Competition Policy

1
Competition Policy

• What is a Cartel?
• How do Cartels restrict competition?
• How might a Cartel benefit the consumer?
• If you are a manufacturer and have sold to a
  retailer, do you want sale price to consumer to
  be high or low?

Nick Gaede April 10, 2006 1/1439286
2
Competition Policy

• Dyestuffs case, p. 811
• Facts
• Companies charged with fixing price and dividing
  markets for sale of dyestuffs
• Price leadership one firm sets and within
  short period of time other firms follow
• Dyestuff companies seek to overturn adverse
  Commission decision
• Issue
• Does this parallel behavior violate Article 81
  TEC?
• Decision ?
• Rationale ?

3
Competition Policy

• Sugar Cartel Case, p. 812
• Facts
• Sugar producers in Netherlands, Belgium and
  Germany allegedly entered into agreements/practice
  s to coordinate behavior in order to
• moderate impact of over production in Belgium
• restraint Belgium producers from exporting large
  quantities to the Netherlands
• Court Jurisdiction Article 230 TEC
• Issue Was there a cartel which violated Article
• 81 TEC?
• Decision ?
• Rationale ?

4
Competition Policy

• Wood Pulp Case, p. 815
• Facts
• Commission decision that wood pulp producers had
  engaged in concerted activity in violation of
  Article 81 TEC because the prices announced on a
  quarterly basis were the same, based upon the
  price announcements to users (i.e. purchasers) of
  a price leader
• Commission found that system of quarterly price
  announcements itself infringed Article 81
• Court Jurisdiction
• Article 230 TEC

5
Competition Policy

• Wood Pulp Case, p. 815 (contd)
• Issues
• Do quarterly price announcement infringe Article
  81?
• Do quarterly price announcement constitute
  evidence of concentration at earlier stage?
• Decision ?
• Rationale ?

6
Competition Policy

• Article 82 TEC
• Any abuse by one or more undertakings of a
  dominant position within the common market or in
  a substantial part of it shall be prohibited as
  incompatible with the common 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

7
Competition Policy

• Article 82 TEC (contd)
• (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.

8
Competition Policy

• Analysis of Article 82
• Any abuse by one or more undertakings,
• Affect trade between MSs
• Affect competition in a relevant market
• Behavior which influences the structure of the
  relevant market
• Abusive conduct excessive pricing,
  discriminatory pricing, refusal to deal,
  exclusive dealing contracts, etc.

9
Competition Policy

• Analysis of Article 82 (contd)
• Dominant position,
• Does the consumer have a choice between different
  products/services?
• Not based just on size
• Economic strength of undertaking is such that it
  enables it to hinder the maintenance of effective
  competition on the relevant market by allowing it
  to behave to an appreciable extent independently
  of its competitors and customers and ultimately
  its consumers

10
Competition Policy

• Analysis of Article 82 (contd)
• Within the common market or a substantial part
  of it,
• First step need to define the relevant market
  (a) product/service and (b) geographic
• Not limited to MS geography issue in effect
  within Community
• Example Bananas is the relevant market fruits
  or just bananas

11
Competition Policy

• Analysis of Article 82 (contd)
• Joint Dominance,
• The economic links between the undertakings
  concerned . . . enable them to act together
  independently of their competitors, the
  customers, and consumers
• From economic point of view the undertakings
  . . . act together on a particular market as a
  collective entity

12
Competition Policy

• Abuse of Dominant Position
• British Leyland PLC case, p. 842
• Facts
• UK gave British Leyland exclusive right on
  allowing import of British Leyland cars
• British Leyland (a) arbitrarily refused entry and
  (b) charged higher fees for left-hand-drive cars
• British Leyland challenges Commission adverse
  decision
• Court Jurisdiction Article 230 TEC
• Issue Violate Article 82 TEC?

13
Competition Policy

• British Leyland PLC case, p. 842 (contd)
• Decision Yes
• Rationale
• undertaking abuses dominant position when
• Has administrative monopoly and
• Charges service fee disproportionate to economic
  value of service provided
• Fact that amount of fee had no detrimental effect
  on re-importation is not relevant

14
Competition Policy

• Abuse of Dominant Position
• United Brands (Banana) case, p. 843
• Facts
• Distributor in Denmark asked for preferential
  treatment vis a vis other distributors in
  Denmark United Brands refused
• Distributor began selling Dole bananas as well
• United Brands refused to continue to provide
  distributor Chiquita bananas
• Court Jurisdiction Article 230 TEC
• Issue Did United Brands violate Article 82 TEC?

15
Competition Policy

• Abuse of Dominant Position
• United Brands (Banana) case, p. 843 (contd)
• Decision Yes
• Rationale ?
• The relevant market? Bananas or fruit? The
  criteria Court used

16
Competition Policy

• Abuse of Dominant Position
• Sugar case revisited, p. 885
• Is a loyalty rebate an abuse of dominant
  position?
• Did loyalty rebates apply dissimilar conditions
  to equivalent transactions?

17
Competition Policy

• Abuse of Dominant Position
• Hoffmann LaRoche Co., p. 859
• Facts
• 47 of Vitamin A
• 80 of Vitamin B
• Some customers exclusive
• Some customers requirements contracts (customer
  request)
• Some customers buy most of needs and received
  fidelity rebates based on volume had English
  clause i.e. if Hoffman/LR does not meet or
  better price, customer can buy and not lose
  rebate
• Merck - Buy Vitamin B at 20 discount
• Not resell at discount
• Hoffman/LR buy X from Merck some deal

18
Competition Policy

• Hoffmann La Roche Co., p. 859 (contd)
• Court Jurisdiction Article 230 TEC
• Issues
• Did exclusive contracts violate Article 82?
• Did requirements contracts violate Article 82?
• Did Merck contract violate Article 82?
• Did fidelity rebates violate Article 82?

19
Competition Policy

• Hoffmann La Roche Co., p. 859 (contd)
• Decision
• Yes
• Yes
• Yes even though Merck proposed
• Yes
• Rationale for Issue (4) Rebate arrangements

20
Competition Policy

• Abuse of Dominant Position
• AKZO Chemie BV case, p. 869
• Facts
• AKZO produced 50 of organic peroxide
• ECS which sold to flour manufacturers had excess
  capacity and expanded sales market to plastics
  manufacturers
• AKZO threatened to and then (a) made aggressive
  steps to sell to flour manufacturers and (b) sold
  to flour manufacturers at prices below prevailing
  prices
• AKZO sold to ECS customers at price below cost
  and charged its loyal customers 60 more
• ECS business dropped 70

21
Competition Policy

• AKZO Chemie BV case, p. 869 (contd)
• Court Jurisdiction Article 230 TEC
• Issues
• Did AKZO have a dominant position?
• Did AKZO abuse its dominant position?
• Decision ?
• Rationale ?

22
Competition Policy

• Horizontal Restrictions Article 81 TEC
• What is a horizontal restraint?
• Which horizontal restraints are subject to
  Article 81(1)?
• Which horizontal restraints do not fall within
  Article 81(1)?
• What is the market?
• What is the level of competition?
• What is the relative size of the companies who
  are collaborating?

23
Competition Policy

• Horizontal Restrictions Article 81 TEC (contd)
• What is the market share of the companies who are
  collaborating?
• What is the purpose of the collaboration?
• What is the balance of the pro competitive vs.
  anti competitive aspects of the collaboration
• Negative clearance vs. Article 81(3) exemption

24
Competition Policy

• Horizontal Restrictions Article 81 TEC
  (contd)
• Joint Buying Arrangements
• Intergroup case, p. 879 Commission Decision
• Review the 4 criteria for Article 81.3 exemption
• contribute to improving production or
  distribution of goods
• allow consumer to receive a fair share of
  benefits
• not impose on undertakings restrictions
  indispensable to objective
• not allow undertakings possibility of eliminating
  competition in respect of substantial part of
  products in question

25
Competition Policy

• Horizontal Restrictions Article 81 TEC
  (contd)
• Intergroup (contd)
• Facts
• Small food retailers/wholesalers form Intergroup
  to purchase under name SPAR and to provide
  technical/legal assistance
• Purchases 2.4 of the relevant products
• Turnover of wholesalers 1
• Decision ?
• Rationale ?

26
Competition Policy

• Horizontal Restrictions Article 81 TEC
  (contd)
• National Sulphuric Acid, Note 1, p.880
• Facts
• Commission Decision
• Compare to INTERGROUP
• Negative Clearance vs. Exemption

27
Competition Policy

• Horizontal Restraints Article 81 TEC (contd)
• Joint Selling Arrangements
• Purpose
• Small Firms SAFCO (Commission decision), p. 882
• Large Firms Potassium Salts (Commission
  decision), p.882
• -- Potash case, p. 883
• Why did not the agreement afford the possibility
  of eliminating competition in respect of a
  substantial part of the market?

28
Competition Policy

• Vertical Restraints Article 81 TEC
• Intrabrand restraints
• How benefit consumer
• How exploit consumer
• Review Consten and Grundig case
• Distillers v. Commission case, p. 909
• Parallel imports/exports
• Compare to USA law, including GTE Sylvania case

29
Competition Policy

• Vertical Restraints Article 81 TEC (contd)
• Delimitis v. Henninger Brace, AG case, p. 916
• Facts
• Delimitis rents pub from Henninger and agreed to
  sell only Henniger beer. Henniger had other
  similar agreements to assure outlets for its beer
• Delimitis asserts agreement violated Article 81(1)

30
Competition Policy

• Vertical Restraints Article 81 TEC (contd)
• Court Jurisdiction Article 234 TEC
• Issue
• Did the exclusive contracts have effect of
  distorting competition?
• Did the exclusive contracts have effect of
  denying access to the market of new national and
  foreign competitors?
• Decision ?
• Rationale ?