Assessing the legality of a proposed agreement between two charities under EU competition law, Study notes of European Union law

Download Assessing the legality of a proposed agreement between two charities under EU competition law and more Study notes European Union law in PDF only on Docsity! Children’s Help is a charity established in the Netherlands. They share the same objective, the protection of children, with Kid’s Hotline, a charity established in a nearby town in Germany. In order to raise money for their activities, both charities sell knitted hats. The hats are quite successful and are sold in shops in the EU. In the Netherlands and Belgium, Children’s Help holds around 6% of the market for knitted hats, while Kid’s Hotline holds around 2%. In Germany, Kid’s Hotline holds around 5% of the market, and Children’s Help holds about 3.5%. Both charities hold negligible market shares in other EU Member States. Worried about its declining reputation at home, Kid’s Hotline approaches Children’s Help with a proposal to stop selling to Germany, promising that they will not sell to the Netherlands and Belgium either. Children’s Help is tempted to agree but has some doubts as to whether the agreement breaches EU competition law. Advise Children’s Help. An in-depth examination of EU competition policy is required to address the issue at hand. Competition policy has almost always played a major role in EU law with the primary objective to increase efficiency, maximize consumer welfare, and accomplish the allocative efficiency. In order to advise Children Aid, a comprehensive assessment is required of Article 101 which prohibits (1) any collusive conduct between two or more independent undertakings (2) that could affect trade between Member States (MS) and (3) that has the object or effect of preventing, restricting, or distorting competition. To advise Children's Help, it is needed to explore whether or not the undertakings have entered into an agreement or concerted practice with each other. If such an agreement or concerted practice is reached, does it imply a distortion of competition in the internal market? In other words, have the two companies violated Article 101 by imposing geographical limits on each company? At the outset, it is important to determine whether Children’s Aid and KH are undertakings for the purposes of competition law. Hofner and Elser defined undertaking as any entity engaged in economic activity regardless of its legal status. The court has defined economic activity as the process of offering goods and services in the market (Pavlov). Given that the charity organizations CH & KH make revenue via the sale of knitted hats, it is evident that they participate in economic activity.(Fenin). While no formal agreement was established between the parties, CFI in Bayer held that a confluence of will between at least two parties, the form being irrelevant so long as it embodies the genuine expression of the party's intention; an agreement may be horizontal or vertical; additionally, in Dyestuff, the Court of Justice defined concerted practise as a kind of coordination between firms that had not yet reached the threshold of formal contract but had achieved an agreement/understanding/consensus in practise not to compete. The CJ held in Suiker Unie (Sugar Cartel) that although it is not required for enterprises/undertakings to have a plan, in reality, it would constitute concerted practices if they entered into some type of contract (direct or indirect), agreement or consensus. As can be gleaned in the problem question, some form of contact/conversation occurred in relation to the said proposal, implying that some form of dealing and cooperation occurred between the undertakings, hence the existence of an agreement, albeit a horizontal one, given that they are all at the same level of production.In the UK Agricultural Tractor, conveying commercially advantageous or sensitive information may constitute a concerted practice in and of itself if it enables rivals to identify and respond effectively to the strategy taken by other competitors. (2) the agreement may affect trade between member states: The CoJ has adopted a broad interpretation of this requirement. There is an effect on trade between MSs wherever it is ‘possible to foresee with sufficient degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question may have influence direct or indirect, actual or potential, on the pattern of trade between Member States”; (Société Technique Minière/Manfredi) it seems that cooperation between the undertakings to offer their product in specific markets will have an actual effect on trade between the MS. Nevertheless, it is relevant only if it is appreciable (Tepea). (3) The third requirement entails a comprehensive economic investigation to ascertain whether the stated activity is an object or an effect. The court concluded in the Consten & Grundig case that the expression 'object or effect' is disjunctive/distinct and so there was no obligation to prove an effect where the agreement's object was the prevention, limitation, or distortion of competition. Additionally, the CJ noted in T-Mobile Netherlands that a concerted practice is anti-competitive under Article 101 TFEU if its substance and goals/objectives as well as its legal and economic context, are capable of blocking, limiting, or distorting competition within the single market. Thus, it seems that the non-compete clauses described above between the undertakings constitute a restriction by object, as the obligations of prohibiting one another from doing business in a sufficiently broad shared market (Glaxo). Agreements with the objective of "prevent, limit, or distort competition," are considered to be illegal by their very nature and thus there is no further requirement to prove the effect of such agreements because they are presumed to effect trade between MS. Hence there is no need to determine whether the actual effect on competition is appreciable within the meaning/context of the de Minimis rule applicable to this category (Expedia). Lastly, if the agreement is proven to be anti-competitive ,it needs to be determined whether pro-competitive advantages outweigh its anti-competitive consequences. Anti- and pro- competitive impacts are assessed completely within the framework provided by Article 101(3)