INTRODUCTION TO COMPETITION LAW

Nenad Gavrilovic, PhDAssistant Professor at the Faculty of Law “Iustinianus Primus” in Skopje

The Notion of Competition Law

Competition Law is a particular legal discipline that regulates legal relations that form following the carrying out of economic activities

The central idea of competition law is the regulation of market activities of undertakings

The central aim of competition law is the achievement of a competitive market

The System of Competition law

Antitrust

Abuse of a Dominant Position

Control of Concentrati

onsState Aid

Unfair Competition

Legal Sources of Competition Law (1)

Domestic Sources European Sources Constitution Law on Protection of

Competition Law on Control of State

Aid Law on Unfair Competition Regulations of the

Government Notices and Guidelines of

the Commission for Protection of the Competition?

Case Law?

Treaty on the Functioning of the European Union

Regulations of the Council and the Parliament

Regulations of the Commission

Notices and Guidelines of the Commission?

Case Law?

Legal Sources of Competition Law (2)

Substantive Provisions

Procedural Provisions

The substantive provisions regulate the particular acts of undertakings by determining the conditions by which a certain act can be qualified as uncompetitive

The procedural provisions regulate the competence of certain bodies (in principle, administrative organs) and the procedure of determining whether a certain act can be qualified as uncompetitive

Domestic Competition Law and EU Competition Law

1. The following are incompatible with the proper functioning of the Agreement, insofar as they may affect trade between the Community and the former Yugoslav Republic of Macedonia:

a) all agreements between undertakings, decisions by associations of undertakings and concerted practices between undertakings which have as their object or effect the prevention, restriction or distortion of competition;

b) abuse by one or more undertakings of a dominant position in the territories of the Community or of the former Yugoslav Republic of Macedonia as a whole or in a substantial part thereof;

c) any public aid which distorts or threatens to distort competition by favouring certain undertakings or certain products

2. Any practices contrary to this Article shall be assessed on the basis of criteria arising from the application of the rules of Articles 81, 82 and 87 of the Treaty establishing the European Community.

Article 69(1) and 2 SAA

Parties and Aims

Parties Aims

Undertakings

Society

Consumer

s Free Market Competitive Market Liberal Market Low Prices High Quality Goods

and Services Efficiencies Consumer Welfare…

Antitrust

Basic Principles

Subject Matter of Antitrust Sanctioning of bilateral behavior Covering agreements, concerted

practices and decisions of associations

Covering agreements notwithstanding whether made between competitors or not

Covering agreements notwithstanding the level of the economy

Basic Legal Provisions (1)1. The following shall be prohibited as incompatible with the

internal 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 internal market, and in particular those which:

a) 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.

Article 101(1) TFEU

Basic Legal Provisions (2)2. Any agreements or decisions

prohibited pursuant to this Article shall be automatically void.

Article 101(2) TFEU

Basic Legal Provisions (3)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.

Article 101(3) TFEU

The System of Group Exemptions

Established either: Directly by the Council (and the parliament) By empowering the Commission

Procedural matters covered by Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty

Substantive matters mostly covered by Regulations of the Commission and related notices and guidelines

Sectors of Application of Block Exemptions

Vertical agreements: Vertical agreements in general Motor Vehicles

Horizontal agreements Licensing agreements for the transfer of

technology Specific sector legislation:

Agriculture Insurance Postal services Professional services Transport Telecommunications

Key Points of Block Exemptions

Market Share Effect on Trade Hardcore Restrictions Un(presumed) Invalidity Partial Nullity Divided Competences

Administrative Bodies and Courts National and European Bodies

Administrative and Civil Sanctions Ex Officio or following a Complaint De Minimis Informal Guidance Leniency in Cartels

Burden of Proof

In any national or Community proceedings for the application of Articles 101 and 102 of the Treaty, the burden of proving an infringement of Article 101(1) or of Article 102 of the Treaty shall rest on the party or the authority alleging the infringement. The undertaking or association of undertakings claiming the benefit of Article 101(3) of the Treaty shall bear the burden of proving that the conditions of that paragraph are fulfilled

Article 2 Council Regulation (EC) No 1/2003

Abuse of a Dominant Position

Basic Principles

Subject Matter of Abuse of a Dominant Position

Sanctioning of unilateral behavior Possible overlapping with sanctioning

of bilateral behavior Distinction between dominant

position and its abuse

Basic Legal Provisions

Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal 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;

(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.

Article 102 TFEU

Key Points of Determining Abuse (1)

Procedural matters covered by Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty

Substantive matters covered by Communication from the Commission: Guidance on its enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings

Key Points of Determining Abuse (2)

Determining the Dominant Position on the Market Geographic Market Product Market

Determining the Abuse Divided Competences

Administrative Bodies and Courts National and European Bodies

Administrative and Civil Sanctions Ex Officio or following a Complaint Informal Guidance

Burden of Proof

In any national or Community proceedings for the application of Articles 101 and 102 of the Treaty, the burden of proving an infringement of Article 101(1) or of Article 102 of the Treaty shall rest on the party or the authority alleging the infringement. The undertaking or association of undertakings claiming the benefit of Article 101(3) of the Treaty shall bear the burden of proving that the conditions of that paragraph are fulfilled

Article 2 Council Regulation (EC) No 1/2003

Control of Concentrations

Basic Principles

Subject Matter of Control of Concentrations

Concentrations can occur as Mergers Acquisitions

In practice, most cases involve acquisitions or takeovers and not mergers

Legally speaking, acquisitions should not be confused with takeover bids

De lege and de facto concentrations are covered

Basic Legal Provisions

The TFEU does not expressly cover the cases of concentrations

When the TFEU is in question, concentrations are between the regimes of Articles 101 and 102 TFEU

The basic legal source in the EU is Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation)

Substantive issues are mostly covered by Notices and Guidelines of the Commission

Key Points of Merger Control A Notification is Needed The concentration is suspended

pending decision of the Commission The Commission has exclusive

jurisdiction ever Community mergers National merger regulation remains

intact Commitments Possible Strict Time Limits

State Aid

Basic Principles

Subject Matter of State Aid Advantages in any form whatsoever

conferred on a selective basis to undertakings by national public authorities

Ensuring that government interventions do not distort competition and trade inside the EU

Sectors of Fisheries and Agriculture ubder special regimes

Basic Legal Provisions (1)1. Save as otherwise provided in the

Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.

Article 107(1) TFEU

Basic Legal Provisions (2)2. The following shall be compatible with the internal

market:(a) aid having a social character, granted to individual

consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.

Article 107(2) TFEU

Basic Legal Provisions (3)3. The following may be considered to be compatible with the

internal market:(a) aid to promote the economic development of areas where the

standard of living is abnormally low or where there is serious underemployment, and of the regions

referred to in Article 349, in view of their structural, economic and social situation;

(b) aid to promote the execution of an important project of common European interest or to

remedy a serious disturbance in the economy of a Member State;c) aid to facilitate the development of certain economic activities or of

certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest;

(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

Article 107(3) TFEU

Key Points of State Aid

Procedural Issues covered by Council Regulation No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article 93 (now Art.88) of the EC Treaty

Notification Needed Standstill until a Decision of the

Commission is made De Minimis

Block Exemptions and State Aid

General rules established by Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Article 87 and 88 of the Treaty (General block exemption Regulation)

Block Exemptions applicable to: regional aid; SME investment and employment aid; aid for the creation of enterprises by female entrepreneurs; aid for environmental protection; aid for consultancy in favour of SMEs and SME participation in

fairs; aid in the form of risk capital; aid for research, development and innovation; training aid; aid for disadvantaged or disabled workers.

Unfair Competition

Basic Principles

Subject Matter of Unfair Competition

Unfair competition covers the acts of undertaking which are against the principle of good faith and fair dealing and by which a harm is inflicted to competitive undertakings

Generally, unfair competition covers unilateral acts

Rules on protection form unfair competition are mostly focused on

Basic Legal Provisions

(1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition.

(2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition.

(3) The following in particular shall be prohibited:(1) all acts of such a nature as to create confusion by any means

whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;

(2) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;

(3) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.

Article 10bis Paris Convention

Key Points of Unfair Competition

Unilateral Acts For the Purposes of Competition Against Good faith and Fair Dealing Claims

Ceasing with the Acts Damages

Acts do not need be qualified as abuse of dominant position

Some Examples

Pyramid Sales Untrue Statements Price Comparisons Tying Comparative Advertising Misuse of IP Rights…