Economic of European Integration Prof. Giovanni Graziani Introduction

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EU Competition Policy
Michele Colucci ISDE-JMLS Barcelona June
2-4,2009 Email info_at_colucci.eu Web site
www.colucci.eu
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PRINCIPLES
Art. 2 EC COMMON MARKET HIGH DEGREE OF
COMPETITIVENESS
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EU Competition Policy
Legal basis Rules applying to
undertakings Art. 81 EC Art. 82 EC State
aids Art. 86 EC Art. 87 EC
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EU Competition Policy

• Four main forms of restriction of competition
• Agreements between companies (Art. 81)
• Abuse of dominant position (Art. 82)
• Mergers (Regulation 139/2004)
• State aids

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Art. 81.1

• Art. 81.1

• The following shall be prohibited as incompatible
  with the common market all agreements between
  undertakings, decisions by associations of
  undertakings and concerted practices which may
  affect trade between Member States and which have
  as their object or effect the prevention,
  restriction or distortion of competition within
  the common market, and in particular those which
• directly or indirectly fix purchase or selling
  prices or any other trading conditions
• (b) limit or control production, markets,
  technical development, or investment
• (c) share markets or sources of supply
• (d) apply dissimilar conditions to equivalent
  transactions with other trading parties, thereby
  placing them at a competitive disadvantage
• (e) make 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.

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Art. 81.1
LEGAL ANALYSIS
SUBSTANTIAL ANALYSIS
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LEGAL ANALYSIS

• DEFINITION OF TRADE
• NEUTRALITY
• APPRECIABILITY

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Art. 81.1

• LEGAL ANALYSIS
• 1. Definition of TRADE (Point 19 Commission
  Notice 2004/C 101/07)
• The concept of trade is not limited to
  traditional exchanges of goods and services
  across borders. It is a wider concept, covering
  all cross-border economic activity including
  establishment.

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Art. 81.1

• Legal ANALYSIS
• 2. MAY AFFECT (Point 23 Commission Notice 2004/C
  101/07)
• the notion may affect implies that must be
  possible to foresee with a sufficient degree of
  probability on the basis of a set of objective
  factors of law or fact that the agreement or
  practice may have an influence, direct or
  indirect, actual or potential, on the pattern of
  trade between Member States

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Art. 81.1

• Legal ANALYSIS
• 3. NEUTRALITY (Point 34 Commission Notice
  2004/C 101/07)
• The term pattern of trade is neutral. It is
  not a condition that trade be restricted or
  reduced. Patterns of trade can also be affected
  when an agreement or practice causes an increase
  in trade.

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Art. 81.1

• LEGAL ANALYSIS
• 4. APPRECIABILITY (Point 44 Commission Notice
  2004/C 101/07)
• The effect on trade criterion incorporates a
  quantitative element, limiting Community law
  jurisdiction to agreements and practices that are
  capable of having effects of a certain magnitude.
  Agreements and practices fall outside the scope
  of application of Article 81 and 82 when they
  affect the market only insignificantly having
  regard to the weak position of the undertakings
  concerned on the market for the products in
  question. Appreciability can be appraised in
  particular by reference to the position and the
  importance of the relevant undertakings on the
  market for the products concerned

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Art. 81.1

• LEGAL ANALYSIS
• 4. APPRECIABILITY (Point 52 Commission Notice
  2004/C 101/07)
• Agreements are not capable of appreciably
  affecting trade between Member States when 2
  conditions are both met
• a. If the aggregate market share of the parties
  to the agreement is less than 5,
• b. Horizontal Agreements aggregate annual
  turnover of the undertakings does not exceed 40
  Million Euro
• Vertical Agreements aggregate annual
  Community turnover of the supplier does not
  exceed 40 Million euro

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Art. 81.1

• SUBSTANTIAL ANALYSIS
• Impact on Competition
• Object (contained in art. 81.1)
• De Minimis (Commission Notice on Agreements of
  minor importance)
• Paragraph 7 H. A. 10 Market Share
• Paragraph 7 V. A. 15 Market Share (Aggregate)

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Art. 81.3
INDIVIDUAL EXEMPTION
BLOCK (OR GROUP) EXEMPTION
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Art. 81.3

• The Art.81.3 exception only refers to that
  behavior which falls within Art.81.1. This is a
  fundamental point.
• Art. 81.3
• The provisions of paragraph 1 may, however, be
  declared inapplicable in the case of
• - any agreement or category of agreements between
  undertakings,
• - any decision or category of decisions by
  associations of undertakings,
• - any concerted practice or category of concerted
  practices,
• which contributes to improving the production or
  distribution of goods or to promoting technical
  or economic progress, while allowing consumers a
  fair share of the resulting benefit, and
• which does not
• (a) impose on the undertakings concerned
  restrictions which are not indispensable to the
• attainment of these objectives
• (b) afford such undertakings the possibility of
  eliminating competition in respect of a
• substantial part of the products in question.

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Art. 81.3

• INDIVIDUAL EXEMPTION
• 4 Cumulative conditions
• Positive Conditions
• 1. Economic Benefits
• 2. Fair Share for Consumers
• Negative Conditions
• 3. Indispensability
• 4. Enough competition in the market

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Art. 81.3

• INDIVIDUAL EXEMPTION
• Positive conditions
• 1. Economic Benefits
• a. Improving Production or
• b. Improving distribution or
• c. Promoting technical progress or
• d. Promoting economical progress
• N.B. These 4 conditions are alterantives, while
  the previuos 4 are cumulatives
• 2. Fair share for consumers

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Art. 81.3

• INDIVIDUAL EXEMPTION
• Negative Conditions
• 3. Indispensability
• does not impose on the undertakings
  concerned restrictions which are not
  indispensable to the attainment of these
  objectives (referred to in the first condition.

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Art. 81.3

• INDIVIDUAL EXEMPTION
• Negative Conditions
• 4. No Restriction of Competition
• which does not afford such undertakings
  (which are party to the agreement) the
  possibility of eliminating competition in respect
  of a substantial part of the products in
  question.

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Block Exemption

• Comm. Regulation 2790/1999 Vertical Agreements
• This regulation is the concrete application of
  the new approach to vertical agreements and it is
  the first group exemption of the new generation
• Instead of indicating the clauses of vertical
  agreements which would benefit the exempion, the
  Commission decided to indicate only the clauses
  which would prevent the exemption and would
  permit the rest.
• White list

Black List
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Block Exemption

• Comm. Regulation 2790/1999 Vertical Agreements
• For a V.A. to be caught by the Art. 81.3
  exemption, it must fulfill 2 conditions
  cumulatively, found in Art. 3.1 and Art. 4 of the
  Regulation
• Market share held by the supplier does not exceed
  30 of the relevant market on which it sells the
  contract goods or services
• The agreement does not contain a clause which
  lays down a restriction of the type mentioned in
  the black list of art. 4 (No Hardcore
  Restriction)

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Block Exemption

• Hardcore Restrictions for Vertical Agreements
• Art. 4 Commission Regulation n. 2790/1999
• Price fixing
• Territorial Restriction
• Restriction to sell to end users
• Restriction of Cross- supplies
• Components and spare parts restriction

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Block Exemption

• Hardcore Restrictions for Vertical Agreements
• Art. 11 De Minimis Notice
• Art. 4 Commission Regulation n. 2790/1999

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Block Exemption

• Active Sales
• Approaching individuals customers by direct mail
  or visit or actively approaching in a specific
  territory a customer by establishing a warehouse
  or a distribution outlet
• Passive Sales
• Responding to unsolicited request from individual
  customers including delivery of goods or services
  to such customers

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Block Exemption

• Hardcore Restrictions for Vertical Agreements
• Art. 4 Commission Regulation n. 2790/1999
• 2. Market Sharing
• Not possible the restriction of the
  territory but
• 2.1 Possible restriction of Active Sales
  (paragraph 50 guidelines)
• 2.2 Possible restriction of Active and Passive
  Sales to end users by the wholesaler
• 2.3 Selective Distribution
• 2.4 Possible restriction to sell componets to
  costumers who would use them to manifacture the
  same type of goods

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ABUSE OF DOMINANT POSITION

• ART. 82 EC
• 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.

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ABUSE OF DOMINANT POSITION

• 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
• (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.

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MARKET

• GEOGRAPHICAL MARKET
• PRODUCT MARKET

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Fields of application in Sport

• Transfer rules
• Sale of tickets
• Broadcasting rights
• Monopoly of federations
• Multi-ownership of clubs

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BASIC PRINCIPLES OF EC LAW

• EC law applies to Sport in so far it constitutes
  an economic activity (ECJ case law)
• No Activities purely social, artistic or
  sporting ......
• but then MECA MEDICA judgement of 18 July
  2006...
• Test of Necessity
• Test of Proportionality

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The Legal Methodology in the Meca Medina case

• STEP 1 Are the EC anti-trust rules, i.e.
  Articles 81 and/or Art. 82 applicable to Sporting
  rules?
• STEP 2 If EC anti-trust rules are applicable,
  does the sporting rule fall outside the
  prohibition of Articles 81 (1) and 82?
• STEP 3 Can the rule be considered compatible
  with EC anti-trust rules because it fulfils the
  conditions of Article 81(3) EC or because of an
  objective justification under Article 82 EC?

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STEP 1

• 1. Is the sports association that adopted the
  rule in question an undertaking or
  anassociation of undertakings?
• a. The sports association is an undertaking to
  the extent it carries out an economic activity
  itself (e.g., the selling of broadcasting
  rights).
• b. The sports association is an association of
  undertakings if its members carry out an
  economic activity.
• If no economic activity, Articles 81 and 82 do
  not apply
• Is trade between MS affected (geographical
  market, production market, Community
  interest...)?

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STEP 2

• Compatibility of rules with the Community rules
  on competition cannot be assessed in the
  abstract.
• Taking into account
• the overall context in which the decision of
  the association of undertakings was taken or
  produces its effects.
• Its objectives measures inherent in the pursuit
  of those objectives and proportionate to them.
• Proportionality of measures (quid sportive
  sanctions?)

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STEP 3

• Can the rule be considered compatible with EC
  anti-trust rules because it fulfils the
  conditions of Article 81(3) EC or because of an
  objective justification under Article 82 EC?
• Case by case approach
• No General sports exception!

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Sporting rules that are more likely to comply
with Art. 81 and Art. 82 EC

• Selection criteria for sport competition
• At home and away rules
• Transfer periods
• Nationality clauses for national teams
• Rules prohibiting the multiple ownership of clubs
• Antidoping rules
• Rules of the game

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Sporting rules that are less likely to comply
with Articles 81 and 82 EC

• Rules regulating professions ancillary to sport
• Rules excluding legal challenges of sports awards
  before ordinary Courts
• Rules limiting the number of foreign players
• Rules requiring transfer payments for players at
  the end of their contracts

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CONCLUSIONS

• ALL ROADS LEAD TO ROME BUT FIRST....
• THEY GO THROUGH BRUSSELS!