EU Competition law

Question
Explain and discuss how the Court has used Article 102 TFEU to stop undertakings abusing
their dominant position.

This essay delves into various aspects of European Union competition law.1 This text delves into the concept
of market dominance and the potential exploitation of that dominant position by businesses operating within
that particular market. Article 102 TFEU deals with cases of monopolistic behaviour in EU competition law.
Article 102 TFEU outlines a range of specific abuses that are prohibited, although it should be noted that the
list is not exhaustive.

According to Article 102, it is against the law for companies that have a dominant position in the internal
market or a significant portion of it to engage in any abusive behaviour that could affect trade between
Member States. This behaviour is deemed incompatible with the internal market, as per legal standards.
The General Court has identified cases where businesses with a dominant market position have engaged in
unlawful abuse. This essay will analyse the development of the legal system, using the framework established
for the particular cases of misconduct described in Article 102.

Unfair prices
When engaging in sales, it is crucial to evaluate the fairness of the pricing being charged. In the United Brands
v Commission (1978) decision, it was established that a price might be deemed excessive if it does not have a
rational correlation to the economic worth of the goods being offered. The Court proposed that the process of
evaluating the "value" may entail a comparison of selling prices and manufacturing costs in order to evaluate
equity. The court in the British Leyland case of 1986 determined that the elevated fees charged for type-
approval certificates, which were intended to dissuade customer imports, were deemed legal. This decision
was made in accordance with the manufacturer's goal of preserving pricing differentials and segmenting the
common market. Within United Brands, there was a reference to alternative methodologies that economists
could employ for the purpose of identifying unjust pricing. In that particular case, the Court considered
various considerations, including the comparison of prices with other products and the examination of prices
in different geographical regions. In Deutsche Post (2000), the Commission performed a comparative analysis
between cross-border tariffs and domestic tariffs to determine the pricing for mail delivery. An intriguing case
to examine is Bodson (1988), which focused on burial services in France and the existence of concessions in
specific regions. The Court analysed whether the prices charged in these locations were considered 'fair' in
comparison to prices in places without concessions.

Unfair trading conditions

United Brands was discovered to have participated in unfair trading practices by preventing importers from
reselling unripe bananas. Another example is when the Commission reached a settlement with Microsoft
regarding its standard agreements for licencing software to PC manufacturers. These agreements had unfairly
hindered competitors from selling their products. In the case of AAMS v Commission (2001), the court made a
ruling stating that distribution agreements enforced by the dominant wholesaler were considered illegal.
These agreements limited the access of international cigarette manufacturers to the Italian market.

Discriminatory treatment

For example, in the United Brands case, the company was enforcing a pricing discrepancy that sometimes
exceeded 100 percent in multiple regions.
The charge was determined by considering the market's willingness to pay.
The pricing arrangements for type-approval certificates for left-hand-drive cars in British Leyland were
considered to be unfair and biassed.

In the case of British Airways v Commission (2003), British Airways, which had a dominant position in the
market for air-travel agency services, introduced a reward programme for UK travel agents to encourage them
to boost the sales of BA tickets. A factor that played a role in uncovering the misuse was the possibility for two
travel agencies involved in the scheme to receive different commission rates for the same sales.
Contrary to popular belief, anti-competitive abuse involves using one's dominance to undermine or eliminate
a competitor. Here are a few examples:

(i) Making connections or establishing links. In the Tetra-Pak case in 1994, buyers of aseptic carton-making
equipment were required to exclusively purchase cartons from Tetra-Pak. In the Hoffmann-La Roche case in
1979, consumers were required to purchase the majority of their supplies from La Roche in order to receive
"loyalty rebates".
(ii) Predatory pricing is the act of intentionally setting prices below cost with the aim of eliminating
competition in the market. Predatory pricing is the intentional strategy of setting prices extremely low,
sometimes even below production costs, in order to drive competitors out of the market. This action may be
considered as a potential act of abuse. In 1986, it was uncovered that AKZO Chemie, a prominent company in
the organic peroxides manufacturing industry, had engaged in pricing practices of this nature.
However, the court in the Hoffmann-La Roche case emphasised the significance of distinguishing between
strategies aimed at attracting new customers through cost reduction and strategies aimed at eliminating a
competitor.The ruling in the case of Compagnie Maritime Belge Transport (2000) highlighted the importance
of proving intent. Based on the available evidence, it appears that there was a clear motive to eliminate the
only competitor in the marketplace.
(iii) Provision denied. Engaging in practices that restrict or eliminate competition is viewed as an abusive
behaviour. In 1974, ICI SpA was established with the goal of transferring the production of ethambutol from
competitor Zoja to its own subsidiary. Furthermore, the choice to cease the provision of wind instruments by
B & H in the case of Brass Band Instruments (BBI) v Boosey & Hawkes (1988) was made with the intention of
thwarting BBI from entering the market as competitors.

The decision to begin manufacturing ethambutol at ICI SpA did not justify the choice to cease supplying the
raw material to a competitor who also manufactures the same product. In the case of Radio Telefis Eireann v
Commission (1995), the Court upheld the Commission's determination that it is unlawful to deny a party
access when there is no preexisting economic relationship. A comparable scenario occurs when a powerful
corporation declines to provide its services in order to maintain exclusive control over certain activities. In the
case of Italy v Commission (1985), BT reserved exclusive rights for its telex-forwarding services.
The examples given above illustrate how the concept of abuse in EU competition law is interpreted broadly to
include situations where a company's actions are likely to harm competition and create distortion. The Treaty
provisions outline certain behaviours that can be considered abusive, but the ECJ's legal decisions have gone
beyond that, providing room for adaptability in dealing with emerging activities that could potentially affect
markets down the line.

Question
Critically assess the scope of exemptions to the competition law provisions found in Article
101(3) TFEU.

I have a question about the competition legislation of the European Union. Article 101(1) includes a provision
that states that agreements between corporations will be considered invalid if they have an impact on trade
between Member States and if their purpose is to hinder, limit, or distort competition within the internal
market. If these agreements satisfy the requirements of Article 101(3), they will be exempted from the
prohibition outlined in Article 101(1). The Commission of the European Communities had exclusive authority
to make decisions on exemptions, which were only granted after the Commission had been notified of an
agreement. The implementation of Regulation 1/2003 brought an end to the agreement. However, the legal
decisions made under the previous system continue to hold great importance. They will offer guidance on
how the domestic courts should navigate the new enforcement system and interpret the provisions of Article
101(3) when it comes to exempting agreements that would otherwise be forbidden under Article 101.

The third paragraph of Article 101 outlines the specific conditions that must be met for an agreement to be
exempt. There are certain exemptions that may come into play when contributing to the improvement of
production or distribution, or to the advancement of technology or the economy. In the GlaxoSmithKline
Services Limited v. Commission (2006) case, the Supreme Court carefully examined Glaxo's arguments
regarding the agreement's necessity in funding extensive and high-risk global research and development.

Glaxo contended that such funding would ultimately foster innovation and competition. In 1993, Ford and
Volkswagen joined forces to create a collaborative enterprise with the goal of developing a versatile vehicle
that could serve multiple purposes. This would result in an increase in production and also promote the
development of new technologies. According to Article 101(3) of the Transocean Marine Paint Association
(1967), manufacturers and distributors were given permission to work together in the production and
marketing of marine paints. This collaboration aimed to ensure that their products met the same standards as
those of top producers, enabling them to compete on a global scale.

This happened because individual manufacturers were unable to supply enough inventory on their own. In the
1980 case of Re Vacuum Interrupters, a joint venture involved in vacuum interrupter development was
granted an exemption on the grounds that it would be beneficial for technological advancement. CECIMO
(1969) is an example of an exception that was granted based on economic progress within a trade fair
agreement. Applying rationalisation in this instance prevented any unnecessary waste of time and effort. An
exception was granted by the CECED (2000) to an anti-competitive agreement among home appliance makers.
This agreement sought to gradually phase out the production of certain washing machines with low energy
efficiency. Manufacturers who failed to produce energy-efficient models would face an increase in production
costs as a result.

Setting performance standards allowed for the provision of suitable benefits to consumers in relation to the
higher upfront expenses. Examples of agreements that allow customers to receive a fair share of the benefits
that result from the situation.

One of the cases analysed was VBVB and VBBB v. Commission (1984). According to the ruling, customers did
not benefit from the agreement between the parties to regulate book prices. Consequently, no exemption
was given. The publication "Synthetic Fibres" (1984) reached a consensus to restrict the availability of
synthetic fibres. This restriction would be advantageous for consumers and ultimately lead to a more robust
and competitive synthetic fibres industry. In the Asnef-Equifax v. Ausbanec (2006) case, Spanish banks
established an electronic registry for credit card information. This registry had a significant impact on
consumers, resulting in improved loan conditions for clients. People who have poor credit scores and have
been denied loans could benefit from reducing their excessive debt. Up until now, the requirements set forth
in Article 101(3) have been presented in a favourable light.

Adhering to the criteria is a positive step in the process of obtaining an exemption. An agreement should
comply with the necessary criteria and incorporate only the essential boundaries needed for the successful
realisation of its benefits. An investigation will be carried out on each clause to determine the practicality of
implementing less stringent methods for imposing limitations. The collaboration agreement between
Carlsberg Brewery (UK) and Grand Metropolitan in the instance of Carlsberg Beers (1984) was exempted
because it was essential for Carlsberg Brewery to develop its own distribution infrastructure and establish a
presence in the UK market. The duration of the arrangement lasted for eleven years. In the Pronuptia de Paris
GmbH (1986) decision, the Supreme Court of the United States highlighted the possibility of including specific
geographical restrictions in an agreement, as long as it contributes to the promotion of competition as a
whole. In the P & O Stena Line (2000) case, an exemption was granted for the joint venture between the
parties, enabling them to combine their activities on a specific sailing route.

In that particular scenario, other possibilities with fewer restrictions, such as shared scheduling, would not
have yielded the same cost savings and improved service frequency as the joint venture. As a law student, you
may find it interesting to know that CECED implemented an agreement that imposed restrictions on home
appliance manufacturers, preventing them from producing certain categories of washing machines. However,
it was crucial to attain the benefits of future manufacturing of models that demonstrate enhanced energy
efficiency.

Considering the potential impact on competition in a significant portion of the products being examined is
seen as a final factor to consider. The Commission's explanation highlights the importance of prioritising
competition and the competitive process over any potential efficiency benefits that may result from
restrictive agreements. Several factors will be thoroughly evaluated during the assessment process, such as
the market share of each party, their incentives for competition, and the specific actions taken by the players
in the market. In relation to CECED, the Commission has concluded that the agreement did not result in the
elimination of competition. This was a result of the parties being allowed to compete based on factors such as
pricing, technical performance, and brand image. In the past, there was fierce competition among various
brands in the market for Re Vacuum Interrupters, with both Japanese and American companies holding a
strong market presence.

Question
Plastex Ltd has developed a specialised plastic coating product that can adhere to any surface without the
need for adhesive. The sealant product is effective in protecting any surface to which it is applied from
corrosion or decomposition. It is extremely popular in DIY shops where there is a big demand for the
product.
Other competitor companies also produce similar plastic coating products but Plastex Ltd still retains 45 per
cent of the market share in the EU, although only 5 per cent of the total market for plastic coverings in
general.
Plastex Ltd supplies the plastic coating product to DIY shops which agree to sell only the plastic coating
product Plastex produces and no other coating material. Low Price Hardware Ltd is a small hardware
retailer which wants to stock the plastic coating product as developed by Plastex Ltd. However, Plastex Ltd
refuses to supply Low Price Hardware because it would not agree to comply with Plastex’s conditions.

Advise Low Price Hardware Ltd (LPH) and Plastex Ltd on the practices adopted in the light of
EU competition law.

Plastex Ltd. is facing allegations of engaging in anti-competitive behaviour by taking advantage of its dominant
position in the plastic coating goods industry, which is the subject of this investigation. This query pertains to
EU competition law and the interpretation of Article 102 of the Treaty on the Functioning of the European
Union. Article 102 of the Constitution of the European Union states that it is not allowed for one or more
companies to abuse their dominant position in the internal market or a significant part of it, if it could affect
trade between Member States.

An individual or organisation involved in a commercial activity is considered an undertaking, according to one

interpretation of the term. Consequently, it encompasses Plastex Ltd. and their accountability for producing
plastic coated products. There are three important questions that need to be asked given the current
situation. The main issue that needs to be addressed is the current market position of Plastex Ltd. in the
plastic coated goods industry. Furthermore, another issue pertains to the misuse of authority. One important
question that must be considered is whether or not an abuse has had an impact on commerce between
Member States.
Plastex is the leading manufacturer of plastic coating products in the market, which is an important matter
that needs to be addressed. A company that possesses substantial economic power, enabling it to hinder fair
competition in the market by operating independently of its rivals, customers, and consumers, is regarded as
being in a dominant position. The definition mentioned above was presented in the legal case of United
Brands v. Commission (1978).

In order to determine whether Plastex Ltd. has the necessary financial resources to independently operate in
the coating market, it is crucial to establish the scope of the market in which competition is alleged to be
present. Conducting an inquiry into the relevant geographical and product markets is essential.
The term "relevant product market" (RPM) pertains to the specific market segment that is closely associated
with plastic coated products. It is possible to provide a more precise definition for the term "sub-market."

Does Plastex Ltd. operate in a market that focuses solely on plastic coating goods, or does it operate in a
broader market that includes all types of sealing products? When evaluating the RPM, the analysis includes
the substitution of one product with another. As per the ICI SpA v. Commission (1974) case, product
substitutability is when the items can be used interchangeably. An in-depth analysis of the cross-elasticity of
demand and supply for the commodities is essential, considering the product characteristics, prices, and
various potential applications. Considering the potential increase in the price of plastic coating products, it is
worth exploring whether consumers would opt for general sealants as an alternative. Will Plastex Ltd.'s
plastic-coated products continue to be the only items being purchased? If the situation described happens,
the demand for plastic-coated products shows a high level of elasticity. On the other hand, if the latter
situation arises, the demand elasticity is minimal.

A market analysis will determine the degree to which the products are essentially interchangeable, similar to
how a law student would approach the subject. United Brands underwent an examination that revealed the
inability to easily replace bananas with the product market known as "other fruit." As a result, bananas were
classified as a distinct market. In the Tetra-Pak case of 1994, the notion that there were distinct markets for
aseptic cartons and related packing technology, as well as for non-aseptic cartons and packaging machinery,
was rejected. In that specific case, the manufacturer's ability to transition seamlessly between markets was a
contributing factor. Declining to provide services to a company (Zoja) under ICI SpA led to the removal of a
prominent manufacturer of ethambutol that was already operating in the market. Attempts to replace
aminobutanol with alternative source ingredients proved to be unsuccessful. Zoja was unable to make any
adjustments to its production. Thus, the sole pertinent product in the market given these circumstances
happened to be a particular chemical known as aminobutanol.

Conducting market research on adhesives, particularly focusing on the plastic coating products manufactured
by Plastex Ltd., is crucial. Plastex Ltd.'s plastic coating product can be seen as operating in a distinct market
compared to similar products made by other providers. In the case of Brass Band Instruments v. Boosey &
Hawkes (1988), it was determined that the key factor in determining the relevant product market is the level
of distinctiveness in commercial reality of the sub-market. In that particular case, the RPM referred to the
collection of instruments used by British-style brass bands, rather than brass instruments in a broader sense.
It is crucial for the firm to establish a strong position either within the internal market or in a significant
market sector. Plastex Ltd. has a significant 45 percent market share in the EU, showcasing its strong presence
in both the EU market and the overall market. According to United Brands, a geographical market is a market
where all traders are subject to the same competitive conditions.

In order to establish the supremacy of Plastex Ltd. in the specialty plastic coated goods industry, a
comprehensive economic analysis of the company and its market position is necessary. Moreover, conducting
a thorough evaluation of the company's financial and technological resources becomes imperative.
Additionally, it is essential to consider any potential obstacles to market entry, such as the existence of more
advanced technology related to this particular product.
The assessment of whether Plastex Ltd. holds a dominant position is of lesser significance; the main focus is
on whether or not they have committed any wrongdoing while in that position.
In the Hoffmann-La Roche case in 1979, the term 'abuse' was defined as the actions of a dominant company
that impact the market structure, undermine competition, and impede the maintenance or growth of
competition in the market.

Given the circumstances, it appears that the decision to withhold LPH may be seen as a form of retaliation
following LPH's refusal to comply with Plastex Ltd.'s requirement that only their plastic coating products be
sold. This situation exemplifies exploitative abuse. United Brands declined to supply a prominent wholesaler,
who had built dedicated facilities for banana storage, due to the wholesaler's prior involvement in promoting
a rival company. The reason for this was that the wholesaler had taken part in the campaign.

If it is found that Plastex Ltd. holds a dominant position and has engaged in abusive behaviour, the UK
national authorities can demand that the infringement be stopped. These authorities have the ability to
enforce fines and require regular penalty payments.

QUESTION
Why does the EU need a competition policy? How effective is it?
The European Union is established on the understanding between its Member States to uphold free market
economies within the Union's borders. Article 3 of the Treaty on European Union (TEU) highlights the
significance of fostering a robust level of competitiveness. This is because competition is widely recognised as
a powerful catalyst for economic activity, as it guarantees a significant degree of freedom in decision-making.
The Treaty does not offer a precise definition for the term 'competition', but it does highlight certain actions
that impede competition and are therefore prohibited, unless the Commission grants exemptions. Article 3
outlines a key objective of the Community, which is to create a framework that safeguards fair competition in
the common market. Competition policy is a powerful tool that the Community can employ to accomplish the
objectives set forth in the Treaty. For example, economic integration will take place to establish a unified
market. This approach seeks to improve the standard of living and quality of life for the residents within the
Union.

The Treaty applies to all types of competitive action, regardless of whether it is conducted by individuals,
businesses, or governments. The section of the Treaty that deals with competition focuses on two separate
sets of regulations that cover both private and public economic activities. Companies that employ unfair
practices or exploit their market dominance are bound by the regulations outlined in Articles 101 and 102.
Articles 107 and 108 discuss the support given by Member States. However, in addition to the Treaty clearly
defining anti-competitive behaviour, it is crucial to establish a system for monitoring and enforcing
compliance. Every Member State has its own set of policies and authorities to handle competition issues. This
is because there are cases of anti-competitive behaviour that are specific to a particular country and do not
fall within the scope of European law. These cases are typically deemed to have minimal or negligible impact
on commerce between Member States. The competition agencies of Member States work closely with the
European Commission, but it is the Commission that has the responsibility of enforcing Community
competition policy, as entrusted by the Treaty. It has the power to issue rulings that must be obeyed by the
individuals they are directed towards, as stated in Article 288 of the Treaty on the Functioning of the
European Union (TFEU).

The Commission's jurisdiction covers four main domains. The entity has the power to collect data, grant
exceptions under Article 101, enforce penalties, and put temporary measures into effect. The authorities and
processes of the entity are established under Regulation 1/2003, as per the legal framework in place. The
Commission requires these significant powers in order to effectively carry out its function. However,
Regulation 1/2003 enforces strict procedural requirements and requires a general obligation of confidentiality
to protect commercially sensitive information. If these obligations or procedures are violated, it may lead to a
legal action being initiated under Article 263 in front of the Court of Justice, and ultimately the Commission's
decision can be invalidated. It is also feasible to initiate a legal claim for compensation against the
Commission, as exemplified in the Adams case (1986). Adams initiated legal proceedings based on Article 288
of the EC Treaty (now Article 340 of the Treaty on the Functioning of the European Union) against the
Commission for violating confidentiality by revealing to his employers, Hoffman-La Roche, that he had
provided assistance to them. Article 101 addresses anti-competitive behaviours such as collusion to set prices,
denying supplies, or restricting market access.

The Commission's role is to oversee agreements and determine whether to provide negative clearance or
exemption. In order to accomplish this, the Commission requires information provided by the applicant as
well as any involved parties. The Commission has the authority to levy fines that do not surpass 1 percent of
turnover in cases where applicants deliberately or carelessly provide inaccurate or deceptive information. The
authority to provide exemption under Article 101(3) is exclusively vested in the Commission. Prior to taking
action, the Commission is required to release a concise overview of the pertinent application or notification,
and all concerned parties must be given the opportunity to provide their feedback.

If the ultimate determination is unfavourable to the applicant, the Commission is obligated to provide him
with a chance to present his arguments regarding the issues he disagrees with. In order to expedite the
evaluation of exemption petitions, the Commission has approved certain block exemptions. These exemptions
enable businesses to organise their operations in a manner that does not violate competition rules.
To reach a conclusion regarding Community competition policy under Art 102, the Commission typically
requires additional information to establish an assessment on the legality of the behaviour in question.

There are two primary methods to acquire this information: through investigations or formal requests for
information. For instance, when the Commission is examining the conduct of a dominating organisation, it
may not only contact the company in question but also reach out to the smaller businesses that have business
transactions with the enterprise. If the responses from the undertakings are inaccurate or insufficient, the
Commission is entitled to levy penalties. Occasionally, it is important to conduct thorough market analysis,
and for this purpose, the Commission has been granted comprehensive powers. If economic trends indicate
that competition within the common market is being limited or distorted, the Commission has the authority
to initiate broad investigations into entire sectors of the economy.

Member States may request more information from governments or competent agencies. The Commission
has the authority to request any information it deems "necessary" to fulfil its duties in all of these cases.
Furthermore, the Commission has the authority to acquire information through conducting on-site
investigations, in addition to making formal requests. These powers encompass the authority to access
premises, inspect books or business documents, make copies of these records, and conduct oral exams. These
investigations can be either voluntary or forced. When it is mandatory, officials of the Commission are
obligated to create a decision that clearly states the topic and objective of the investigation. Typically, the
Commission will conduct surprise visits where there is a significant possibility that the companies, if given
advance notice of the inspection, will eliminate any evidence that could incriminate them. In the movie
"National" released in 1980, a surprise and forceful search and seizure operation was conducted at National
Panasonic's offices, occurring before the company's legal representatives could reach.

National argued that, despite the raid being permitted under Regulation 1/2003, there should have been
some form of advance notice. The Court of Justice, in response to an action filed under Article 263 to request
the annulment of a decision, expressed a different opinion. According to the rule, the Commission had the
authority to conduct investigations that were necessary to uncover any violations of Articles 101 and 102
(formerly known as 85 and 86). Nevertheless, it is the responsibility of the Court to regulate the investigation
authority of the Commission, as was affirmed in a previous instance concerning a 'dawn raid' (Hoechst
(1989)). On occasion, the Commission may ask the competent authority of a Member State, such as the Office
of Fair Trading, to conduct investigations on its behalf. Every endeavour must adhere to the lawful requests of
the Commission, regardless of whether the information provided may incriminate oneself.
If individuals do not collaborate or provide inaccurate or deceptive information, they are subject to fines.
The Commission has the authority to levy fines of up to €1 million or 10% of the global annual revenue of the
company, whichever is greater, in cases where Articles 101 or 102 of the Treaty on the Functioning of the
European Union (TFEU) have been violated. This applies regardless of whether the infringement has occurred
purposefully or negligently. The magnitude of the penalty will be determined by the gravity of the conduct, its
duration, and the scale of the enterprise implicated. Intentional violation typically warrants a more severe
penalty than cases where the violation was simply due to negligence.

The Commission has been proactive in exercising its authority to levy fines. The Vitamins Cartel was fined over
855 million euros in 2001 for violating Article 101 of the Treaty on the Functioning of the European Union
(TFEU). Similarly, in 2011, Intel was fined 1.06 billion euros for violating Article 102 of the TFEU. The
Commission receives and retains any fine imposed, without any portion being allocated to the victim affected
by the anti-competitive behaviour. They should pursue a solution through their domestic judicial system.
According to Article 261 of the Treaty on the Functioning of the European Union (TFEU), the General Court has
complete authority when it comes to imposing fines. If the amount of the fine is being disputed, it is typically
challenged through legal actions under Article 263 TFEU in order to invalidate the decision that imposed it.
The European Union's competition policy grants the Commission extensive powers due to the complicated
nature of the issues it addresses, which can take up to two years to be resolved. In certain cases, such a delay
can result in irreversible harm to certain endeavours. In order to address this potential scenario, the
Commission is granted the authority to promptly intervene by implementing interim measures to halt any
undesirable conduct.

These actions are temporary and intended to maintain the current state of affairs, as seen in the Camera Care
case in 1980. The Commission is bound by the law of the Community, which includes the general principles of
Community law as determined by the Court. The Court of First Instance have the authority to validate,
decrease, annul, or augment penalties and penalty payments imposed by the Commission. Since all actions
that have legal force from the Commission must be made through decisions, these decisions can be contested
before the Court of Justice through a legal action under Article 263 of the Treaty on the Functioning of the
European Union (previously Article 173).

There is a definite judicial oversight of the Commission to ensure that it operates within the boundaries of
European Union legislation. The Commission's powers are necessary to fulfil the requirement stated in Article
119(1) of the Treaty on the Functioning of the European Union (TFEU) for an open market economy with free
competition. The Commission's concern is limited to cases where the competition rules have been exploited
or violated. The Commission acknowledges the necessity for European enterprises to engage in global
competition. However, it emphasises the importance of striking a balance between profit generation and
consumer welfare. Due to its extraterritorial nature, the competition policy of the EU applies to all enterprises
engaged in trade inside the EU, regardless of their country of registration. This policy has proven to be highly
effective in preserving a fair and competitive market.

QUESTION
What is meant by ‘an abuse of a dominant position’?
The term 'dominant position' is associated with Article 102 and relates to the policy addressing anti-
competitive behaviour by corporations. Community law does not explicitly forbid the establishment of a
dominant position. Article 102 of the Treaty on the Functioning of the European Union deals with the matter
of exploiting a dominant position in the common market or a substantial part of it. It aims to restrict the
actions of a dominant corporation that inflicts damage upon its business associates. This type of abuse is
prohibited due to its potential to affect trade among Member States.

The Commission's perspective on a dominant position was discussed in Continental Can (1972).
Undertakings are deemed to be in a dominant position when they have the power to act unilaterally without
taking into account their rivals, customers, or suppliers. This happens because of the company's share of the
market or its possession of technical knowledge, resources, and capital, as well as its market dominance.
There is no need for absolute dominance, where the company can eliminate all other competitors. The
company has significant control over its actions due to its market power. In AKZO Chemie BV (1986), the
Commission discussed the concept of dominance and highlighted that a dominant position could involve the
ability to eliminate or weaken existing competitors and hinder the entry of new competitors into the market.
In the Continental Can case, the Court highlighted the Commission's responsibility to evaluate the market
power of a company through a two-step process. First, it is important to determine the relevant market, and
then assess the company's control within that market.

This exercise can be quite challenging because identifying markets is not always a straightforward task. When
the market is narrowly defined and potential substitutes are ignored, it can create the illusion of a large
market share, which can overstate the market power of the company's product. Applying a broad definition to
the market can lead to underestimating the market share of the undertaking. The Court requires the
Commission to clearly identify the relevant market and provide justification for its definition. In the
Continental Can v Commission case, the Court disagreed with the Commission's conclusion that the
Continental Can corporation had a dominant position in the market for cans and closures used in meat and
fish products.

The main concern revolved around the Commission's failure to sufficiently consider alternative products.
Meat and fish providers can choose between glass or plastic containers, while cylindrical can manufacturers
may consider switching to producing the flat cans commonly used for meat and fish products. In the United
Brands case, the corporation sought to prove that the Commission had once again made an erroneous
evaluation of the market. However, the Court recognised the Commission's precision in identifying the
relevant market as the one for bananas. United Brands argued that they did not have a dominant position in
the fresh fruit market. Nevertheless, the Commission presented evidence showing that bananas were
predominantly consumed by vulnerable populations, including young children, the elderly, and the sick.

Furthermore, it was found that the pricing and consumption of other fruits did not have a significant impact
on banana consumption. It is evident that in order to establish dominance in a particular product market, a
comprehensive understanding of economics is essential. According to this study, various factors are used to
determine dominance. The company's market share plays a crucial role in determining its dominance.
Regarding Continental Can, it is worth noting that the corporation had a commanding 80% share in the
German market. Similarly, United Brands had a substantial 45% portion of the banana market, highlighting the
considerable extent of market share that can exist. According to the Commission, dominance in specific
markets can be established when a company holds a market share between 20% and 40%. The duration of the
company's market presence will be substantial. What are the financial and technical resources of the
company that holds a position of power?

Can it eliminate competitors through aggressive advertising efforts or by engaging in predatory pricing?
Having access to both raw materials and markets is absolutely essential. In the United Brands case, the
company demonstrated vertical integration by owning and operating multiple businesses that were
responsible for the production, transportation, warehousing, and distribution of bananas. Commercial
Solvents, the corporation, refused to supply aminobutanol to another Italian company and had a strong
control over its production. The act of refusing to supply in this specific instance exemplifies the decisive
factor of dominance, which is the behaviour demonstrated by the company. A firm's conduct can illustrate its
dominance, as exemplified in the Continental Can case. This indicates that the firm has the capacity to act
independently, without being swayed by its competitors, customers, and ultimately, consumers.

United Brands utilises a pricing structure that exhibits discriminatory practices, serving as yet another
illustration. Violation of Article 102 TFEU occurs when a company possesses dominant market power either in
the entire common market or in a substantial portion of it. The precise measurement or ratio of an area that
qualifies as a significant element of the common market is not definitively established. In the case of Sugar
(1975), the Court highlighted the significance of considering the production and consumption patterns, as well
as the habits and economic opportunities of sellers and buyers, when assessing a particular product. The
Commission's Notice on Agreements of Minor Importance provides valuable guidance on the relevant
geographical market, highlighting the crucial role of transportation costs. Considering the aspect of
dominance, it is crucial to also consider the element of time. Understanding the impact of seasonality on a
specific market, especially when it comes to perishable agricultural products, is crucial.

As mentioned earlier, Art 102 TFEU does not aim to tackle dominance directly, but rather focuses on
addressing the improper use of a dominant position. How is abuse defined under Article 102?
The Article offers a few examples of anti-competitive behaviour, although the list is not intended to be
exhaustive. There are two main categories that abuse can fall into: exploitative and anti-competitive.

Exploitative abuses can occur when a dominant company takes advantage of its position by imposing trading
conditions that are severe or unfair. There are several common examples of these issues, such as unfair
pricing, unjust trading conditions, discriminatory treatment, and denial of supplies. When examining the
United Brands case, it becomes apparent that an unfair pricing is one that lacks a reasonable connection to
the economic value of the goods. Although the Court did not clearly state its position, the Commission argued
that United Brands was charging excessively high prices for their Chiquita brand of bananas. The decision by
United Brands to prohibit importers from selling green bananas was seen as creating unjust trading
conditions. United Brands stated that they have implemented this rule to ensure that the consumer receives a
high-quality product. Nevertheless, this argument was dismissed. United Brands had the power to enforce
discriminatory pricing, leading to significant price disparities between various Member States.

In the end, United Brands decided not to supply goods to a major client who had invested heavily in the
required infrastructure because of their support for a competing company. The strength of the endeavour is
significant when it assumes a position of authority.

Demonstrating anti-competitive abuses presents a greater challenge compared to establishing exploitative

abuses. Usually, these actions are less harsh, but they still achieve the desired result by reducing or
eliminating competition. A notable example is the tying-in agreement that arose in the Hoffman-La Roche
(1977) case. This endeavour had a significant presence in seven different vitamin markets. Customers are
dedicated to purchasing the majority, if not all, of their needs exclusively from La Roche through tying-in
agreements. These companies were granted fidelity rebates in the form of discounts as a form of
compensation. The agreements also included provisions called 'English' clauses, which allowed customers to
ask La Roche to match rates offered by other suppliers for similar products. If La Roche fails to fulfil this
obligation, the corporation would be free to obtain the products from another source. Although the tying-in
arrangements did not impose excessive burdens on the enterprises, the Commission found that they limited
consumers' freedom to choose alternative providers. Once the alternative suppliers were identified, La Roche
took proactive measures to eliminate its rival. Both the Commission and the Court concluded that these
methods were deemed abusive.

La Roche's use of predatory pricing demonstrates behaviour that is anti-competitive. AKZO Chemie BV (1986),
a company with a strong market position in the production of organic peroxides, implemented a strategy of
lowering prices below their production costs in order to eliminate potential competitors from the market.
Other examples of anti-competitive behaviour include refusing to provide necessary supplies, monopolising
certain activities, and implementing restrictions on imports and exports. Continental Can was subject to the
application of Article 102 TFEU (formerly Article 86) by the Commission in relation to a proposed merger or
takeover, just like a law student would analyse a case. The Commission's ruling concluded that the proposed
takeover was deemed an abuse of their dominant position in the common market, particularly in Germany. It
is unlikely for such a scenario to happen right now under Article 102 of the Treaty on the Functioning of the
European Union (TFEU) because there is a specific policy, Regulation 139/2004, that deals with mergers and
acquisitions.
QUESTION 32
Critically review the Commission’s application of the Merger Regulation.
Although the EU competition policy focuses on discouraging restrictive behaviours and the exploitation of dominant
positions, it also seeks to regulate other activities. In certain cases, the actions of Member States or the consolidation of
public firms may be seen as negatively affecting competition.

EU legislation seeks to regulate or limit these activities in order to address their impact on the Community. The
Commission has been granted the authority to handle mergers under Regulation 139/2004, as per its jurisdiction. This
regulation was put into effect to replace the current regulations with the aim of enhancing procedural consistency in
evaluating different types of mergers and acquisitions. After a proposed merger fulfils the necessary conditions to be
deemed a concentration, the next step is to determine if it satisfies the prerequisites for having a 'Community
dimension'. The evaluation for this is determined by either sales or turnover.

As per Article 1(3), mergers meeting the criteria of a global turnover of €2,500 million and a combined turnover inside
the European Union exceeding €100 million will undergo review by the European Commission. The Commission's
supervisory role has been expanded as a result of being notified about these mergers.
There are three types of mergers: horizontal, vertical, and conglomerate mergers.

Horizontal mergers happen when companies producing the same products and operating at the same market level
decide to join forces. Vertical mergers happen when companies operate in different stages of production but within the
same market for a specific product. Lastly, conglomerate mergers occur when there is no connection between the
businesses involved in any particular product sector. Horizontal mergers present a significant challenge to competition.

The European Commission is tasked with enforcing the competition policy of the European Community, which involves
overseeing mergers. The Merger Task Force (MTF) is a division within the Competition Directorate DG IV that oversees
merger control throughout the European Union (EU). For the policy to have any real impact, it's crucial that the
participating businesses give proper notification. As per Regulation 139/2004, Article 4 requires the MTF to be notified.
Not adhering to this requirement could lead to the imposition of fines as specified in Article 14(1)(a). When the MTF
determines that the notification falls under the Merger Regulation, it must make the notification public. The MTF has
the power to commence an investigation into the proposed merger or concentration, during which the merger must be
paused. Failure to comply with this requirement could lead to the Commission imposing a significant financial penalty,
as outlined in Article 14(2).

The investigation conducted by the MTF consists of two separate stages. In the initial phase, the MTF has the power to
decide, as stated in Article 6(1), whether the concentration is outside the scope of the regulation. In the second stage,
the Commission raises significant concerns regarding the compatibility of the merger or concentration with the common
market. Article 8 of the rule provides the Commission with various options to consider, allowing them to assess whether
a merger or concentration truly breaches the evaluation criteria. Based on the regulation, it is mandatory for the
Commission to make a decision within four months of initiating the procedures. If the merger fails to achieve this, it will
be deemed compatible with the single market. However, if the Commission determines within the designated
timeframe that it is incompatible with the common market due to a significant obstacle to competition, the Commission
is empowered to issue a decision to that effect. Such circumstances could hinder the advancement of the merger or
necessitate the reversal of a previously finalised merger.

The Commission has clearly stated that the evaluation of whether a concentration exists will be based on legal and
factual considerations. However, the Commission has received backlash for certain actions, such as its intervention to
block the merger of Aerospatiale-Alenia and de Havilland. The criticism of the decision centred on the Commission's
definition of the relevant product market. Supporters of the merger contended that the Commission's market definition,
which only included 20- to 70-seater aircraft, was overly restrictive. However, the Commission has consistently rejected
any attempts to reconsider the matter. This particular case is quite unusual as the majority of notifications do not lead
to the Commission intervening to block the merger. This is made possible by the Commission's authority to impose pre-
clearance requirements on mergers, as exemplified by the 1993 merger between Nestlé SA and Perrier SA.

However, the Commission is currently grappling with a fresh challenge related to collective domination. The
Commission has concluded that the Merger Regulation applies to situations of collective dominance. This occurs when a
merger leads to the creation or strengthening of a dominant position held by the merging parties and other market
participants in a particular market for specific goods or services. In the Gencor Ltd v Commission case, a merger was
being considered between two companies operating in the platinum market. The Commission expressed concerns about
the potential for these two companies to establish a dominant position in the market, along with another business.
After careful examination by the General Court, it was concluded that the Merger Regulation encompasses this type of
collective domination. The Court also outlined the steps for applying this regulation. Expanding on the standards
established by the European Court of Justice in the Woodpulp case, the Court of First Instance concluded that the
regulation's extraterritoriality was satisfied because the platinum, despite coming from South Africa, was intended for
sale within the European Union. Based on principles of public international law, the Court concluded that the intended
concentration would have a swift and substantial impact within the European Union.

The General Court's broad interpretation of the regulation on collective dominance has presented difficulties for the
Commission in proving the existence of collective dominance. In the Airtours plc v Commission case, the Court of First
Instance (CFI) found errors in the Commission's assessment of competition in the 'relevant market'. In the United
Kingdom, the tour operator market is predominantly dominated by a select few major operators. The operators
mentioned are Thomson's, Airtours, Thomas Cook, and First Choice, each contributing a significant percentage to the
market share. If Airtours were to merge with First Choice, they could potentially gain a larger market share. In addition,
the three remaining major operators would have the opportunity to establish a dominant position in the industry, since
no other operator currently holds more than 5% of sales. The Commission failed to present any evidence to back up its
assessment of the expected reaction to Airtours' purchase of First Choice plc, a major competitor in the market.
Consequently, the Commission's decision to block the concentration was reversed. The outcome of this case has
emphasised the importance of the transparency test in establishing the existence of collective domination. However,
proving this can be quite challenging, just like in cases involving assessments for superiority under Article 102.

In the case of Schneider Electric SA v Commission, the decision to prevent the merger between Schneider Electric SA
and another French producer of low-voltage electrical equipment was overturned. The CFI found flaws in the economic
analysis conducted by the Commission. Soon after, there was a case called Tetra Laval BV v Commission, where the
Court of First Instance (CFI) heavily criticised the Commission's analysis. The Commission's evaluation of the merger's
potential anti-competitive effects seemed overly optimistic, and the information provided by the Commission appeared
insufficient to support its decision.

The Commission's jurisdiction over mergers no longer depends on the use of specific articles of the TFEU, as seen in the
Continental Can (1973) and Philip Morris (1987) cases. The current Regulation 139/2004 has been developed to meet
the requirements of business and the European Commission (EC), with the goal of establishing a more efficient and
simplified process. The regulation is currently under review. This requirement made it necessary for firms to fulfil a clear
and distinct reporting obligation, emphasising the unique role of the Commission in relation to the various merger
authorities in the Member States. The Commission has extensive investigative powers and the ability to impose fines.
However, a major challenge has been the strict time limitations it must adhere to. In the fast-paced world of the global
economy, making quick decisions is crucial. However, this does create challenges and constraints for the Commission.

The experiences of Tetra Laval and Schneider highlight the difficulties of conducting market investigations and
evaluating the potential consequences of a proposed merger or concentration within the regulatory timeframe. The
Commission is anticipated to seek input from Member States and the business community regarding the reform of the
application of the Merger Regulation, just as a law student would do. Following previous assessments, the Commission
introduced a new Regulation 139/2004, which came into effect in May 2004.

The new law has simplified the notice proceedings to speed up the decision-making process regarding the "compatibility
with the common market" for any potential "concentration".

Despite facing criticism from certain firms and national bodies, the Commission effectively showcased its ability to take
swift action during the 2008 financial crisis. During that period, the Commission approved Lloyds Bank's acquisition of
HBOS.