(Estimated time: 60 minutes)
12 companies have joined forces to better distribute personal protection equipment
(PPE) in a number of member states. These 12 companies are the major producers
and importers of PPE for these member states and collectively account for 70 – 75%
of PPE sales in the member states where they are active. To improve the distribution
of PPE these companies have created a platform that will better match supply and
demand by aggregating consumption data with data on expected PPE usage as a
result of the Covid-19 spread using a complex machine learning algorithm that will
use real-time infection numbers, R-data and many other datapoints. To ensure that
this will work, all 12 companies invest very significant sums to develop the algorithm
and set up the distribution structure. Part of the agreement is a Most Favoured
Customer clause whereby the 12 companies cannot offer PPE on any more
favourable terms than those for which they offer it through the platform. The platform
is open to other companies who will also be required to sign the agreement and
commit to investing in the platform and distribute their products in compliance with
the MFC-clause. The operation of the platform is financed by means of a
commission taken from the sales of PPE through the platform. The 12 original
companies pay a lower commission than that paid by a company that joins the
platform later. This lower commission corresponds to the initial higher investment by
the 12 originator companies. The commission, both for the original companies and
for new companies, is set by means of a decision by the platform management
board that consists of representatives of the 12 companies and an independent
CEO.
Provide a risk assessment with regard to the risks on the basis of Article 102 TFEU.
What could be done to minimise possible risks?
For art. 102 it is first important to notice if there are one or more undertakings. The
definition of undertakings is the same in arts. 101 and 102 (Flat Glass). Therefore, we
need to look at Höfner and Elser. Every entity engaged in an economic activity (regardless
of its legal status, the way it is financed or formed) constitutes, in principle, an
undertaking. An economic activity consists of offering of goods/services on a market. The
companies distribute PPE and therefore offer goods on a market. There are two grounds
of exceptions (state prerogatives and solidarity activities) that are known, but there is no
need to assess these exceptions in this case. According to the text of art. 102 (''one ore
more undertakings'') a dominant position can also be held collectively. If entities are
united by such economic links that they together hold a dominant positon, there is a
finding of collective dominance. In this case the companies are expressly connected with
each other through contractual links, as they have an agreement with each other. This
can lead to a finding of collective domince as already was stated in Compagnie Maritime
Belge. Therefore, however, it is required that these companies together (, so not Vedder: But is this agreement enough to
find a collective; check CMB carefully.
separate), hold a dominant position. The meaning of a dominant position is definied
in Continenal Can: economic strength and the ability to act independently on a particular
market, or the ability to act independently of the usual competitive constraints facing
market operators (United Brands). For the assessment if a company/companies in this
case are dominant it is necessary to define the market and to examine the
undertaking's power on that market. To define the market it is necessary to look at the
product market, the geographic market (and possibly the temporal aspect). First I''ll
12 companies have joined forces to better distribute personal protection equipment
(PPE) in a number of member states. These 12 companies are the major producers
and importers of PPE for these member states and collectively account for 70 – 75%
of PPE sales in the member states where they are active. To improve the distribution
of PPE these companies have created a platform that will better match supply and
demand by aggregating consumption data with data on expected PPE usage as a
result of the Covid-19 spread using a complex machine learning algorithm that will
use real-time infection numbers, R-data and many other datapoints. To ensure that
this will work, all 12 companies invest very significant sums to develop the algorithm
and set up the distribution structure. Part of the agreement is a Most Favoured
Customer clause whereby the 12 companies cannot offer PPE on any more
favourable terms than those for which they offer it through the platform. The platform
is open to other companies who will also be required to sign the agreement and
commit to investing in the platform and distribute their products in compliance with
the MFC-clause. The operation of the platform is financed by means of a
commission taken from the sales of PPE through the platform. The 12 original
companies pay a lower commission than that paid by a company that joins the
platform later. This lower commission corresponds to the initial higher investment by
the 12 originator companies. The commission, both for the original companies and
for new companies, is set by means of a decision by the platform management
board that consists of representatives of the 12 companies and an independent
CEO.
Provide a risk assessment with regard to the risks on the basis of Article 102 TFEU.
What could be done to minimise possible risks?
For art. 102 it is first important to notice if there are one or more undertakings. The
definition of undertakings is the same in arts. 101 and 102 (Flat Glass). Therefore, we
need to look at Höfner and Elser. Every entity engaged in an economic activity (regardless
of its legal status, the way it is financed or formed) constitutes, in principle, an
undertaking. An economic activity consists of offering of goods/services on a market. The
companies distribute PPE and therefore offer goods on a market. There are two grounds
of exceptions (state prerogatives and solidarity activities) that are known, but there is no
need to assess these exceptions in this case. According to the text of art. 102 (''one ore
more undertakings'') a dominant position can also be held collectively. If entities are
united by such economic links that they together hold a dominant positon, there is a
finding of collective dominance. In this case the companies are expressly connected with
each other through contractual links, as they have an agreement with each other. This
can lead to a finding of collective domince as already was stated in Compagnie Maritime
Belge. Therefore, however, it is required that these companies together (, so not Vedder: But is this agreement enough to
find a collective; check CMB carefully.
separate), hold a dominant position. The meaning of a dominant position is definied
in Continenal Can: economic strength and the ability to act independently on a particular
market, or the ability to act independently of the usual competitive constraints facing
market operators (United Brands). For the assessment if a company/companies in this
case are dominant it is necessary to define the market and to examine the
undertaking's power on that market. To define the market it is necessary to look at the
product market, the geographic market (and possibly the temporal aspect). First I''ll
