lLiterature European Union Law
Probleem 1
E-Lesson The prohibition of cartels: Article 101 TFEU
Vragen:
1. An action or a practice may be caught by Article 101 only when it is bilateral
or multilateral, not when it is unilateral (within a single undertaking).
2. This distinction is of importance when it comes to vertical restrictions since
intra-brand competition is restricted by the production of a product vis-à-vis its
distributors.
- A&V, pp. 439-454 (on the basic principles of competition law in general)
- A&V, pp. 483-486, 487-490 (on the enforcement of Article 101 TFEU);
- A&V, pp. 490-491 (on the legal protection in EU competition law)
Case Law:
- Höfner and Elser-case (C-41/90);
- SAT v. Eurocontrol-case (C-364/92);
- Poucet and Pistre-case (C-159/91 and C-160/91);
- Consten and Grundig-case (56/64 and 58/64);
- Bayer-case (T-41/96);
- ICI v. Commission-case (49/69);
- P Cartes Bancaires v. Commission-case (C-67/13);
- Société Technique Minière (STM)-case (56-65);
- Delimitis-case (C-234/89)
1) What are the rules regarding the prohibition of collusive
behaviour/cartels in European competition law?
There are two categories of competition rules:
- The rules addressed to undertakings or companies as they are more
colloquially known, article 101, 102.
- And the rules concerning member state intervention in the market, article
106 and 107.
EU competition law serves a two-fold purpose: to promote market integration and
ensure effective competition. As regards the objective of market integration, it is
worth referring to Consten and Grundig, in which it held as follows concerning
the prohibition of collusive behaviour in what is now article 101:
- If member states are required to remove trade barriers, private parties
(undertakings) should not be able to create new ones by concluding
market sharing agreements.
Article 101 TFEU
,Article 101 prohibits multilateral behaviour between undertakings (broadly referred to as
‘collusion’). There are four conditions for the application of Article 101 TFEU:
(1) The actors involved must be qualified as ‘undertakings’
(2) Their conduct must be captured by the forms mentioned in this paragraph
(3) Their conduct must be collusive in a sense that it is anti-competitive by object or
effect, and
(4) The collusive conduct must affect trade between Member States.
In order to understand what type of behaviour is prohibited under Article 101, we first
have to define the meaning of the term ‘undertaking'.
Definition Höfner and Elser: (from the book)
It must be observed, in the context of competition law, first that the concept of an
undertaking encompasses every entity engaged in an economic activity, regardless of the
legal status of the entity and the way in which it is financed and, secondly, that
employment procurement is an economic activity.
(1) Undertakings
Article 101 TFEU prohibits anti-competitive agreements between undertakings.
The Court gave a definition of ‘undertaking’ in the Höfner and Elser-case
(paras. 21-22)
- The definition of an undertaking revolves around the activity of the
economic operator and not its legal or institutional form.
Two essential elements can be highlighted in this definition of undertaking:
1. The legal personality of the entity and the way in which it is financed are not
relevant for the
definition of undertaking:
- Natural persons, legal persons, State and public bodies can be considered
as undertakings.
- It is also possible from an economical point of view that different
companies or entities can constitute together one entity.
This functional concept of undertaking
broadens the scope of competition
rules to include entities that may
formally not be regarded as
companies.
Even the State and its public bodies
may sometimes be regarded as an
undertaking, where they engage in an
economic activity.
There are two exceptions to the
concept of economic activity: these are
the:
- Exercise of public powers
exception
This exception was discussed in the
SAT v. Eurocontrol case. The CJEU
decided that Eurocontrol’s activities
regarding control and supervision of
Europe’s air space did not constitute
an economic activity on the grounds
that the control and supervision of air
space was connected with the exercise
,of powers which are typically those of a public authority. A private body may not
count as an undertaking, where it is engaged in a task in the public interest which
forms part of the essential functions of the State. Since Eurocontrol’s activities
did not constitute an economic activity, competition law did not apply to them.
- Exception for non-commercial activities
This means solidarity-based activities. In this case, the special requirements that
the government imposes on the performance of a particular activity is examined
in order to determine whether it could also be performed under ordinary market
conditions. An example of this is to be seen in the Poucet and Pistre case. The
CJEU concluded that sickness funds and the organizations involved in the
management of the public social security system fulfil an exclusively social
function based on the principle of national solidarity and is entirely non-profit-
making. The benefits paid are statutory benefits that bear no relation to the
amount of the contributions. Accordingly, that activity is not an economic activity
and the organizations to which it is entrusted are not undertakings.
The higher the level of solidarity, the harder it becomes to provide the social
insurance products under ordinary market conditions. In a few cases, CJEU has
distinguished three criteria to distinguish whether social insurance schemes are
to be considered an economic activity:
- Does the body in question pursue a profit-making or social objective?
- What is its level of solidarity?
- What is the level of government supervision?
An action or a practice may be caught by Article 101 only when it is bilateral or
multilateral, not when it is unilateral (within a single undertaking).
- For this reason, Article 101 does not apply in the relationship between an
undertaking that is a parent company and an undertaking that is a
subsidiary company where the two are seen to form ‘a single economic
unit’; this is applicable if (1) The subsidiary has no real freedom to
determine its course of action on the market and if (2) The agreement
concerned merely the internal allocation of tasks as between the
undertakings. Article 101 TFEU will thus not apply when such two
undertakings act as one.
(2) Forms of collusion that are prohibited by Article 101(1) TFEU
For the application of Article 101 TFEU there must be some form of collusion. The
collusion between the undertakings can consist of one of the following forms:
(i) Agreements, or
(ii) Concerted practices, or
(iii) Decision of associations of undertakings
(i) Agreements
The CJEU has given a broad interpretation of the notion of agreements. It is a
faithful expression of the joint intention of the parties to the agreement with
regard to their conduct in the common market. If there is a concurrence of wills
among a plurality of parties, the form is unimportant. Agreement might
encompass formal contracts, regardless of their validity, gentleman’s agreements
or oral understanding.
What kind of agreements are ‘caught’ by Article 101(1)?
- Horizontal agreements are agreements between undertakings that are
competing with each other at the same commercial level.
, - Vertical agreements, by contrast, are agreements between undertakings
at different levels of the commercial chain.
- Within its text, Article 101 does not make a distinction between horizontal and
vertical agreements, and it thus seems to generically cover both types. The
Court confirmed in the Consten and Grundig case that vertical agreements
were covered by the provision as well.
There is also the distinction between inter-brand and intra-brand
competition. Inter-brand competition is competition between producers
of different brands. Intra-brand competition is the competition between
distributors of the same brand. This distinction is of importance when it
comes to vertical restrictions since intra-brand competition is restricted by
the production of a product vis-à-vis its distributors.
Every agreement (whether horizontal or vertical) must be concluded through the
consent between the parties:
- It must be formed by a concurrence of two wills.
- The idea of an ‘agreement’ will thus find a limit where one party
unilaterally imposes its will on the other.
- Yet there may sometimes be a fine line between tacit (implied or
understood) acceptance and unilateral imposition (eenzijdige oplegging);
the Court has struggled to demarcate this line for the Union legal order.
An agreement may be hidden as an ‘apparently unilateral behavior’.
- An example of this is a situation where party A acts as if it took a decision
for anti-competitive conduct on its own and imposed it on party B, but in
reality, party B has given its consent to the action. This consent can be
given implicitly/tacitly, for instance by virtue of the fact that the second
party has agreed on the action by signing the contract. Therefore, there is
the need of a (tacit) acquiescence (the reluctant acceptance of something
without protest) by the other partners, express or implied, in the attitude
adopted by them.
- In the Bayer-case (para. 72), the Court defined the test to decide when
an ‘apparently unilateral behavior’ is actually an agreement that falls
under Article 101(1) TFEU. According to the Court, for an ‘apparently
unilateral behavior’ to qualify as an agreement, there needs to be ‘an
acquiescence by the other partners, express or implied, in the attitude
adopted by the manufacturer.’ This tacit compliance can for instance be
shown through actual compliance with the apparently unilateral measure.
The burden of proof lies with the Commission.
(ii) Concerted practices
This concept was designed as a safety net to catch all forms of collusive behavior
falling short of an agreement.
- The CJEU has again adopted a broad interpretation of this term.
- It can be seen as coordination between undertakings which is not
consensually agreed.
This must be apparent from the behavior of the participants.
- Tacit collusion or coordination will often be the result of an oligopolistic
market structure. When there are very few undertakings in the market, the
strategic behavior of each market player is known to the others and
depends on the behavior of the others. They therefore act in parallel. A
price increase by one of the undertakings would have an effect on its
Probleem 1
E-Lesson The prohibition of cartels: Article 101 TFEU
Vragen:
1. An action or a practice may be caught by Article 101 only when it is bilateral
or multilateral, not when it is unilateral (within a single undertaking).
2. This distinction is of importance when it comes to vertical restrictions since
intra-brand competition is restricted by the production of a product vis-à-vis its
distributors.
- A&V, pp. 439-454 (on the basic principles of competition law in general)
- A&V, pp. 483-486, 487-490 (on the enforcement of Article 101 TFEU);
- A&V, pp. 490-491 (on the legal protection in EU competition law)
Case Law:
- Höfner and Elser-case (C-41/90);
- SAT v. Eurocontrol-case (C-364/92);
- Poucet and Pistre-case (C-159/91 and C-160/91);
- Consten and Grundig-case (56/64 and 58/64);
- Bayer-case (T-41/96);
- ICI v. Commission-case (49/69);
- P Cartes Bancaires v. Commission-case (C-67/13);
- Société Technique Minière (STM)-case (56-65);
- Delimitis-case (C-234/89)
1) What are the rules regarding the prohibition of collusive
behaviour/cartels in European competition law?
There are two categories of competition rules:
- The rules addressed to undertakings or companies as they are more
colloquially known, article 101, 102.
- And the rules concerning member state intervention in the market, article
106 and 107.
EU competition law serves a two-fold purpose: to promote market integration and
ensure effective competition. As regards the objective of market integration, it is
worth referring to Consten and Grundig, in which it held as follows concerning
the prohibition of collusive behaviour in what is now article 101:
- If member states are required to remove trade barriers, private parties
(undertakings) should not be able to create new ones by concluding
market sharing agreements.
Article 101 TFEU
,Article 101 prohibits multilateral behaviour between undertakings (broadly referred to as
‘collusion’). There are four conditions for the application of Article 101 TFEU:
(1) The actors involved must be qualified as ‘undertakings’
(2) Their conduct must be captured by the forms mentioned in this paragraph
(3) Their conduct must be collusive in a sense that it is anti-competitive by object or
effect, and
(4) The collusive conduct must affect trade between Member States.
In order to understand what type of behaviour is prohibited under Article 101, we first
have to define the meaning of the term ‘undertaking'.
Definition Höfner and Elser: (from the book)
It must be observed, in the context of competition law, first that the concept of an
undertaking encompasses every entity engaged in an economic activity, regardless of the
legal status of the entity and the way in which it is financed and, secondly, that
employment procurement is an economic activity.
(1) Undertakings
Article 101 TFEU prohibits anti-competitive agreements between undertakings.
The Court gave a definition of ‘undertaking’ in the Höfner and Elser-case
(paras. 21-22)
- The definition of an undertaking revolves around the activity of the
economic operator and not its legal or institutional form.
Two essential elements can be highlighted in this definition of undertaking:
1. The legal personality of the entity and the way in which it is financed are not
relevant for the
definition of undertaking:
- Natural persons, legal persons, State and public bodies can be considered
as undertakings.
- It is also possible from an economical point of view that different
companies or entities can constitute together one entity.
This functional concept of undertaking
broadens the scope of competition
rules to include entities that may
formally not be regarded as
companies.
Even the State and its public bodies
may sometimes be regarded as an
undertaking, where they engage in an
economic activity.
There are two exceptions to the
concept of economic activity: these are
the:
- Exercise of public powers
exception
This exception was discussed in the
SAT v. Eurocontrol case. The CJEU
decided that Eurocontrol’s activities
regarding control and supervision of
Europe’s air space did not constitute
an economic activity on the grounds
that the control and supervision of air
space was connected with the exercise
,of powers which are typically those of a public authority. A private body may not
count as an undertaking, where it is engaged in a task in the public interest which
forms part of the essential functions of the State. Since Eurocontrol’s activities
did not constitute an economic activity, competition law did not apply to them.
- Exception for non-commercial activities
This means solidarity-based activities. In this case, the special requirements that
the government imposes on the performance of a particular activity is examined
in order to determine whether it could also be performed under ordinary market
conditions. An example of this is to be seen in the Poucet and Pistre case. The
CJEU concluded that sickness funds and the organizations involved in the
management of the public social security system fulfil an exclusively social
function based on the principle of national solidarity and is entirely non-profit-
making. The benefits paid are statutory benefits that bear no relation to the
amount of the contributions. Accordingly, that activity is not an economic activity
and the organizations to which it is entrusted are not undertakings.
The higher the level of solidarity, the harder it becomes to provide the social
insurance products under ordinary market conditions. In a few cases, CJEU has
distinguished three criteria to distinguish whether social insurance schemes are
to be considered an economic activity:
- Does the body in question pursue a profit-making or social objective?
- What is its level of solidarity?
- What is the level of government supervision?
An action or a practice may be caught by Article 101 only when it is bilateral or
multilateral, not when it is unilateral (within a single undertaking).
- For this reason, Article 101 does not apply in the relationship between an
undertaking that is a parent company and an undertaking that is a
subsidiary company where the two are seen to form ‘a single economic
unit’; this is applicable if (1) The subsidiary has no real freedom to
determine its course of action on the market and if (2) The agreement
concerned merely the internal allocation of tasks as between the
undertakings. Article 101 TFEU will thus not apply when such two
undertakings act as one.
(2) Forms of collusion that are prohibited by Article 101(1) TFEU
For the application of Article 101 TFEU there must be some form of collusion. The
collusion between the undertakings can consist of one of the following forms:
(i) Agreements, or
(ii) Concerted practices, or
(iii) Decision of associations of undertakings
(i) Agreements
The CJEU has given a broad interpretation of the notion of agreements. It is a
faithful expression of the joint intention of the parties to the agreement with
regard to their conduct in the common market. If there is a concurrence of wills
among a plurality of parties, the form is unimportant. Agreement might
encompass formal contracts, regardless of their validity, gentleman’s agreements
or oral understanding.
What kind of agreements are ‘caught’ by Article 101(1)?
- Horizontal agreements are agreements between undertakings that are
competing with each other at the same commercial level.
, - Vertical agreements, by contrast, are agreements between undertakings
at different levels of the commercial chain.
- Within its text, Article 101 does not make a distinction between horizontal and
vertical agreements, and it thus seems to generically cover both types. The
Court confirmed in the Consten and Grundig case that vertical agreements
were covered by the provision as well.
There is also the distinction between inter-brand and intra-brand
competition. Inter-brand competition is competition between producers
of different brands. Intra-brand competition is the competition between
distributors of the same brand. This distinction is of importance when it
comes to vertical restrictions since intra-brand competition is restricted by
the production of a product vis-à-vis its distributors.
Every agreement (whether horizontal or vertical) must be concluded through the
consent between the parties:
- It must be formed by a concurrence of two wills.
- The idea of an ‘agreement’ will thus find a limit where one party
unilaterally imposes its will on the other.
- Yet there may sometimes be a fine line between tacit (implied or
understood) acceptance and unilateral imposition (eenzijdige oplegging);
the Court has struggled to demarcate this line for the Union legal order.
An agreement may be hidden as an ‘apparently unilateral behavior’.
- An example of this is a situation where party A acts as if it took a decision
for anti-competitive conduct on its own and imposed it on party B, but in
reality, party B has given its consent to the action. This consent can be
given implicitly/tacitly, for instance by virtue of the fact that the second
party has agreed on the action by signing the contract. Therefore, there is
the need of a (tacit) acquiescence (the reluctant acceptance of something
without protest) by the other partners, express or implied, in the attitude
adopted by them.
- In the Bayer-case (para. 72), the Court defined the test to decide when
an ‘apparently unilateral behavior’ is actually an agreement that falls
under Article 101(1) TFEU. According to the Court, for an ‘apparently
unilateral behavior’ to qualify as an agreement, there needs to be ‘an
acquiescence by the other partners, express or implied, in the attitude
adopted by the manufacturer.’ This tacit compliance can for instance be
shown through actual compliance with the apparently unilateral measure.
The burden of proof lies with the Commission.
(ii) Concerted practices
This concept was designed as a safety net to catch all forms of collusive behavior
falling short of an agreement.
- The CJEU has again adopted a broad interpretation of this term.
- It can be seen as coordination between undertakings which is not
consensually agreed.
This must be apparent from the behavior of the participants.
- Tacit collusion or coordination will often be the result of an oligopolistic
market structure. When there are very few undertakings in the market, the
strategic behavior of each market player is known to the others and
depends on the behavior of the others. They therefore act in parallel. A
price increase by one of the undertakings would have an effect on its
