Transcript LUMSA – International Commercial Law

LUMSA – International Commercial Law
30 October 2014
Prof. Avv. Roberto Pirozzi
Email: [email protected]
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102
Any abuse by one or more undertakings of a dominant position
within the internal market or in a substantial part of it shall be
prohibited as incompatible with the 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;
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102
(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.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Article 102 of the TFEU is aimed at preventing undertakings who
hold a dominant position in a market from abusing that position.
Its core role is the regulation of monopolies, which restrict
competition in private industry and produce worse outcomes for
consumers and society.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Dominance
First it is necessary to determine whether a firm is dominant, or
whether it behaves to an appreciable extent independently of its
competitors, customers and ultimately of its consumer.
Under EU law, very large market shares raise a presumption that
a firm is dominant, which may be rebuttable.
Where a firm has a dominant position, it has a special
responsibility not to allow its conduct to impair competition on
the common market.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Market definition
Market shares are determined with reference to the "relevant
market" in which the firm and product in question is offered.
Market definition refers to the delineation of this relevant
market. It is an essential part of a competition case under Art.
102. If the market is defined too widely then it will contain more
firms and supposedly substitutable products, preventing a
finding of a dominant position. If the market is defined too
narrowly then there might be an incorrect presumption that the
company is dominant. There are various ways to define whether
a company is dominant.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
The product market
What other products or services might consumers switch to?
There is the 'hypothetical monopolist' test which is whether a
small but significant increase in price is likely be allowed by the
hypothetical monopolist company to profit from this. If
consumers can and would move away from the hypothetical
monopolist's product and onto other products then their market
is more widely defined.
There is also the 'intuitive approach', which focuses on brand
loyalty and the use of the products.
The Commission's Notice on the Definition of the Relevant Market
is a mixture of the two above approaches, with the hypothetical
monopolist having more importance.
LUMSA – International Commercial Law
COMPETITION LAW – Assessing dominance (Art. 102)
The geographic market
The relevant geographic market is an
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Defining the relevant market is essential for assessing dominance,
because a dominant position can only exist on a particular
market.
Product market: the relevant product market is made of all
products/services which the consumer considers to be a
substitute for each other due to their characteristics, their prices
and their intended use.
Geographic market: the relevant geographic market is an area in
which the conditions of competition for a given product are
homogenous.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Market shares are a useful first indication of the importance of
each firm on the market in comparison to the others. The
Commission's view is that the higher the market share, and the
longer the period of time over which it is held, the more likely it is
to be a preliminary indication of dominance. If a company has a
market share of less than 40%, it is unlikely to be dominant.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
The Commission also takes other factors into account in its
assessment of dominance, including the ease with which other
companies can enter the market – whether there are any barriers
to this; the existence of countervailing buyer power; the overall
size and strength of the company and its resources and the extent
to which it is present at several levels of the supply chain (vertical
integration).
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
What is an abuse?
To be in a dominant position is not in itself illegal. A dominant
company is entitled to compete on the merits as any other
company. However, a dominant company has a special
responsibility to ensure that its conduct does not distort
competition. Examples of behaviour that may amount to an abuse
include:
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
What is an abuse?
Examples:
1) requiring that buyers purchase all units of a particular product
only from the dominant company (exclusive purchasing);
2) setting prices at a loss-making level (predation);
3) refusing to supply input indispensable for competition in an
ancillary market; charging excessive prices.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
The Commission's investigative powers to enforce Article 102 are
detailed in Regulation 1/2003 (the Antitrust Regulation).
The Commission is empowered, for example, to:
– Send information requests to companies;
– In the context of an inspection:
 enter the premises of companies;
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
The Commission's investigative powers to enforce Article 102 are
detailed in Regulation 1/2003 (the Antitrust Regulation).
– examine the records related to the business;
– take copies of those records;
– seal the business premises and records during an inspection;
– ask members of staff or company representatives questions
relating to the subject-matter and purpose of the inspection
and record the answers.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Statement of objections and Article 7 prohibition decision
Following the investigation, the Commission may issue a
statement of objections (SO). This document informs the parties
of the Commission's objections raised against them. It gives the
companies the possibility to exercise their rights of defence.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Statement of objections and Article 7 prohibition decision
Rights of defence: To ensure an objective outcome, the parties
are given certain rights of defence. They are entitled to
have access to the file – this means they can see all nonconfidential documents from the Commission's investigation. The
parties may then reply to the SO in writing within a certain delay.
They may also request an oral hearing, which is conducted by an
independent Hearing Officer. After examining the parties'
arguments, the Commission reviews and sometimes abandons
(part of) its initial objections and may decide to close the case.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Statement of objections and Article 7 prohibition decision
If the Commission's concerns are not – or only partly dispelled – it
drafts a decision prohibiting the identified infringement
(according to Article 7 of the Antitrust Regulation). The draft is
then submitted to the Advisory Committee composed of
representatives of the Member States' competition authorities.
This provides a final check of the draft decision. If fines are
proposed in the draft decision, the Advisory Committee meets a
second time to specifically discuss them. Finally, it is submitted to
the College of Commissioners which adopts the decision.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Article 9 commitment decisions
Alternatively, the Commission may take a commitment decision
under Article 9 of Regulation 1/2003. This is a quick way of
restoring effective competition to the market. Under commitment
decisions, the Commission does not have to prove an
infringement of the antitrust rules and imposes no fines. It voices
its concerns and parties can come forward with commitments to
address these concerns. If the Commission, after consulting
market participants, finds these commitments sufficient, it takes a
decision to make them legally binding.
The commitments are usually valid for a specific period of time
but if the companies breach them they can be fined.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Fines
A firm that has engaged in anti-competitive behaviour and so
infringed competition law may be subject to fines imposed by the
Commission under Regulation 1/2003. The Commission's fining
policy is aimed at punishment and deterrence. The fines reflect
the gravity and duration of the infringement. They are calculated
under the framework of a set of Guidelines last revised in 2006.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Fines
The starting point for the fine is the percentage of the company's
annual sales of the product concerned in the infringement (up to
30%). This is then multiplied by the number of years and months
the infringement lasted. The fine can be increased (e.g. repeat
offender) or decreased (e.g. limited involvement).
The maximum level of fine is capped at 10% of the overall annual
turnover of the company.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Victims' claims for damages
Any citizen or business which suffers harm as a result of a breach
of the EU competition rules should be entitled to claim
compensation from the party who caused it. This means that the
victims of competition law infringements can bring an action for
damages before the national courts.
LUMSA – International Commercial Law
COMPETITION LAW – GENERAL PRINCIPLES (Art. 102)
Investigation
Joint/collective dominance
It should also be noted that groups of companies can also be held
to be collectively dominant on a particular market, but this is less
frequent in practice.
LUMSA – International Commercial Law
COMPETITION LAW – Compliance with competition rules
Compliance means respecting the law. In the competition field, it
means business proactively respecting competition rules.
Why is it important?
It is the prime responsibility of large, medium and small
companies alike to comply with these rules. Companies need to
be aware of the risks of infringing competition rules and how to
develop a compliance strategy that best suits their needs. An
effective compliance strategy enables a company to minimize the
risk of involvement in competition law infringements, and the
costs resulting from anti-competitive behaviour.
LUMSA – International Commercial Law
COMPETITION LAW – Compliance with competition rules
The Commission welcomes and supports efforts by the business
community to ensure compliance with EU competition rules. If an
infringement is found, however, the mere existence of a
compliance strategy will not be taken into consideration when
setting the fine: the best reward for a good compliance strategy is
not to infringe the law. This standing policy has been confirmed
publicly (see speeches "Compliance and competition policy" and
"Cartels: the priority in competition enforcement")
LUMSA – International Commercial Law
COMPETITION LAW – Compliance with competition rules
The Commission welcomes and supports efforts by the business
community to ensure compliance with EU competition rules. If an
infringement is found, however, the mere existence of a
compliance strategy will not be taken into consideration when
setting the fine: the best reward for a good compliance strategy is
not to infringe the law. This standing policy has been confirmed
publicly (see speeches "Compliance and competition policy" and
"Cartels: the priority in competition enforcement")
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
Towards more effective antitrust damages actions in Europe
Infringements of the EU competition rules, such as price cartels
and abuses of a dominant position in the market, are not only
negative for the economy and consumers as a whole: they also
cause direct harm to the infringer's customers and competitors
(e.g. higher prices, lost profits).
The European Court of Justice held that any citizen or business
who suffers harm as a result of such breaches is entitled to
compensation from the infringers.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
However, most victims of antitrust infringements, particularly
SMEs and consumers, rarely obtain reparation for the harm
suffered. The exercise of the right to compensation is governed by
national rules. These often make it costly and difficult to bring
actions, so that compensation is not available for victims in all
Member States.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
That is why on 11 June 2013 the Commission proposed a Directive
on antitrust damages actions to remove the main obstacles
standing in the way of effective compensation, and guarantee a
minimum protection for citizens and businesses, everywhere in
the EU.
On 17 April 2014, the European Parliament adopted a text the
Directive which was agreed between the European Parliament
and the Council during the ordinary legislative procedure. The
agreed text of the Directive has been sent to the EU Council of
Ministers for final approval.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
The proposal follows up on earlier policy initiatives in this field, in
particular a 2005 Green Paper and a 2008 White Paper.
The Commission also took initiatives on two other issues relevant
to antitrust damages actions:
1) A recommendation on collective redress which concerns all
breaches of EU law, and thus is also relevant for harm suffered by
victims of breaches of EU competition law, particularly victims
who individually suffered low-value damage.
2) A Communication and a Practical Guide on the quantification of
harm in antitrust infringements.
LUMSA – International Commercial Law
COMPETITION LAW – Victims claim for damages
Aside from these specific policy initiatives, the Commission is
committed to providing assistance to national courts in the
application of Articles 101 and 102 TFEU. This includes a funding
programme for training of national judges in EU competition law
and judicial cooperation between national judges.