partaking in economic
activities. Accordingly, C and K are undertakings because although they are
charities, they sell hats in exchange for monetary compensation.
The issue requires assessing whether an undertaking has abused its dominant
position, thus it falls under Art. 102 of The Treaty of Functioning of the European
Union (TFEU) and the EU commission has jurisdiction to resolve it under article 3 of
Regulation 1/2003.
First, it must be determined whether ________ is dominant. This requires an
assessment of the product/geographical market.
Product market
In United Brands, the cross-elasticity or interchangeability of products i.e., whether
consumers would switch to another brand if the price of one went up was the
relevant factor. The characteristics, price, ease of shifting from making one product
to the other, intended use of a product would determine its interchangeability.
Accordingly, _________.
In Michelin, cross-elastciity was not found because it was not easy to shift from
manufacturing car tires to tires for heavier vehicles.
Further, as per the “Small but significant non-transitory increase in price test”
(SSNIP), laid out in the 1997 Commission notice, (APP)_________________, because a
price rise in one undertaking would be unprofitable and substantial consumers
would shift to other brands.
Geographic market
This was defined in United Brands as “an area where the objective conditions of
competition are the same for all traders”. This is evidenced by practical evidence of
consumption patterns and habits and whether one brand can be substituted.
Establishing dominance
Since it is established that the undertakings belong to the same market, it can be
assessed whether ________ is dominant. According to AZKO, any undertaking with a
share more than 50% is dominant. However, in British Airways, a comparison
between the market shares of competitors was used to determine their dominant
position. Thus _________
Additionally, the extent of barriers to entry of a product in the market determines
the autonomy of an undertaking. The manufacturing of this product requires the use
of superior technology, expertise, specific skills, deep pockets so cannot be
produced overnight by an average person….
Another relevant factor is whether it is a substantial part of the common market. In
Sugar Cartel, being part of a member state was sufficient. Accordingly, _______
Thus, _____ has is a dominant undertaking.
Subsequently, it must be assessed whether it has abused its position.
Abuse was defined in Hoffman as an activity which hampers competition or its
growth. Examples of it have been provided in Article 102. ………… Types of abuse
and paragraphs.
Thus, _____ has abused its dominant position.
It may be able to defend itself under the Post Danmark exception which requires
that the abuse was objectively necessary and is beneficial to the consumer.
______________
Conclusion
Thus, _____ is advised to take advantage of the whistle blowing policy which offers
them 100% immunity from fines for revealing secret cartel activity as per the
Methylglucamine case.
Or
Thus, ___ is advised to report to the national court which has the jurisdiction to
apply article ____ as per article 6 of Regulation 1/2003

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Competition Policy Questions

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Competition policy questions

Art. 101 question

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