State-Related Restraints of Competition

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State-Related Restraints of Competition The
European Experience

• Asian Competition Forum
• Hong Kong
• December 11, 2007

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EXEMPLARY CASESOverview

• CIF Horizontal cartel
• Equipment for fire engines Bundling of buyer
  power
• Aéroports de Paris Abuse
• Second Operator of GSM (Italy) Abuse

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EXEMPLARY CASES Key Questions

• What is the competitive problem with
  state-related restraints?
• Who is the addressee? State or undertaking?
• Is there a public interest defence?
• What is the decision?

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EXEMPLARY CASES CIF

• Facts (ECJ, 09.09.2003, Case C-198/01)
• CIF Association of match-producers in Italy
• agreement with Italian government trade monopoly
  taxation
• CIF assigned production quotas according to
  traditional shares
• state authority rubber-stamps quotas

• ? German manufacturer complains to Italian
  Competition Authority

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EXEMPLARY CASES CIF

• Problem quotas hardcore cartel, market entry
• Addressee association directly but scope for
  action? If yes undertaking. If no state.
• Defence
• over-riding taxation issue?
• Decision
• violation of cartel prohibition
• for fines take state action into account

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EXEMPLARY CASES Equipment for fire engines

• Facts (Bundesgerichtshof, 12.11.2002, Case KZR
  11/01)
• Public company formed by municipalities of one
  region to centralise buying
• Here call for tenders to equip fire engines
• Before, municipalities had bought the equipment
  individually

• ? Two companies, distributing fire equipment,
  file for injunctive relief is the call for
  tender void?

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EXEMPLARY CASES Equipment for fire engines

• Problem bundling of buyer power demand side
  cartel
• Adressee association of undertakings directly,
  here municipalities.
• but end consumer?
• but sovereign task?
• Defence principle of budgetary austerity?
• Decision violation of cartel prohibition, but
  exemption due to small market share

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EXEMPLARY CASES Aéroports de Paris

• Facts (ECJ, 24.10.2002, Case C-82/01 P)
• AdP public undertaking, owner of airport
  premises
• Contract with private company AFS AFS is allowed
  to provide ground services and pays a fee
• Later, additional concession to another company
  with better conditions

• ? AFS turns to COM

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EXEMPLARY CASES Aéroports de Paris

• Problem arbitrary advantage for one undertaking
  through public intervention (discrimination)
  abuse
• Addressee AdP public undertaking
• Defence
• exemption for air traffic?
• Decision abuse of dominant position, two months
  to remedy

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EXEMPLARY CASES Second operator of GSM (Italy)

• Facts (European Commission, 4.10.1995, 95/489/EG)
• GSM-based mobile phoning in Italy
• 1st licence, without particular fee and
  procedure Telecom Italia (public undertaking)
• COM no monopoly!
• Italy call for tender for 2nd licence, one
  criterion (without exact weighting) starting
  fee
• Omnitel is best in all categories and accepts all
  conditions

? COM wants to intervene
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EXEMPLARY CASES Second operator of GSM (Italy)

• Problem Unfair starting fee leads to abuse by TI
  (predatory pricing or delay of GSM-introduction)
• Addressee Government! No scope of action left to
  TI. (Obligation for fairness if new markets are
  created?)
• Defence
• Voluntary acceptance by Omnitel?
• Decision Abuse, government has three months to
  equalise terms without new tender

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CONCLUSIONS

• What is the competitive problem with
  state-related restraints?
• State-related restraints are
• difficult to discern
• particularly harmful
• difficult to remedy
• Emphasis on
• opening markets
• non-discrimination

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CONCLUSIONS

• 2. Who is the addressee?
• Distinguish responsibilities Sovereign state
  actions are not addressed but narrow
  definition
• State is addressed if undertakings cant but act
  in violation of competition laws (accessory)
• Undertakings are addressed if they have
  autonomous scope of action
• Undertakings may be public ones

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CONCLUSIONS

• 3. Is there a public interest defence?
• root of state intervention
• original state measure
• market failure
• political priority
• check necessity of the restraint
• competition as an organising principle for the
  economy

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CONCLUSIONS

• 4. What is the decision?
• main point stop the infringement
• leave remedy to state agencies
• take state actions into account when sanctioning
  private undertakings

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CONCLUSIONS

• What is key to success?
• comprehensive strategy, using all sorts of
  instruments
• privatisation
• liberalisation/reduction of market barriers
• enforcement of competition law in individual
  cases
• enforcement of related rules in individual cases
• competition advocacy
• example telecommunications sector in Europe

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Thank you!

• Comments, questions
• rup_at_ip.mpg.de