Introduction to Competition Law - Competition Law - Lecture Slides, Slides of Competition Law and Policy

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Introduction to Competition Law Docsity.com Structure of the seminar • An historical perspective: the common law of restraints to trade • Modern competition law/Structure • Remedial Structure and Institutional Design • The aims of competition law • Substantive issues 2 Docsity.com Cont. • Competition law and government regulation – Government regulation is ubiquitous and pursues a variety of aims (e.g. job safety, discrimination in employment relationships, product safety) – Economic regulation involves an important degree of State intervention (control prices, restrict entry to the specific industry) – Institutional differences (sector-specific regulators) – Market failure (e.g. public goods, informational asymmetry, positive and negative externalities) • Competition law as a form of accountability mechanism: regulation of capitalism function – The managerial revolution: Adolph Berle & Gardiner Means, The Modern Corporation and Private Property (1932), 5 Docsity.com An historical perspective • 483 A.D. Emperor Zenon “ No one may presume to exercise a monopoly of any kind…and if anyone shall presume to practice a monopoly, let his property be condemned to be forfeited and himself condemned to perpetual exile” • Common law • Conspiracy to injure – Mogul Steamship Co. Ltd v. McGregor Gow & Co [1892] AC 25 • The Case against Monopolies – Darcy v. Allein 77 Eng. Rep. 1260 (K.B. 1602) – The Statute of Monopolies (1623) 6 Docsity.com Cont. • The Statute of Monopolies – “All monopolies and all commissions, grants, licenses, charters and letters patents heretofore made or granted, or hereafter to be made or granted, to any person or persons, bodies politick or corporate whatsoever, of or for the sole buying, selling, making, working or using of any thing within this realm, or of any other monopolies, or of power to give license or toleration to do, use or exercise any thing against any law…are contrary to the laws of this realm, and so are and shall be utterly void…” – “Provided that any declaration before mentioned shall not extend to any letters patents and grants of privilege for the term of fourteen years or under, hereafter to be made, of the sole working or making of any manner of new manufactures within this realm, to the true and first inventor or inventors of such manufactures…” 7 Docsity.com Competition law as part of EU “Economic Law” • Article 3 TEU • 3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance. • It shall combat social exclusion and discrimination, and shall promote social justice and protection, equality between women and men, solidarity between generations and protection of the rights of the child. • It shall promote economic, social and territorial cohesion, and solidarity among Member States. 10 Docsity.com Cont. • Article 3 TFEU • 1. The Union shall have exclusive competence in the following areas: […] – (b) the establishing of the competition rules necessary for the functioning of the internal market • Competition law and policy has being conceived as a means to enhance the objective of establishing a common/Internal market • The Treaty of Lisbon maintains however a separate Title for competition, taxation and approximation of laws from the Internal market provisions: Title VII, Chapter 1 11 Docsity.com Cont. • Article 119 (industrial policy) (ex Article 4 TEC) • 1. For the purposes set out in Article 3 of the Treaty on European Union, the activities of the Member States and the Union shall include, as provided in the Treaties, the adoption of an economic policy which is based on the close coordination of Member States' economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition. • Article 120 (Economic Policy) • The Member States and the Union shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, and in compliance with the principles set out in Article 119 12 Docsity.com Cont. • The Commission developed initially a broad definition of what constitutes a restriction of competition – Institutional reasons: Commission had exclusivity on the application of article 101(1) • Drawbacks of this approach – Very difficult to define what is a restriction of competition/ any type of agreement may have the effect to restrict the freedom of action of the parties/ it may also have the effect to restrict the freedom of action of a third party that would like to conclude an agreement with one of the parties – Increasing number of notifications and use of Art. 101(3) – uncertainty – cost for business/many welfare enhancing transactions would not proceed by fear of infringing Art. 101(1) – Broad scope for article 101(3)/Burden of proof on the undertakings to prove the existence of efficiency gains 15 Docsity.com Cont. • The Court followed a more flexible approach and slowly but constantly developed an “economic test” to article 101 (1) – This “economic test” focuses on harm to consumers – The “rule of reason” debate that is still ongoing is an implication of this uncertainty as to the content of article 101(1) • This hardly changes with the new approach after Reg. 1/2003 – Legal exception regime/global approach: a practice is subject to the prohibition of Art. 101(1) if it has a restrictive object and/or effect and cannot benefit from the exception of Art 101(3) – The Commission loses its exclusive power to grant exemptions under Art. 101(3) • However, the bifurcation of Art. 101 remains concerning the legal burden of proof. Art. 101(1): the burden of proof is on the plaintiff or the competition authority. Art. 101(3): the burden of proof is on the defendant 16 Docsity.com EU Competition Law (main provisions) Rules applying to “undertakings” Abuse of dominant position • Article 102 Prohibits “Abuse” by Dominant Undertakings • Is a company “dominant”: i.e. does it have the ability to harm competition? • What is the abuse and does it result in consumer harm? – Unfair prices (e.g. predatory or excessive) – Limiting output/new product (e.g. refusals to deal/license) – Applying dissimilar conditions (e.g. price discrimination) – Imposing supplementary obligations (e.g. tying) 17 Docsity.com Cont. • Actors – European Commission • DG Competition • Chief Economist team • Legal Service of the European Commission – General Court – Court of Justice – National Competition Authorities • UK: OFT, Competition Commission, OFCOM, OFGEM, ORR, OFWAT, CAA • European Competition Network – National Courts (direct effect of Articles 101 and 102) – Advisory Committee on Restrictive Practices and Dominant Positions and Advisory Committee on Concentrations 20 Joaquín Almunia EU Commissioner for Competition Judge Marc Jaeger President of the General Court Judge Vassilios Skouris President of the ECJ Docsity.com Example 1 • The international lysine cartel (1992-1995) • “The Informant”: http://theinformantmovie.warnerb ros.com/ • “our customers are our enemies” • John M. Connor, Cartels & Antitrust Portrayed: Private International Cartels from 1990 to 2008 http://papers.ssrn.com/sol3/paper s.cfm?abstract_id=1467310 21 Docsity.com Example 2 • Consten v. Grundig 23 September 1964, [1964] JO 2545/64, [1964] CMLR 489, Consten & Grundig v Commission (56 & 58/64) 13 July 1966, [1966] ECR 299, [1966] CMLR 418, CMR 8046 – What is the main difference between this case and the lysine cartel case? – Should competition law apply in such a setting? – What difficulties would Grundig have in penetrating the French market in 1957? – Why should Grundig have wanted to protect Consten from parallel imports? – Were Leissner and UNEF taking a free ride on Consten’s promotion? Would they have wanted to sell in 1962 without Consten’s investment? – Who does the ECJ’s case law protect here? • Parallel traders? • The supplier? • French consumers? 22 Docsity.com Conflicts – Supremacy principle • Case 14/68 Walt Wilhelm & Others [1969] ECR 1 • Before Reg. 1/2003: national law could be applied so long as its application did not prejudice the full and uniform application of Community law or the effects of measures taken or to be taken to implement it • After Reg. 1/2003: – Art. 3(2): the application of national competition law may not lead to the prohibition of collusive practices which may affect trade between Member States but which do not restrict competition within the meaning of Art. 101(1) of the Treaty or which fulfil the conditions of Art. 101(3) or which are covered by a regulation for the application of Art. 101(3) – However, Member States may adopt stricter national laws prohibiting unilateral conduct – Recital 9, Reg. 1/2003 (& Art. 3(3) : does not preclude national legislation that protects legitimate interests other than the protection of competition on the market (other objectives than the protection of competition on the market) 25 Docsity.com Cont. • Euroclause: Section 60 of the UK Competition Act 1998: consistency, where possible in the application of domestic and Community competition law • (1) The purposes of this section is to ensure that so far as is possible (having regard to any relevant differences between the provisions concerned), questions arising under this Part in relation to competition within the United Kingdom are dealt with in a manner which is consistent with the treatment of corresponding questions arising in Community law in relation to competition within the Community • (2) At any time when the court determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between – (a) the principles applied, and decision reached, by the court in determining that question; and – (b) the principles laid down by the treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in Community law 26 Docsity.com Cont. • (3) The court must, in addition, have regard to any relevant decision or statement of the Commission • (4) Subsections (2) ad (3) also apply to – (a) the OFT; and – (b) any person acting on behalf of the OFT, in connection with any matter arising under this Part • (5) In subsection (2) and (3), court means any court or tribunal • (6) In subsections (2)(b) and (3), decision includes a decision as to – (a) the interpretation of any provision of Community law – (b) the civil liability of any undertaking for harm caused by its infringement of Community law • Aim is to reduce the compliance burden placed upon undertakings by the need to respect the two systems of competition law (EU, UK) in the UK 27 Docsity.com