Competition Law Final

Competition Law
Giovanni Petroboni
instructions for use

- slides are not enough
- in one hand, the law
- EU Treaty, Regulations, Commission Notices, Decisions, etc.
- in the other hand, the slides and the text-book; about the
latter:
- Monti is enough [Chapters 1-2, 5-11; 12 (exclusively Subchapter 6)]
- Sufrin-Jones only for further readings
- assessment method: written exam
why a competition law? /1

A. The economic reason: one core idea and two facts /1
The core idea:
- when firms are under adequate competitive pressure, and are rivals, they duel to keep and
increase their customers, and so to produce more outputs, at lower costs, of higher quality;
some benefits on welfare outcome:
- lower prices
- innovation in productive and distributive processes
- product differentation
- expulsion from the market of inefficient firms
- when the competitive pressure is low, firms may operate without considering competitors
behaviour and customers satisfaction; they may live (survive) in the market without any
commitment in improving their products, productive and distributive processes, etc.

The first fact: The market, if left without any control, often evolves (involves?)
towards reductions of competitive pressure:
collusive behaviours of two or more firms: price-fixing cartels, agreements on quantity of

outputs, agreements on geographical partition of the market, etc. (restrictive agreements)
mergers, or acquisitions, or sets-up of a new common firm, which may cause a reduction of
the number of firms operating in the market or, in any case, a harm on competition
(concentrations)
When such reductions of competitive pressure involve firms having market power, this
will affect the state of welfare that would have been achieved in a competitive regime

The second fact: When competitive pressure is already low, the market, if left
without any control, often evolves (involves?) towards further reductions of
competitive pressure or other scenarios which harm the welfare as well:
abusive behaviour of firms with dominant position on the market, which harm competitors
or consumers (abuse of dominant position)
The aim of Competition Law
The object of Competition Law
Competition Law seeks to protect the

well-functioning of the market, by
ensuring the maintenance of an
adequate competitive pressure, and so
to get the maximum welfare
Competition Law determines the legal

conditions whereby to ban, or to control,
firms behaviour which imply, or may
imply, a reduction of competitive
pressure and, in any case, a harm for the
welfare.

B. The political, philosophical, cultural reasons
competition as economic democracy
-
freedom of entering into a market of any interested firm (so called equality of opportunities)
freedom of choice of consumers
consistency between competition (understood as economic democracy) and political

rights (democracy), as well as civil rights (cultural pluralism)
division (non gathering) of economic power as a way to ensure division (non
gathering) of political power
C. The historical reasons
USA (Sherman Act 1890):
Small traders and farmers against cartels (at the time, often in
the form of trusts) which were entered into by big enterprises
in crucial economic sectors: heavy industry, energy,
communications, transports
ECSC (1951) EEC (1957):
Creation of a European Market of Coal and Steel, then a

Common (later a Single, and finally an Internal) Market
(and, formerly, pressure by U.S. on Japan and Germany for
the introduction of an antitrust legislation)
competition law:
politics, economics, institutions /1
Three anticompetitive behaviours // Three rules:
-
ban of restrictive agreements

- ban of abuses of dominant position
control on concentrations (mergers and acquisition)
different concepts and cases //

different reasons for regulation //
different time and ways of enforcement
one common feature:

open textured legislation (e.g.:
competition, restriction of
competition, abuse, dominant
position, market, etc.)
three important extra-legal factors who influence the enforcement of legal provisions:
politics, economics and institutions
competition law:
1. Politics
(policy:
which aims)
what are the goals of competition law?

what does the well functioning of the market means?
Only economic goals (welfare, efficiency) // Also other public goals (employment, environment,
economic freedom and pluralism, etc.)
2. Economics
(economic
theory:
how markets
behave)
what is (a restriction of) competition?

Harvard School // Chicago School // Post-Chicago
what is welfare?
Consumer Welfare // Total Welfare
what is efficiency?
Allocative Efficiency // Productive Efficiency // Dynamic Efficiency
competition law:
3. Institutions
(how the competition
system works)
what are the institutions entitled to enforce competition law?

Indipendent authorities // Political government
1.2.3.: the impact on (history of) competition law

No legal system has given just one answer to the above indicated questions:
- historical evolutions and changes for each of the three factors
- in addiction, as to political (1.) and economic (2.) factor, variety of answers by the
competition authorities also in the same period of time
Changes/Variations in interpretation/enforcement of competition law depend on how the
above indicated questions/options have been answered/chosen
competition law in Europe /1

European Union Law: general principles
- Treaty on the Functioning of the European Union (TFEU, 2007): articles 119, 1,
and 120
- Treaty on European Union (TEU, 2007): article 3, 3

- Protocol No. 27 attached to TEU and TFUE
[to be compared with Treaty on European Economic Community (1957): article 3, (g)]
- Charter of Fundamental Rights of the European Union (2007): article 16

[actually: economic freedom (individual, subjective view), not competition (general objective view)]

European Union Law: detailed rules
- Treaty establishing the European Coal and Steel Community (1951): articles 65-66
- Treaty on the Functioning of the European Union (2007):
- articles 101-106 TFEU
[former Treaty on EEC (1957): articles
85-90 (re-numbered as articles

81-86 by the Treaty of Amsterdam, in 1997)]
- Regulations
- reg. 139/04, on mergers
[former reg. 4064/89]
- reg. 330/10, on vertical restraints
- soft law (praxis of Commission, often summarized in Commission Notices)
- case law (General Court and Court of Justice)

Domestic Laws
-
in some cases historically preceeding EU law (e.g. Germany, France, UK), in other cases
following it (e.g. Italy)
in some cases applicable to anti-competitive behaviours which are also subject to EU

competition law (so called double barrier; e.g. Germany), in other cases applicable only to facts
which are not subject to EU law (so called single barrier; e.g. Italy: Law No. 287/90, article 1, 1)
in any case, strong influence of EU Competition Law on (the evolution of) domestic
competition laws:
(i)
sometimes, the duty to conform interpretation of domestic laws to
EU law is expressively prescribed (e.g., Italy: Law No. 287/90, article 1, 4)
(ii)
de facto, even when not prescribed
(iii)
phenomenon even stronger after recent reforms of enforcement of EU
competition law (nowadays delegated to the national competition
authorities)
EU competition law:
an overview
Three Rules
ban of restrictive
agreements
(article 101 TFEU)
ban of abuses of
dominant
position
- general ban
- specific cases
- exemptions
- general ban
- specific cases
- no exemption
Enforcement
Public
- voidness
- sanctions
- corrective measures
-precautionary measures
(article 102 TFEU)
control on
concentrations
(Reg. No. 139/04)
- notification in advance to the

European Commission
Private
- approval, disapproval,
conditional approval
- sanctions
- precautionary measures
-action for damages

- action for
precautionary
measures
EU competition law:
when is it applicable? /1
nowadays all EU countries have a domestic competition law:
- where does (the scope of) EU law begin?

(in countries with single barrier system:)
- where does (the scope of) domestic law end?
the answers are different depending on the anticompetitive behaviour concerned
concentrations
- restrictive agreements
- abuse of dominance
EU competition law:
Concentrations with Community dimension: the first set of thresolds
(article 1, 1-2, Reg. No. 139/04)
1) the combined aggregate worldwide turnover of all the undertakings concerned

more than EUR 5.000 million
AND
2) the aggregate EU-wide turnover of each of at least two of the undertakings concerned
more than EUR 250 million
UNLESS
3) each of the undertakings concerned achieves more than a given percentage of its
aggregate EU-wide turnover within one and the same Member State
more than two-thirds
EU competition law:
Concentrations with Community dimension: the second set of thresolds
(article 1, 1-2, Reg. No. 139/04)
1)
the combined aggregate worldwide turnover of all the undertakings concerned

AND
2)
in each of at least three Member States, the combined aggregate turnover of all the
undertakings concerned
AND
3)
in each of at least three Member States included for the purpose of point (2), the
aggregate turnover of each of at least two of the undertakings concerned
AND
4)
the aggregate UE-wide turnover of each of at least two of the undertakings concerned
UNLESS
5)
each of the undertakings concerned achieves more than two-thirds of its aggregate
Community-wide turnover within one and the same Member State.
go to slide 149
EU competition law:
Restrictive Agreements and Abuses of Dominance /1
(art. 101 TFUE and article 102 TFUE)
within the internal market (art. 101, 1, TFUE)

within the internal market or in a substantial part of it (art. 102, 1, TFUE)
low attitude in distinguish
the scope of EU Competition law
and the relevant one of Domestic Laws
which may affect trade between Member States (articles 101, 1, and 102, 1,
TFUE)
that is crucial
EU competition law:
(art. 101 TFUE and article 102 TFUE Commission Notice 2004/C101/07)
the concept of trade:
- not only the traditional exchanges of goods and

services, but all cross-border economic activities,
including establishment ( 19)
between Member States (i):
- at least two Member States ( 21), but see

also the following notes:
- any restriction on import and/or export activities
concerning one Member State implies that the
condition of the harm of trade between Member
States is met (see 25, 27, 37, 39, 40)
EU competition law:
(art. 101 TFUE and article 102 TFUE Commission Notice 2004/C101/07)
between Member States (ii):
- any agreement or practice which have as object or

effect the maintenance of the current market
structure within an entire Member State, has also
the effect to partition that market (i.e., that Member
State), isolating it from the trade with other Member
States ( 77)
- sometimes, the condition is met even if the
agreement or the practice concerns only an imortant
portion of a Member State: for example, a port or an
airport, because trade and transport connected with
such facilities cannot not influence the trade
between Member States (GC T-128-98, Aroports
de Paris)
EU competition law:
applicability of EU competition law
(whether a fact falls within the scope of it)
institutional context where EU competition law is enforced

(which authorities are entitled/required to enforce it)
lets consider, at the moment, only public enforcement

(and only from a general point of view; some exceptions and details shall be considered forward)
concentrations (Reg. 139/2004)
if EU law applies, the institutional

context for public enforcement is
exclusively at European Union level
go to slide 150
agreements and abuses of dominance

(Reg. 1/2003)
if EU applies, domestic authorities are
entitled/required to enforce it
EU competition law:
but what about the conditions whereby EU competition law ends?
which relevance have
the nationality of the firms concerned?
(for the agreements) the place where the contract was entered into?
(for the agreements) the law applicable to the contract?
(for the mergers) the place where the production sites are?
no one: so called effects doctrine applies:

- if the agreement/the practice has effects within the internal market, EU law applies
- if the merger concerns firms overcoming EU turnover thresolds above indicated, EU law applies
(and see now Commission Notice 2004/C101/07, 100)
the anticompetitive behaviours:

one common issue
Whatever anti-competitive behaviour is considered, the need of a double
analysis arises:
- determining the market power of the firm/the firms concerned
- assessing the economic effects of such behaviour on competition (i.e. on
efficiency, on welfare)
For both purposes, the relevant market must be outlined, that is the place
where firms exert their market power, as much as they can (due to the
competitive pressure of other competitors)
not as the area where the firm sells its products
nor as the economic sector where it belongs
the relevant market: Commission Notice 1997/C372/03
the relevant market:

preliminary notes /1
Defining the relevant market means identifying those actual competitors of the
undertaking involved that are capable of constraining those undertakings behaviour
and of preventing them from behaving independently of effective competitive
pressure
Commission Notice 1997/C372/03, 2
in the three anticompetitive behaviours, defining the relevant market:
implies different analysis

has different function

in the three anticompetitive behaviours, defining the relevant market
implies different analysis
agreements and abuses
its an ex post definition:
- a photograph of the market in the
present/in the past
- in order to assess the effects that
actually derived from the considered
behaviours
mergers
its an ex ante definition:
- a prospect of the future market,
both as resulting from the
considered merger and as coming
from the natural evolution of the
market itself
(see Commission Notice 1997/C372/03, 12)

in the three anticompetitive behaviours, defining the relevant market
has different functions
abuses and mergers
agreements
generally speaking, it is mainly useful
only to assess the entity of the harm
to the market
it is useful in an earlier moment, that

is to determine:
- wheter the behaviour was lawful or
not (abuses)
- whether the merger may be
approved or not (mergers)

two levels of analysis
definition of relevant market
as identification of the competitors of the firms concerned (see above):
- from a merceological point of view (so called relevant product market)
- from a geographical point of view (so called relevant geographical market)
[see again the Commission Notice 1997/C372/03, ::::::::::::]
relevant product market
relevant geographical market
interchangeability
of goods and services offered
by the firms involved
homogeneity
of the conditions of competition
where the firms involved operate
(If they are interchangeable, they belong to

the same r.p.m)
(if they operate in areas where such

conditions are homogeneous, they belong to
the same r.g.m.)
the relevant
product market /1
demand-side substitutability
- all those products and/or services which are regarded as
interchangeable, or substitutable, by the consumer, by reason of the
products characteristics, their prices and their intended use
(Commission Notice 1997/C372/03, 7)

Examples of different r.p.m. (demand side)
beverages
-- with gas/without gas -- alchoolic/non alchoolic

-- distributed via supermarkets or via horeca
-- only to quench thirst/mainly in a social context
tootbrushes
-- manual/electric
air carriers
[every single pair point of origin - point of destination is a market and

further division between]
-- time sensitive consumers // price sensitive consumers
the relevant
product market /2
supply-side substitutability
- the relevant market include those suppliers that are able to switch
production to the relevant products and market them in the short term
without incurring significant additional costs or risks in response to small
and permanent changes in relative prices
(Commission Notice 1997/C372/03, 20-23)
Examples of different r.p.m. (supply side)

beverages
-- fruit based/milk based
Examples of same r.p.m. (supply side)

paper
-- copy paper//art book paper
the relevant
product market /3
Demand side and supply side substitution: does it exist any jerarchy between the two?
Generally speaking, no jerarchy
Supply side substitutability may also be taken into account in those situations in which its effects
are equivalent to those of demand substitution in terms of effectiveness and immediacy
Actually, supply side substitutability seems to be a means to check, and correct, the
results of the demand side substitutability:
Switch of production by the suppliers, without costs and risks may happen in those situations
which typically arise when companies market a wide range of qualities and grades of one
product: even if, for the customers, the different qualities are not substitutable, the different
qualities will be grouped into one product market
the relevant
geographical market /1
the area in which the undertakings concerned are involved in the supply and demand of
products or services, in which the conditions of competition are sufficiently
homogeneous and which can be distinguished from neighbouring areas because the
conditions of competition are appreciably different in those areas
Commission Notice 1997/C 372/03, 8
from the demand side

also r.g.m.
from the supply side
the relevant
geographical market /2
Supply side
- whether the conditions of competition are homogeneous or not (e.g. costs of transports, entry
barriers, local preferences) in the areas where the firms concerned offer their products and
services
e.g. cement
r.g.m limited: operating area of a cement factory depends on the quantity

and quality of the roads, the traffic conditions, the geographical caracteristics
Demand side
- whether customers are willing to move and search better conditions of sale or supply
e.g. banks and insurance
r.g.m. mainly local: customers reluctant to move from home

methods for determining /1
The main method
1) The SSNIP test (at the same time r.p.m. and r.g.m.) (Commission Notice
97/C372/03, 15-18)
to imagine a hypothetical monopolist of a given product in a given area

who practices a Small but Significant Non-transitory Increase of Price
(5-10%)
to assess whether, in response, the customers would switch to readily
available substitutes or to suppliers located elsewhere
-
if substitution were enough to make the price increase unprofitable

(because of the resulting loss of sales), additional substitutes and areas are
included in the relevant market
the test is completed when a set of products or services and areas is
identified where the price increase would be profitable
to assess whether, in response, other firms would switch their

production in order to include the product of the candidate market

and some corrections
[limits of reliability of the SSNIP test:
- starting price is actually reached under competitive conditions?
- a risk that relevant markets size depends on the extent of price increase]
Additional quantitative methods (mainly for r.p.m.):

2) Own price elasticity: if the demand of a given product is inelastic, conclusions
may be drawn that (there are no close competitors and that) it forms a
separate market
3) Cross-price elasticity: if there is a correlation between price increase or

reduction of one product (or one area) and changes in demand of another one,
the two are in competitive relationship and are part of the same market
4) Price correlation analysis: if historically there is a high correlation between

price movements ot two products, this suggests that they belong to the same
market

Demand side /3
[sometimes quantitative methods are non exaustive]
Additional methods (mainly for r.p.m.):

5) Evidence of actual substitution in the past (shock analysis)
6) Surveys on Views of Customers and Competitors of the firm(s) involved
7) Studies, Surveys and Reports on Customer preferences and perceptions
the anticompetitive agreements:

an overview
prohibition (article 101, 1, TFUE) and exemptions (article 101, 3, TFUE)
balance of interests
note 1: single exemption block exemption
note 2: modernization of competition law (Reg. 1/03)
- Domestic Authorities involved in the (public) enforcement of art. 101 TFUE (see above)
- no more the need of a grant of single exemption: a system of legal exemption
general prohibition and specific cases (article 101, 1, TFUE)

clarity, and flexibility, of the law
the reasons for the prohibition

distorsive effects on allocation
e.g.: in the case of a monopoly deriving from a cartel:
pre-determining of prices and quantities, regardless of the demand
transfert to the producers of all the surplus paid by the consumer
negative effects on innovation in productive and distributive

processes
additional costs for the set up and the functioning of the
agreement
monitoring of the parties actual behaviour
sanctions in case of any breach of contract
catching (or excluding) of the outsiders
and the reasons

for the exemptions
(possible) positive effects on productive and distributive
efficiency
(possible) positive effects on technological progress

(possible) positive effects on products quality
(possible) positive effects on pluralism in the market
the general prohibition:

the elements
undertakings
agreements between undertakings // decisions by
association of undertakings // concerted practices
which have as their object or effect the [appreciable]
prevention, restriction or distortion of competition
which may affect trade between Member States (see
above)
the concept of undertaking /1

no definition in legislation, neither primary or secondary
the case law: a functional view

any entity which is engaged in an economic activity, that is the supply of goods or
services in a given market; an activity which may have effect on competition in that
market

no relevance (for the institutional structure of the entity and
so) for:
the ownership // the ways of financing
the legal status
the profit making purpose
the existence of a professional organization engaged in the activity
the focus is on the activity

(and so various activities of the same entity must be considered individually)

what is an economic activity? some (extreme) examples
individuals (as long they do not act as employees or consumers; the
case of the artist/performer who sells IP rights on his/her
performances)
members of liberal professions (notwithstanding the nature of public
law of their activity: customs agents, lawyers, architects, etc.)
sports associations engaged in commercial activities (selling
broadcatsing rights and merchandising articles, concluding sponsoring
agreements, etc.)

what is not an economic activity? some examples
activities which are connected (by their nature, aims and rules) with
the exercise of the powers of a public authority: public order, safety,
protection of the environment, etc.
activities which are carried out on the basis of solidarity: public system
of healthcare, social protection such as pensions
the delicate issue of procurement activity which is ancillary to non
economic activities (e.g. purchasing goods and services)
Non economic activity: the lack of an offer to the market
what about agreements between

companies of the same group? /1
Plurality of undertakings still exists in the case of a group?
different legal personality
vs.
single economic entity
Two companies belonging to the same corporate group are considered one
undertaking if they form an economic unit within which the subsidiary has no
real freedom to determine its course of action on the market, and if the
agreements or practices are concerned merely with the internal allocation of
tasks as between the undertakings
what about agreements between

companies of the same group? /2
The lack of indipendence must be evidenced by the involvement of the parent
company in the strategical decisions of the subsidiary
but various other factors may also be taken into account, such as:
o sharing of shareholders
o sharing of directors
o sharing of premises
o vertical integration of activities
o shareholders agreements
o single reporting system
a specific case: the total ownership
- the influence of the parent company is presumed [CG Imperial Chemical Industries (1972)]
- the presumption is rebuttable [proving not to have received any instruction from the
controlling company: Comm. Gomma Cloroprene (2007)]
another case of
(likely) lack of indipendence
the principal/agent relationship
if the agent does not decide its market conduct indipendently, how can we
consider its agreements and contracts with the principal as agremeents
between two firms?
How to prove the (lack of) indipendence?
Immaterial factors
- exclusivity / non exclusivity of the agency relationship
- qualification given by the parties / by the law which is applicable to the agency contract
The main indicator

the risks borne by the agent
the double relevance

of a lack of indipendence
When we have two entities (in a group or in a principal/agent relationship),
the existence of either two firms, or just one, may have a double relevance in
competition law:
(in case of an agreement between the two entities)
as to the qualification of the agreement as relevant under Article 101 TFEU

(the burden of proof of the indipendence is on the authority)
(in case of an anticompetitive conduct materially adopted by the subsidiary/the agent in the
market)
as to the decision whether the parent company/the principal is also liable for
the infringement of competition law and may be punished by the authorities
(the burden of proof of the indipendence is on the parent company/the principal)
(the group turnover constitutes the basis for the calculation of the fines)
agreements, decisions or
concerted practices /1
The actual (limited) relevance of the distinction:
both in theory - (the function of the three figures is to determine the scope of the same
discipline)
and in practice - (the notion of agreement is understood so widely, that the

difference with the concerted practice becomes very light)
- (this is a restrictive agreement and, in any case (or at least), a
concerted practice)
the list in article 101 (1) TFUE is intended to apply to all collusion between
undertakings, whatever the form it takes. There is continuity between the
cases listed. The only essential thing is the distinction between
independent conduct, which is allowed, and collusion, which is not,
regardless of any distinction between types of collusion
ECG [1999] Anic Partecipazioni
and collusion occurs in any case of cooperation whereby two or more

indipendent undertakings :
- adopt, o do not adopt, a given conduct
- reduce the uncertainty as to their (current or future) behaviour
(again) a functional approach
1) As a consequence, the three notions are not understood in a
formal/formalistic way, but must include every case in which the parties
substitute the risks of competition with the advantages of the cooperation.
2) A fourth notion has arisen in the case law: the single overall agreement.
Nexus of complementary conducts with:
- one purpose
- same parties
- same products and services concerned
- same ways of performance of the agreement
regardless of
- the proof of each agreement or practice, or of the parties who took part of it, or
of the involvement of each party on a day to day basis
- the different degrees of intensity overtime
agreements /1
agreement
any expression of wills of at least two indipendent

undertakings, regardless of their (i) form and (ii) binding or
enforceable effects
It is a wider notion, than the ordinary one, generally used in private law
-
binding and enforceable contracts (also promise of agreements, as well as

framework agreements)
expired contracts (when the parties still adehere to them)
LOI, gentlemens agreements, other unenforceable contracts, etc.
the use of anticompetitive terms and conditions in sales invoices by one party,
and their tacit acceptance and compliance by the other party
the delicate issue of mere unilateral proposals, tacitily accepted by the other
party
agreements /2
When/How an agreement becomes relevant, for competition law?
- when it is entered into?
- when it is performed?
- when it produces its anticompetitive effects?
It depends:
- for the opening of a procedure for infringement
- for the implementation of a fine
- for the assessment of the gravity of the behaviour
decisions of association of
undertakings
decisions
of association
any decision of any association, organization, committee

of firms which, by expressing a general will in the
interest of a group or of a category, may induce a
coordinated behaviour of the undertakings concerned,
regardless of the binding or not-binding nature of the
effects:
-
binding decisions (deontological codes, bye-laws,

regulations, ecc.)
expression of will by firms adehering to (even
temporary) association of firms
reccomendations
concerted practices
concerted
practice
conscious coordination of two or more undertakings, with

harm to the competition:
1) contact which permits the cancellation, or in any
case the reduction, of any uncertainty about the future
behaviour of other competitors:
-
exchange of information (with or without confidiality)

periodical meetings (also by representatives)
2) following adoption of parallel conducts (but often, once

proved the taking contact mentioned sub 1), this 2) is
presumed)
function of completing the system
(e.g. when the evidence
of an agreement or a decision is missing?)
the problem of (mere)

parallel conducts /1
Often they are a sign of the existence of a concerted practice (see above)
But they also may be intended as the result
of some rational decisions taken by single indipendent market players
So what about when you have just mere parallel conducts
(and no evidence of previous contacts)?
the problem of (mere)

parallel conducts /2
What is material is whether the parallel conducts:
- create market conditions which are not equivalent to that produced in an ordinary
competitive context
- consolidate and fix market power of the firms concerned without any relevance for
the actual choice of the other market players
When these two conditions are not met (i.e., proved), the parallel conducts are likely only
the effect of normal competition // the effect of a clever analysis of the market by the
market players
the proof
of restrictive agreements
sometimes
the authorities have the text of either the agreement, or

the decision (because it is public or has been found during
any inspections)
generally
the parties try to destroy any evidence, or modify the

documental description of the facts (false minutes, false
subjects of the meeting, altered names and data, etc.)
How to prove the agreement, then?

1.
leniency programs
(see Commission Notice 2006/C298/11)
2.
(but in any case) evidence grounded on clues, which have to be

objective, pertinent and consistent (so called narrative congruence )
How to prove the participation of the single firm?
The case of the single overall agreement
as their object or effect /1

object:
the object of the contract (in a technical sense)?

the common intent of the parties?
the natural and objective attitude

(within the economic context)
- price fixing
- market or customers partitioning
- output or sales limiting
(so called per se restrictions hardcore restrictions)

effect:
...the juridical effects of the agreement?
the consequences occured in the market concerned

(both expressively provided and not provided by the parties)
material factors:
- the relevant market
- the number and size of competitors
- the degree of saturation
- effects on the business interests of third parties
(a counterfactual analysis)

object/effect: which relationship?
alternative, non cumulative

a) if the agreement has an anticompetitive object, we do not need to
prove the anticompetitive effects
(but the effects on the market are not totally unrelevant)
b) we must consider the effects when the object is not by nature

anticompetitive

object/effect: which (further) relevance?
the appreciability of the restriction

a) Per se/Hardcore restrictive agreements are always relevant under EU
competition law
b)The others (those whose effects must be assessed to be ) are presumed to

be immaterial if they concern firms whose position on the market is not
significant
(de minimis doctrine)
the appreciability
of the effects /1
when an agreement doesnt have an anticompetitive object
- a mere limitation of economic freedom is not enough
- neither minimal anticompetitive effects are enough
- an appreciable, significant, modification of competition is needed
- the agreement must be able to alter not occasionally the competition in a
given market
(see also the notion of workable competition)
the appreciability
of the effects /2
Commission Notice 2001/C 368/07
- quantitative thresolds which detect firms whose agreements are presumed
to be unrelevant
(safe harbour)
- thresolds defined on the basis of threee joint criterions
- market power
- horizontal agreements // vertical agreements
- (per se restrictions // not per se restriction: see above and see also C.N. 2001/C368/07,
11, 1)
Horizontal agreements:
Vertical agreements
joint market share of all the firms

concerned, in all the markets concerned,
not exceeding the 10% thresold
market share of each of the firms

concerned, in all the markets concerned,
not exceeding the 15% thresold
the appreciability
of the effects /3
the actual relevance of the de minimis thresolds
No absolute exclusion
(rebuttable presumption: see CN 2001/C368/07 2)
No absolute inclusion
(a relevant agreement may be exempted)
Not absolute at all

[block exemptions are grounded on other (higher) thresolds]
from the general prohibition

to the specific cases
the notion of restrictive agreement and its elements
agreement // decision of association // concerted practice

between two (or more) undertakings
having as their object or effect
an appreciable restriction // distortion // prevention of
competition
with harm to the trade among Member States
the elements of the general prohibition into the (concrete

occurence of the) specific cases
a) fixing the prices /1

the aim
- free definition of the prices is one of the most clear expression
of economic freedom (in a subjective view) and competition (in
an objective view) price competition is the most elementary competition
- trend to a natural reduction of prices is one of the reasons of

preferability of competitioncompetition as a way to get consumer welfare
Price fixing agreements

as ones of the most negative restriction of competition
(per se restrictions hardcore restrictions)

in the case law // in the practice
(i) fixing the sale (or purchase) prices
(ii) fixing the minimal prices
(iii) fixing the amount/the percentage of increase of price (as well as of
the discounts)
(iv) fixing the amount/the percentage of profit that every firm
concerned may get
Note 1: to fix // to recommend // to

determine the conditions whereby
Note 2: no need that prices (or increases

of prices) are identical
[ notion of agreement
conscious substitution of
the risks of competition
with the advantages of
cooperation ]

- some further suggestions
(i)
it falls within the prohibition the commitment of the firms

concerned to purchase the respective excesses of output each from
the other
[(CG Veraenag Cementhandeleren (1972))]
(ii)
any increase of costs of commodities is not enough to justify the

increase of prices, when such increase was practiced by all the firms
concerned in the same way
[EC Cera per candele (2008)]
a) or other trading conditions /4

- other contractual clauses that may have an impact on the global
price of goods and services
-
warranties
aftersale services
conditions for payment
transports and delivery costs
b) limiting or controlling production, or

markets, or technical development, or
investment /1
the aim
- to avoid agreements which, indirectly, may help maintain a specific price level
- production
- production (or market) quotas
- compensation mechanisms in case of exceeding/undershooting of demand or supply
- covenant not to produce a certain product at all
- agreed closing of the plants, also on a shift basis

- commitment not to establish new plants, or to enlarge/develop the existent ones
- quality standardization of the products
b) limiting or controlling production, or

markets, or technical development, or
investment /2
- markets
- common distributive networks (when the market shares are big)
- investments and technical development

also with reference to advertising, taking part in trading fairs, etc.
(delicate issue: see art. 101, 3, TFEU)
c) sharing markets
or sources of supply /1
the aim
-
to avoid that any markets are deprived by competition:

within its own market, each firm would be monopolist
-
(depending on the case) to avoid obstacles to the the creation of a

common/single/internal market within the Union
c) sharing markets
or sources of supply/2
any market sharing
- on a geographical basis
- on customers basis
o stable allotment of customers (by name or by category) to each firm
o moratorium (either permanent or temporary) of competitive pressure (both active and
passive) with reference to some customers
- on suppliers basis
- on products/services basis
o division of tenders (and/or lots)
also indirect (e.g. agreement on discount policy which is diversified by country [see specific
case a)])
d) applying dissimilar conditions

to equivalent transactions/1
(so called discriminatory practices)
the aim
-
thereby placing them at a competitive disadvantages (Article 101, 1,

d), TFEU)
without a cause [and see Article 2, 2, d), Italian Law No. 287/90]

unequal treatment with a cause
- actual differences as to the output or the consideration:
- differences as to the quantity of output
- differences as to the production costs
- differences as to the payment terms

and without a cause

- unequal treatment which is conditional to a commitment about future
transactions
(commitment to purchase exclusively from suppliers
of a given group/association in the future)
- unequal treatment which is grounded on the identity/the category of the

customers
(firms which are customers, but, in other markets, competitors)

a borderline case: the collective boycott

- collective refusal of bargaining. various goals:
- to divide domestic markets (no commodities coming from a given country)
- to punish (exclude from the market) those firms that do not adhere to another
restrictive agreement
e) making the conclusion of contracts

subject to other contracts
(so called tying contracts)
the aim
- to avoid that a condition of power in a given market is (ab)used to impose
additional obligations (and get more power) in other markets
ordinarily
but in some cases

- also by means of an agreement:
- frequent practice of a dominant

firm
(air cargo services and other landtransport services)
a limit: the products which are typically bought together
the exemptions /1
restrictive agreements
between prohibition and (individual and/or block) exemptions
[art. 101, 1 and 3, TFEU]
4 requirements to be met for the grant of exemptions,

2 positive and 2 negative:
a) - improvement of producton or distribution of goods //
- promotion of economic progress
b)
- fair share for consumers (price reduction, increase in quality of the products,
etc)
c)
- (provided that they are not) restrictions which are not indispensable to the
attainment of objectives sub a) and b)
d) - (provided that they are not) restrictions which eliminate competition in respect
of a substantial part of the products in question
the exemptions /2
individual exemptions /1
before Regulation 1/03

- notification of the agreement by the parties to the Commission / granting of the
exemption on individual basis
- enlargement of European Union (2004)
- well developed competition culture
after Regulation 1/03

- so called self-assessment (control by the competent authorities delayed // the
burden of the proof in any case on the parties)
the exemptions /3
individual exemptions /2
Some Guidelines of European Commission

- Commission Guidelines on the applicability of Article 101 to horizontal cooperation
agreements (14 January 2011 C 1)
- Commission Guidelines on vertical restraints (19 May 2010 C130)
- Commission Guidelines on the application of Article 81 of the EC Treaty to
technology transfer agreements (27 April 2004 C 101)
the exemptions /4
block exemptions /1
1) the effects of block exemptions on the burden of the proof charged

on the parties:
Not
But
to prove that the agreement meets the 4 requirements mentioned

by Article 101, 3
to prove that the agreement falls within the scope of application of
the block exemption
2) if an agreement does not fall within a block exemption

general rule of Article 101, 3, TFEU (single exemption) applies
the exemptions /5
block exemptions /2
block exemption regulation for vertical agreements

(Regulation 330/2010) *
block exemption regulation for research and development

agreements
(Regulation 1217/2010) *
block exemption regulation for specialization agreements

(Regulation 1218/2010)
* further analysis hereinafter
vertical agreements /1
vertical agreements have anti-competitive effects
- territorial exclusivity in the interest of the distributor/retailer
- product exclusivity in the interest of the producer/wholesaler
- (at least) market partitioning - (generally) lack of indipendence in price determining -
some vertical agreements have pro-competitive effects, though

generally
- efficiency
(economies of scale)
in particular
(selective distribution)
- qualified distributors
in the absence of some vertical agreements, some anti-competitive effects occur
sometimes
(- launch of new products
- entering into a market of a new player)
in any case
the need of a risk protection for

the distributor exists
a) risks of free riding
b) less products and services

c) lower information/knowledge
about products/services
d) narrower markets
vertical agreements/3
two notes /1
1) generally speaking any agreement which:
- protects the distributor on a geographical basis
- strengthens the relationship between producer and distributor
(affects intra-brand competition, but) favours inter-brand competition
vertical agreements/4
two notes /2
2) if deriving from a vertical agreement, anti-competitive effects on
competition actually arise at some conditions only:
- as to the market power of the firms concerned
- as to the restrictive contractual conditions:
- RPM resale price maintenance
- absolute geographical protection
Regulation 330/2010/EU
general rule
(articles 2- 3)
- exemption for those agreements whose parties do not have a market share not
exceeding 30%
(the seller in the market where it sells the buyer in the market where it buys)
clauses which inhibit the

exemption
(article 4)
and clauses which do not

inhibit the exemption, but are
void by themselves
(article 5)
clauses which inhibit the exemption /1
-- RSP [article 4 (a)] -- fixing the minimum resale price
- fixing the distribution margin
- fixing the maximum level of discounts
- granting rebates or reimbursement of promotional costs subject to the

observance of a given price level
- practicing delay or suspension of deliveries subject to the observance of a given
price level
- monitoring distributors prices policy
- but allowed maximum resale prices, as well as reccomended resale prices
clauses which inhibit the exemption /2
-- Territorial Exclusivity [Article 4 (b)]-- restricting the territory into which / the customers to whom the buyer may sell
- but some exceptions are provided

- allowed restrictions of active sales
- allowed restrictions of sales to end users by a buyer operating at the wholesale
level
- and some special rules apply
- selective distribution systems
clauses which do not inhibit the exemption, but are void
- non compete clause without term (or with term longer than 5 years)
- ban of purchase/sell/production of relevant products after 1 year from the
termination of the supply
and what about the validity of the agreement?
r&d agreements /1
anticompetitive effects
- coordination of behaviours as to investments and production
- reduction of outputs
- increase of prices
- restriction on (free) innovation
positive effects
- improving the production or distribution of goods or promoting technical or
economic progress (Article 101, 3, a, TFEU)
r&d agreements /2
Regulation 1217/2010/EU
- the notion of r&d agreements
- conditions for the block exemption
- market thresolds
- duration of the exemption
- clauses which inhibit the exemption
- clauses which (do not inhibit the exemption, but) are void
r&d agreements /3
the notion of r&d agreement / preliminary concepts
contract technologies
- technologies or processes arising out from

the joint r&d
contract products
- products arising out from the joint r&d

- products manufactured or provided applying
the contract technologies
exploitation
- production or distribution of the contract

products
- application of contract technologies
- assignment or licensing of intellectual
property rights
- communication of know how required for
such manufacture or application
r&d agreements /4
the notion of r&d agreement / the first group of cases
- joint r&d of contract products or contract technologies and joint exploitation of the
results of that r&d
- joint exploitation of the results of r&d of contract products and contract
technologies jointly carried out pursuant to a prior agreement between the same
parties
- joint r&d of contract products or contract technologies excluding joint exploitation
of the results
r&d agreements /5
the notion of r&d agreement / the second group of cases
- paid-for r&d of contract products or contract technologies and joint exploitation of
the results of that r&d
- joint exploitation of the results of paid-for r&d of contract products and contract
technologies jointly carried out pursuant to a prior agreement between the same
parties
- paid-for r&d of contract products or contract technologies excluding joint
exploitation of the results
r&d agreements /6
conditions for the block exemption /1
1) full access of each party to the final results of the joint r&d or paid-for r&d,
including any resulting IP rights and know how, for the purposes of further r&d
and for puposes of further exploitation?

and what about any consideration for the access?
2) (if the r&d agreement is limited to joint r&d or to paid-for r&d) full access of each
party to the pre-existing know how of the other parties, if this is necessary for the
purposes of expoitation of results
r&d agreements /7
conditions for the block exemption /2
3) joint exploitation pertaining to results which are indispensable for the manufacture
of the contract products or the application of the contract technologies
4) (unless the parties agreed that only the party charged with the manufacture of the
contract products may distribute them) full access of each party to the supplies of the
party charged with the manufacture of the contract products
r&d agreements /8
market thresolds
r&d agreements between non competitors
no market thresold
r&d agreements between competitors
25%
duration of the exemption

general rule
as long as the duration of

the r&d contract is
exploitation of the results
7 years after the first put

on the market
dominance
and competition law /1
dominance
- holding of a market power which allows to behave regardless of the reaction of
other market players
- condition which may bring to behaviours harming competitors (exclusionary abuses)

and/or consumers (exploitative abuses)
dominance
dominance:
- which treatment under competition law?

- prohibition of dominance as such?
1) prevention of new and/or stronger dominant positions

(merger control: see hereinafter)
2) prohibition of abuses of those firms which are already dominant

the so called special responsability of
dominant firms (duties of transparency,
fairness, not-discrimination)
dominance
two notes
1) competition law as protection of the existence of rivalry over time
competition law as protection from the negative results of rivalry itself
2) the delicate issue of ascertaining (and proving) a dominant position
the abuse of dominance:

an overview /1
the prohibition (art. 102 TFEU)
(i) general prohibition and specific cases
(as well as the prohibition of anti-competitive agreements)
(ii)
general prohibition is based on some key-concepts:

-
undertaking
(relevant) market
harm to the trade between the Member States
(as well as the prohibition of anti-competitive agreements)
dominant position
abuse
(unlike the prohibition of anti-competitive agreements)
the abuse of dominance:

an overview /2
the prohibition (art. 102 TFEU)
(iii) specific cases (almost) identical to the specific cases prohibited as anticompetitive agreements:
- unfair prices, unfair trading conditions
- no reference to the sharing of markets and/or sources of supply (they presuppose the
existence of at least two indipendent undertakings)
(iv) no exemption is admitted

(unlike the prohibition of anti-competitive agreements)
the concept
of dominance /1
the concept in the case law
[ECJ (1975) Hoffmann La Roche] [ECJ (1978) United Brands]
condition of market power which allows:
-
to prevent effective competition in the market

- to keep behaviours indipendently of
competitors, customers, consumers
[ECJ (1978) United Brands]
the concept in the Commission Guidance 2009 / C 45 / 11

An undertaking which is capable of profitably increasing prices above the competitive level
for a significative period of time does not face sufficiently effective competitive constraints
and can thus generally be regarded as dominant
the concept
of dominance /2
indicators to be considered in ascertaining a dominant position /1
(i) market share in the relevant market
- beyond 70%
clear indication of the existence of a d.p. (no

additional evidence is required)
- between 50% and 70%
d.p. presumed to be existent (rebuttable presumption)
- between 40% and 50%
strong clue of a d.p. (one of the

clues)
- under 40%
d.p. presumed not to be existent (exceptional

circumstances must exist)
but
thresolds with no absolute value
the concept
of dominance /3
indicators to be considered in ascertaining a dominant position /2
(ii)
market structure -- relevant factors

- number / strength / size of competitors
- distance from the closest competitor
- stability of market share over time
(iii) barriers to entry (or to expand)

- material / legal / financial / technological / commercial gap
(iv) other factors

- countervailing buyer power
the delicate issue

of collective dominance /1
Art. 102 TFEU
one or more undertakings
the concept in the case law

[]
position held by two or more entities, which are both legally and economically
indipendent, that anyway show a business behaviour, on a given market, as they
were a collective entity, acting with a single action
but which is the difference with the anti-competitive agreements?
the delicate issue

of collective dominance /2
the troubled evolution of the case law
about the identifying elements of c.d.p.
-
traditional view: need of structural links among the undertakings concerned

(shareholdings, industrial integration, etc.), which allow them to adopt the same
conduct on the market
remarks from the merger control: no need for a structural link, an economic
interdipendence is enough:
market transparency
existence of credible retaliatory

measures in case of departure from
common policy
inability of (other) competitors

(or customers) to jeopardise
effects of common policy
which relevance of the issue?
the concept of abuse /1
some problems
- the relationship with the concept of dominance: theoretically vs practically
- special responsability vs entrepreneurship
- behaviours which may harm (not single competitors, but) competition

some rules in the case law
(so called form-based approach)
- no relevance for the firms intent

- no relevance for the firms awareness of being dominant
ECJ [1979] Hoffmann-La Roche
- what is crucial is the ability of the conduct of hindering (i) the maintenance of the
degree of competition still existing in the market or (ii) the growth of that competition
ECJ [1979] Hoffmann-La Roche
no need for actual effects: a mere potentially abusive conduct is enough

GC [2003] Michelin II

and new trends in recent practice
(so called effect-based approach)
see Commission Guidance on exclusionary abuses 2009/C45/02:

- economic reasons of the conduct must be considered
- actual consequences of the conduct must be considered
- in particular, consequences must be considered (not on market structure, but) on
consumer welfare
and so conditions are met for an efficiency defense
a) ..unfair prices and trading

conditions.. /1
in principle
-
the dominant firm may exploit its market power in order to get overcompetitive profits (so approaching the level of monopolists profits)
the typical example of behaviour by a dominant firm,

which may act regardless of any reaction of customers

conditions.. /2
but a double risk arises
that any conduct of the dominant firm is deemed abusive, whenever it does not
correspond to that which would occur in a competitive market
(but the prohibition would be on the use, not on the abuse, of dominance)
that competition law goes beyond its natural goals and becomes a means of general
control of prices
(power which is given, in some economic sectors exclusively,
to other indipendent national authorities)
a (significant) comparison with U.S.

conditions.. /3
the unfair prices in the case law
checking the irrationality and arbitrariness of a given price policy
- prices which are indipendent from quantity / quality / value of the products and
services
[ECJ (1987) Tournier]
an analysis of production costs is needed
- imposition of fees which are not referrable to the current customer, but to a
preceding one
[Italian AGCM (2007) Enel (2007) Telecom]
the case of predatory prices /1

an anticompetitive behaviour implemented into two phases
(i)
the predatory pricing
(ii)
(after the competitors exit from the market) the over-competitive pricing
the proof of the second phase is not needed
the prohibition aims to prevent any potential restriction of competition
[ECJ (1996) Tetra Pak II]
a comparison with exploitative pricing

exploitative pricing
predatory pricing
harms immediately
customers/consumers
may attract potential competitors to
enter into the market
benefits immediately
customers/consumers
excludes current competitors out of the
market

predatory prices: with reference to what? /1
general rule
- prices are predatory when they are lower than the average variable costs
[ECJ (1991) Akso]
additional rule
-prices are also predatory when
- they are higher than the avarage variable costs

- they are lower than the total costs
- further conditions are met (enough period of
time concerned, proof of a specific plan to exclude
one or more competitors, etc.)

predatory prices: with reference to what? /2
further relevant factors:
(i) adequate financial resources, enough to enable dominant firm to bear the sacrifices of
predatory pricing (cross-subsidization)
(ii) adequate productive capabilities, enough to enable dominant firm to meet the whole
demand
(iii) no reason for such a conduct (promotional sales, sale of products close to be obsolete,
etc.)
b) ..limits on production, markets

or technical development..
so called exclusionary practices /1
various cases
-
to raise the barriers to entry into the relevant market (where the firm is dominant) in order to
obstacle any potential competitor
to expand the dominant position to further markets, linked to the relevant one
to the prejudice of consumers:

-
it must not be deemed as an additional element to be proved; it is a natural effect of the

exclusion from the market (or the missing entering into it) of one or more competitors
the prejudice consists in the mere reduction of choice for consumers
no relevance for any benefit which may occur to the consumers, depending on price or other
trading condition implemented by the dominant firm (e.g. predatory prices)
b) ..limits on production, markets

or technical development..
so called exclusionary practices /2
barriers to entry raised to new competitors
-
EC (1994) Tetrapack II
- contracts including several clauses:

(i) adding of accessorize to the machinery prohibited;
(ii) modifying the machinery prohibited;
(iii) moving the machinery prohibited;
(iv) supply of spare parts by the manufacturer only;
(v) supply of packaging material by the manufacturer only
(vi) duty of attending of (free) workshops provided by the
manufacturer
(vii) warranty on the products subject to all these conditions
to avoid that dominant firms policies may suffocate any

attempt of competitors
c) ..dissimilar conditions for

equivalent transactions..
so called discriminatory practices
sometimes theres an exploitative purpose, sometimes an exclusionary one
ECJ (1975) Suiker
rebates determined (not on the basis of the

quantity/quality of the products or
services, but) on the basis of:
- the undertaking of the customer not to have

contractual relationship with competitors
- the conclusion of long-run supply contracts
a comparison with Art. 2557 Italian Civil Code
the refusal of bargaining /1

Art. 102, b), TFEU?
Art. 102, c), TFEU?
the case
- (at least) two markets, vertically linked
- dominance over one of two markets

- dominant firms having a resource which is essential / indispensable for the linked
market
- refusal (without a cause) to provide those firms which operate in the linked market
with the indispensable resource
or
- the providing of the resource at unfair, or discriminatory, conditions
essential facilities doctrine

note 1: indispensable essential
(i) no substitutable resource
(ii) no way to duplicate the resource
- due to phisical or technical reasons
- due to legal reasons
note 2: without a cause

- material problems related to the firm which demand access to the
essential resource (risks of unsolvency or lack of professionality), provided
that the refusal is a proportionate measure
- technical problems related to the access to the essential resource (limits of
capacity, safety, etc.)

in practice /1
- ECJ (1974) Commercial Solvents
- refusal, by an undertaking which is dominant in

the market of a given raw material, to supply
customers, which are manufacturers of
derivatives of such a raw material, due to the
intention of the dominant firm to manufacture its
own derivatives
- GC (2007) Microsoft
- refusal by Microsoft (almost monopolist in the

market of operating systems for PC) to provide
some competitors (which were active in the linked
market of servers) with information indispensable
to make possible the interoperability between
their servers and Windows

in practice /2
- ECJ (1985) Telemarketing
- refusal by a firm (dominant in the market of TV

advertising) to accept advertising from those
firms that did not wantto use the telephone lines
and the group of telefonists of the dominant firm
- ECJ (2004) IMS Health
- refusal to grant a licence for an intellectual

property right
d) ..some contracts subject to

other contracts.. /1
so called tying contracts
two conditions /1
1) the tying practice must have no justification
- technical reasons
- economic efficiency reasons
- commercial usage
- commercial consumers habits

two conditions /2
2) the tying practice must be coercive
- refusal to sell/to supply the two products separately
- discouraging the separate selling/supplying by providing rebates or other

benefits subject to the joint sell/supply
and their practical enforcement

GC (2007) Microsoft
- tying practice between the sell of computer operating system

(Windows) and the sell of a software for multimedial contents
(Windows Media Player)

some open questions

Sometimes the balance between the two conditions is hard: what about the tying
practice between the supply of spare parts and the maintenance of a warranty?
Again the conflict between the special responsability of dominant firms and the
respect of its free entrepreneurship:
A usage which is acceptable in a normal situation, on a competitive market, cannot be
accepted in the case of a market where competition is already restricted
GC [1994] Tetra Pak II
the non exhaustive nature

of the list under Article 102 TFEU
some cases which do not fall within the list of Article 102 TFEU
artificial extension of the duration of a patent, in order to prevent the potential

competitors from entering into the relevant market
[GC (2005) AstraZeneca]
systematic challenging in court of the competitors patents, in order to raise their

costs (so called sham litigation)
[GC (1998) Promedia]
agreements and abuses of

dominance: the exempted
undertakings /1
Restrictive Agreements & Abuses of Dominance:
the common (broad) concept of undertaking
(see slides no. 39-42 and 102)
a confirmation: Art. 106, 1, TFEU

undertakings /2
two types of exempted undertakings
(Art. 106, 2, TFEU)
undertakings which are holders of a revenue-producing monopoly
undertakings which are entrusted with the performance of services of general

economic interest
the limited scope of the exemption

undertakings /3
the rationale of the exemption under Article 106, 2, TFEU
revenue-producing monopoly as a remedy for a market failure:
-
the need for a universal service in a given economic sector

the suspension of competition as the compensation of the costs of
universal service
the natural limit of revenue-producing monopoly: Art. 9 Italian Law N. 287/90)

undertakings /4
the risks of the exemption under Article 106, 2, TFEU
- Exploitment of the legal monopoly in economic sectors which are not
covered by any need for a universal service
From (a condition of) suspension of competition

to (a condition of) distortion of competition?

undertakings /5
some effects on interpretation of Article 106, 2, TFEU /1
(i) services of general economic interest
YES
need for an act of the public authority entrusting the undertaking of the
service
the concerned service must be able to satisfy directly essential interests of the
people
the act makes it a duty to provide those services to everybody
NO
- postal service
- airports
- railways
- motorways
- banks
- port services of loading and
unloading
- airport handling
- restaurants and caf in
motorways

undertakings /6
some effects on interpretation of Article 106, 2, TFEU /2
(ii) the application of such rules does not obstruct the performance, in law or
in fact, of the particular tasks assigned to them :
-
indispensability of the exemption

proportionality of the exemption
some further suggestions

from Italian legal system
A more specific regulation of business run by an undertaking which
is holder of a legal monopoly
(Article 8, 2 bis 2 sexies, Law N. 287/90)
- duty to establish (or to operate by means of) a separate entity

duty to notify the establishment of the new entity (or the acquisition of the control
on it) to Italian Competition Authority
duty of non-discrimination between the separate entity and third parties
(and see the essential facilities doctrine)
concentrations: an overview / 1
a first (neither correct) concept of concentration
substitution of two (or more) indipendent undertakings with just one undertaking
an economic concept of concentration

strenghtening of an undertaking (not by natural grow up, but) by effect of acquisition of
third economies
a more technical idea of concentration (Article 3 Reg. 139/04)

change of control on one (or more) undertaking
concentrations: an overview /2
No discipline in EEC Treaty
First discipline with Reg. EC 4064/89
and now Reg. EC 139/04
+
Commission Notice 2008/C95/01 (jurisdiction)
++ Commission Notice 2004/C31/03 (guidelines on horizontal concentrations)
+++ Commission Notice 2008/C265/07 (guidelines on vertical concentrations)
-- why such a delay? -(in comparison with restrictive agreements and abuses of dominance)
the bivalent nature of concentrations
(i)
reduction of number (and strenght) of

market players
(ii) negative stable effects on market

structure (regardless of any behaviour)
(iii) (frequently) pure will of expansion,
without adequate thinking (and weighing)
of the effects of a merger, with
subsequent production of inefficiences
(i)
economies of scale (more rationality and

efficiency in productive and/or distributive
processes)
(ii) merger of little european players anle to

impede the entering into the market of a
foreign (non european) player (see Reg.
139/04, Recital 4)
(iii) full transparency of concentations
+
political resistance of Member States
and some effects on the structure of the relevant discipline
- (not an ex post punishment of a behaviour already had, but) an ex ante
evaluation of the effects of a prospected transaction
- (not every transaction which constitutes a concentration, but) only those
transactions which exceed some thresolds
- not a rigid option between giving authorization and denying
authorization: some other intermediate reactions are provided by the law
when Regulation 139/04 does not apply,

may the relevant facts fall within the scope of either Article 101 or Article
102?
the concept of concentration /1

- one general description
(the focus is on the effects: change of

control on a lasting basis)
art. 3 Reg. 139/04
- three types of transaction - merger

- acquisition of control
- establishment of a common firm
from a juridical point of view

- no common character among the three types of transaction
- acquisition of control and establishment of a common firm are not juridical concept
and in fact the common character is economical/factual

- what is material is the change of control: the acquisition of the (whether direct or
indirect) ownership of the factors of production
the concept of concentration /2

the concept of control (Art. 3, 2, reg. 139/04):
- rights, contracts or any other means which, either separately or in
combination [], confer the possibility of exercising a decisive influence on an
undertaking, in particolar by
a) ownership or the right to use all or part of the assets of an undertaking
b) rights or contracts which confer decisive influence on the composition, voting
or decisions of the organs of an undertaking
shareholding, shareholders agreements, interlocking directorates, etc.
the concept of change of control: some (extreme) examples

-
acquisition of a minority shareholding (if holder of a veto-right about strategicald

decisions such as production, prices, investments, use of profits, etc.)
passage from a joint control to an exclusive control (so called qualitative change of
control)
some further notes on

mergers
the condition of indipendence of the firms concerned
(Art. 3, 1, a), Reg. 139/04)
the case of intra group mergers

(see above for agreements)
the delicate issue of the de facto merger


acquisition of control /1
1. The acquisition of (control over) assets /1
the acquisition [], whether by purchase of secutities or assets, [] of
direct or indirect control of the whole or parts of one or more other
undertakings
(Reg. 139/04, Article 3, 1, (b))
How many assets? How many parts?

Functional equivalence between entities and assets
is a delicate issue for business law (at least business units?)

The answer
The acquisition of control over assets can only be considered a concentration if
those assets constitute the whole or a part of an undertaking, i.e. a business with a
market presence, to which a market turnover can be clearly attributed
The transfer of client base (if this is sufficient to transfer a business with a
market turnover)
The transfer of intangible assets like brands, patents, copyrights (if they
constitute a business with a market turnover)
But in no case the transfer of a non exclusive license
may be a business to which a market turnover is attached

Two final remarks:
market presence and market turnover must be assessed on the basis of
actual results (not as provisional facts)
market presence and market turnover must be transferrable to the
acquiring undertaking

2. Some exceptions: transactions which fulfill the general description set out in
Article 3, 1, (b), Reg. 139/04, but are not considered as concentrations
One example [Art. 3, 5, (a)]:
Acquisition of securities by credit institutions, insurance companies, financial firms,
provided that it is performed:
- with a view to reselling them within one year
- without esercising the voting rights with a view to determining the competitive
behaviour of the concerned undertaking

establishment of a joint venture /1
concentrative joint-ventures
concentrations
Article 3, 4, Reg. 139/04

one condition:
(i) full function joint venture
vs
cooperative joint-ventures
restrictive agreements

establishment of a joint venture /2
the full function nature of the joint venture: the indipendence at the
operational level
(Commission Notice 2008/C95/01, 94 ss.)
resources (whether financial, managerial, human, tangible and intangible assets, etc.)
that are sufficient for the stable conduct of the business on a lasting basis ( 94)
the delicate issue of
cooperation by the (staffs of the) parents: only for the start up period and at the
same conditions as any other third party ( 94)
indipendent behaviour in the market ( 95)

the delicate issue of
indipendence on sales and purchases to or from its parents ( 97)
auxiliary activities: it is not full function if it does not go beyond a specific phase of the
parent companies activity (R&D, production, etc.) without its own access to or
presence on the market ( 95)
the concept of concentration:

a brief summary
three cases, one effect
- merger
- acquisition of control
- establishment of a joint venture
when they have a change of control as result
Article 3, 1 and 4, Reg. 139/04
the last constitutive element of the concept

the exceeding of turnover thresolds
Article 1 Reg. 139/04
go to slides 15-16
the turnover thresolds

juridical functions
defining the scope of application of EU law (on concentrations) and
domestic laws (on concentrations): the need for an impact on the EU
market / the need for a cross border effect
defining the competent authority (on concentrations):
go to slide 20
- EU law: European Commission
- domestic law: domestic authorities
the turnover thresolds:

the concept of undertaking
concerned
A: the economic reality of the operation (CN 2008/C95/01, 145)
B: some general trends

in case of merger
(the mergering and the mergered)
in case of purchase of
securities
(the acquiring and the acquired,

not the seller)
in case of acquisition
by a newco or a purpose veichle
(the parent company of the acquiring,

the acquiring itself and the acquired)
in case of establishment
of a joint venture
(the parent companies

and the joint venture)

the concept of turnover /1
The turnover of the undertakings /1
- turnover of the undertakings concerned as well as of their groups (aggregate
turnover), after deduction of intragroup sales
(Art. 5, 4 e 1, reg. 139/04)
- turnover after deduction of sales rebates and of v.a.t. and other taxes directly
related to turnover
(Art. 5, 1, reg. 139/04)

the concept of turnover /2
The turnover of the undertakings /2
- turnover of the last financial year
(Art. 5, 1, reg. 139/04 // Commission Notice 2008/C95/01, 169 ss.)
- turnover in the EU or in the Member States: products sold and services provided to
consumers or undertakings in the EU or in the Member States
(Art. 5, 1, reg. 139/04 // Commission Notice 2008/C95/01, 195 ss.)
What about the acquisition of some assets?

The turnover relating to the assets
(Art. 5, 2, reg. 139/04)
(and see the concept of acqusition of control over assets)
the enforcement
how to enforce competition law?
- which authority(ies) are involved in the enforcement? which is
the role of the courts?
- which procedure is followed? which powers do the authorities
have?
- which chances (and means) for a defence do the parties have?
the enforcement: an overview /1

restrictive
agreements
- voidness
private enforcement
- injunctions and corrective measures

- fines
(+ precautionary (or interim) measures)
abuses of
dominance
- injunctions and corrective measures

- fines
concentrations
public enforcement
public enforcement
- giving the authorization / denying authorization / authorization

subject to some conditions
+
++
+++
public enforcement
action for injunctions

private enforcement
action for damages
action for precautionary (or interim) measures
the enforcement: an overview /2

public enforcement and private enforcement
- competition as ideal market structure
the protection of different interests:

- economic rights of other market players
- autonomy
follow on private actions and standing alone private actions
- synergy
the increasing of risks, and costs, of an anticompetitive
behaviour, as common rationale of the two enforcement systems
the competent authorities

(agreements and abuses) /1
investigations and decisions:
the domestic Authorities and the European Commission
(artt. 1-5 reg. 1/03)
the permanent coordination
public
enforcement /1
- preventing initiative of the Commission on a case deprives domestic

Authorities with any power as to the same case
(art. 11, 6, reg. 1/03)
- duty of notification, of any domestic Authority to the European Commission, of

any new proceeding
(art. 11, 3. reg. 1/03)
- a proceeding which is pending before a domestic Authority may be called back

by the Commission after a consultation with the domestic authority
(art. 11, 6, reg. 1/03)

(agreements and abuses) /2
the appealing against the decisions:
domestic Courts and European Courts, as follows:
public
enforcement /2
private
enforcement
- against decisions of domestic authorities: before the domestic Courts

- against decisions of European Commission: before the General Court of EU
- against decisions of General Court: before the Court of Justice of EU
the taking legal action for damages, voidness, etc:

domestic Courts

(concentrations) /1
(concentrations:
ex ante intervention of competition law
about transactions which the parties want to perform in the future)
public enforcement
the European Commission is exclusively

competent
(some excepetions are possible: see further)
private enforcement
the same as for agreements and abuses

(concentrations) /2: some exceptions
concentrations under the thresolds, but of potential EU interest
-
on request of the parties (in a pre-notification phase: art. 4, 5, reg. 139/04)

-
concentrations which may fall within the scope of application of competition law of at
least 3 Member States
a veto-power against the referral is given to (the competition authority of) each Member
State
on request of the Member States (in a post-notification phase art. 22 reg. 139/04)
-
concentrations which may harm the trade between Member States and affect significantly
the competition

(concentrations) /3: some exceptions
concentrations above the thresolds, but of potential domestic interest
-
on request of the parties (in a pre-notification phase: art. 4, 4, reg. 139/04)
on request of Member States, by own initiative or after suggestion of the

Commission (during the Commissions appraisal of the operation: art. 9 reg.
139/04)
in both cases: concentrations which may distort competition within the territory of a Member
State, when such territory is a separate market
public enforcement:
the procedure
the same authority has the power and the duty
- to detect the suspected infringement of competition law
- to collect the evidence
- to take a decision (injunctions, fines, interim measures, etc.)
but
- parties are involved in the procedure
- investigation phase and decision-making phase belong to different officers: the
administrative structure of the Authorities (investigation phase) and their supreme
body (decision-making phase) respectively
the procedure for agreements and

abuses: the starting phase
(restrictive agreements and abuses of dominance:
ex post intervention of competition law
about anticompetitive behaviour which has been already practiced)
the initiative
- a complaint by third parties
or
- an ex officio procedure
starting of the investigation
abandonment
- subject to the condition of a suspected

infringement of competition law
- the decision is noticed to the undertakings
concerned (and, in case, to the
complainant)

abuses: the investigation phase
investigative powers
of the Authorities
powers
of the parties
- request of information and

documents to the parties
- right of access to the documents
- right of inspection
- right of being heared
- right of filing notes and documents
- request of expert reports, economic

and statistic analysis, etc.
investigations within general framework of Western legal system

- privilege against self-discrimination [CG (1989) Orkem]
- legal professional privilege [CG (1982) AM&S Europe]

abuses: the final phase
1. The public hearing before the supreme body (in Italy, AGCM)
2. The decision of the supreme body: the possible outcomes

- statement of non infringement
or
- injunction to stop the anticompetitive practice and to remove its effects:
and
- (in case of serious infringements) condemnation to a fine, calculated up to 10% of
the turnover of the undertaking in the last financial year
in case of non compliance with the injunction
- further fine
- (when non-compliance is repeated) suspension of business

abuses: some variations
precautionary (or interim) measures
leniency programs
(see before: slide 56)
the proposal (and acceptation) of commitments
the procedure
for concentrations /1
(concentrations:
ex ante intervention of competition law
about transactions which the parties want to perform in the future)
the initiative
-
the initiative is on the undertakings concerned only: they must notice the
Commission about the proposed transaction
the content of the notice
-
the undertakings concerned and their groups

the type and subject of the transaction
the expected effects of the transaction on competition:
-
relevant market
market shares (both current and as resulting after the transaction)
charachteristics of the market (demand, supply, barriers)
list of competitors, suppliers, customers
the procedure
evalutation of the notice
immediate authorization
of the proposed transaction
starting of a full investigation

- investigative powers
- powers and rights of the
parties
public hearing and decision

see before
the procedure
the rule under which the Commission gives, or denies, the authorization to
the proposed transaction
-
authorization is not given if the concentration would significantly impede

effective competition in the common market or in a substantial part of it, in
particular as a result of the creation or strenghtening of a dominant position
(art. 2, 2 e 3, reg. 139/04)
the procedure
the criterions to apply the rule
-
market power of the undertakings concerned

barriers to entry
demand and supply trends
consumers interests
future reasonable developments in technology and economics
freedom of choice of the other market players
competition law or industrial policy?
the procedure for concentrations

/5
the possible outcomes
in case of non compliance with a

deny
a) denied authorization
b) given authorization, but subject to
some conditions:
- structural conditions (sale to
third parties of business units,
or trademarks, or patents,
etc.)
- behavioral conditions (duty to
supply, etc.)
c) given authorization
- fines
- de-concentration measures
in case of non compliance with an

authorization subject to conditions
- fines
- recall of the authorization

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Competition Law

instructions for use

- assessment method: written exam

why a competition law? /1

why a competition law? /2

collusive behaviours of two or more firms: price-fixing cartels, agreements on quantity of

why a competition law? /3

The aim of Competition Law

The object of Competition Law

Competition Law seeks to protect the

Competition Law determines the legal

why a competition law? /4

consistency between competition (understood as economic democracy) and political

ECSC (1951) EEC (1957):

Creation of a European Market of Coal and Steel, then a

ban of restrictive agreements

different concepts and cases //

one common feature:

what are the goals of competition law?

what is (a restriction of) competition?

what are the institutions entitled to enforce competition law?

1.2.3.: the impact on (history of) competition law

competition law in Europe /1

- Treaty on European Union (TEU, 2007): article 3, 3

- Charter of Fundamental Rights of the European Union (2007): article 16

competition law in Europe /2

85-90 (re-numbered as articles

competition law in Europe /3

in some cases applicable to anti-competitive behaviours which are also subject to EU

(article 102 TFEU)

- notification in advance to the

-action for damages

- where does (the scope of) EU law begin?

- where does (the scope of) domestic law end?

the answers are different depending on the anticompetitive behaviour concerned

1) the combined aggregate worldwide turnover of all the undertakings concerned

the combined aggregate worldwide turnover of all the undertakings concerned

within the internal market (art. 101, 1, TFUE)

- not only the traditional exchanges of goods and

between Member States (i):

- at least two Member States ( 21), but see

- any agreement or practice which have as object or

institutional context where EU competition law is enforced

lets consider, at the moment, only public enforcement

concentrations (Reg. 139/2004)

if EU law applies, the institutional

agreements and abuses of dominance

no one: so called effects doctrine applies:

the anticompetitive behaviours:

the relevant market: Commission Notice 1997/C372/03

the relevant market:

Commission Notice 1997/C372/03, 2

in the three anticompetitive behaviours, defining the relevant market:

implies different analysis

the relevant market:

(see Commission Notice 1997/C372/03, 12)

the relevant market:

it is useful in an earlier moment, that

the relevant market:

relevant product market

relevant geographical market

(If they are interchangeable, they belong to

(if they operate in areas where such

(Commission Notice 1997/C372/03, 7)