NATIONS UNIVERSITY

DEPARTMENT OF LAW
UNIVERSITY OF LONDON - International Programmes
YEAR THREE
Bachelor of Laws (LL. B.)

EUROPEAN UNION LAW COURSE

LECTURE NOTES 11
ON
COMPETITION POLICY
UNIVERSITY OF LONDON SCHOOL OF THE NATIONS
– International Programmes - NATIONS UNIVERSITY

Prepared by Facilitator Ms. K.T.H. Stephenson- Attorney-at-Law

LL. B. (Credit)(UG), L.E.C. (H.W.L.S), Pg Cld (ComSec/UG),
UNODC Cert. IL & Terrorism, Diplofoundation (Malta) Adv. Cert. in Internet Governance
and ICT POLICY.

2015- 2016
ACADEMIC YEAR

1
 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162

Overview: making markets work better

Competition policy in Europe is a vital part of the internal market. Its aim is to provide

everyone in Europe with better quality goods and services at lower prices. Competition policy

is about applying rules to make sure companies compete fairly with each other. This

encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce

prices and improve quality. These are the reasons why the EU fights anticompetitive

behaviour, reviews mergers and state aid and encourages liberalisation.

The Commission mobilise competition policy tools and market expertise so that they

contribute to the Union's jobs, growth and investment agenda, including in areas such as

the digital single market, energy union, financial services, industrial policy and the fight

against tax evasion.

The Commission pursues an effective enforcement of competition rules in the areas of

antitrust and cartels, mergers and state aid, maintaining competition instruments aligned

with market developments, as well as promoting a competition culture in the EU and world-

wide. The Commission follows an economic as well as a legal approach to the assessment of

competition issues.

The Commission has also put forward measures to improve the right for consumers and

2
businesses to get damage compensation when they are victims of anti-competitive conduct,

and has strengthened and streamlined state aid investigation procedures.

Why we need a European competition policy

Low prices for all: The simplest way for a company to gain a high market share is to offer a

better price. In a competitive market, prices are pushed down. This is not only good for

consumers — when more people can afford to buy products, it encourages businesses to

produce and boosts the economy in general.

Better quality: Competition also encourages businesses to improve the quality of goods and

services they sell — to attract more customers and expand market share. Quality can mean

various things: products that last longer or work better, better after-sales or technical

support or friendlier and better service.

More choice: In a competitive market, businesses will try to make their products different

from the rest. This results in greater choice — so consumers can select the product that

offers the right balance between price and quality.

Innovation: To deliver this choice, and produce better products, businesses need to be

innovative — in their product concepts, design, production techniques, services, etc.

Better competitors in global markets: Competition within the EU also helps make European

companies stronger outside the EU — and able to hold their own against global competitors.

3
Competition: a Europe-wide issue

Sometimes violations of competition rules happen within just one country, so a national

competition authority (NCA) would often handle the case. But with the growth of the internal

market and globalisation, the effects of illegal behaviour, like running a cartel, are often felt

in many countries across the EU and beyond.

The Commission is often well placed to pursue these trans-EU cases. The Commission has

the power not only to investigate but also to take binding decisions and impose substantial

fines. The Commission enforces the EU competition rules together with the NCAs of the EU

countries. These authorities and the European Commission exchange information on

implementing EU competition rules through theEuropean Competition Network (ECN).

National courts also have the power to decide whether a particular agreement complies with

EU competition law or not. Companies and consumers can also claim damages if they have

suffered as a result of illegal behaviour restricting competition.

What are the consequences?

The Commission investigates whether companies are violating or could potentially violate the

competition rules. This means it can act either before or after the rules are broken, in order

to safeguard a competitive market. As a result of the Commission’s investigations, it can

decide to prohibit a certain conduct, require remedial action or impose a fine, depending on

the situation. So the Commission acts both to prevent and to punish competition violations in

4
the EU. The EU competition laws are directly applicable in all the countries in the EU.

National competition authorities can apply EU rules as well as their own competition laws.

Anticompetitive conduct must have an effect on trade between EU countries for the

Commission to be able to act. The Commission has strong competition law enforcement

powers, given to it under the treaties by the EU countries. Its decisions are binding on both

companies and national authorities that violate the rules, but the decisions can be appealed

to the EU’s General Court and further (on points of law) to the Court of Justice. Companies

and EU governments regularly lodge and sometimes succeed in appeals against Commission

decisions.

5
Competition policy . . . . . . . . . . . . . . . . . . . . . . . . . . .161

What is competition policy?

Competition puts businesses under constant pressure to offer the best possible range of

goods at the best possible prices, because if they don't, consumers have the choice to

buy elsewhere. In a free market, business should be a competitive game with

consumers as the beneficiaries.

Sometimes companies try to limit competition. To preserve well-functioning product

markets, authorities like the Commission must prevent or correct anti-competitive

behaviour. To achieve this, the Commission monitors:

• agreements between companies that restrict competition – cartels or other unfair

arrangements in which companies agree to avoid competing with each other and try to

set their own rules

• abuse of a dominant position – where a major player tries to squeeze competitors out

of the market

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• mergers (and other formal agreements whereby companies join forces permanently or

temporarily) – legitimate provided they expand markets and benefit consumers

• efforts to open markets up to competition (liberalisation) – in areas such as transport,

energy, postal services and telecommunications. Many of these sectors used to be

controlled by state-run monopolies and it is essential to ensure that liberalisation is

done in a way that does not give an unfair advantage to these old monopolies.

• financial support (state aid) for companies from EU governments – allowed provided it

does not distort fair and effective competition between companies in EU countries or

harm the economy

• cooperation with national competition authorities in EU countries (who are also

responsible for enforcing aspects of EU competition law) – to ensure that EU

competition law is applied in the same way across the EU

Required reading:

• http://www.eco.uc3m.es/~acabrales/teaching/2005/1IntroductionCompetitionLa

w.pdf

• http://ec.europa.eu/competition/publications/annual_report/2010/part1_en.pdf

7
10.1 The enforcement procedure prior to 1 May 2004 . . . . . . . . . . . . . .163

Pre-May 2004

Post – May 2004

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/284432

/oft442.pdf

10.2 The scope and ratione personae of Article 101 TFEU . . . . . . . . . . . . .163

http://www.uio.no/studier/emner/jus/jus/JUS5310/h13/undervisningmateriale/introducti

on-to-article-101.pdf

http://www.cms-dsb.com/Hubbard.FileSystem/files/Publication/3091276f-ff36-46c1-

9c51-01846c09bb0c/Presentation/PublicationAttachment/db820670-2915-40ed-b54a-

71e49bf858bf/contribution%20on%20art%20101%20TFEU%20in%20Verloren%20van

%20Themaat%20and%20Reuder_s%20European%20Competiti.pdf

http://www.clasf.org/CompLRev/Issues/Vol6Issue2Art1Cseres.pdf

8
10.3 Enforcement: Regulation 1/2003 . . . . . . . . . . . . . . . . . . . . . .172

The Impact of Regulation 1/2003 in the New Member States KJ Cseres* Regulation

1/2003 entered into force on 1 May 2004 introducing a fundamental change in the

enforcement of Articles 101 and 102 TFEU. 1 May 2004 also marked a fundamental

change in the history of the EU: ten new Member States joined the European Union.

The modernization of EC competition law enforcement has in fact taken place against

the background of enlargement. Enlargement and the modernization of law

enforcement had been closely connected to one and other not only in the field of

competition law. This paper discusses the impact of Regulation 1/2003 in the ten new

Member States situated in Central and Eastern Europe that joined the EU in 2004 and

2007. What makes these Central and Eastern European countries (CEECs) special is

transition from command and control economy and totalitarian rule to market economy

and to compliance with the rule of law. What makes implementation of EU rules in

CEECs’ legislation special is the conditionality and the fact that Europeanization of these

countries’ laws have been interacting with market, constitutional and institutional

reforms. The paper discusses both the direct and indirect impact of Regulation 1/2003

in the legislation, enforcement models and institutional designs in these countries. The

experience of the CEECs indicate that EU leverage has been the most noticeable and

direct on the statutory enactments of substantive competition law, however, it has in an

indirect way also influenced enforcement methods and institutional choices. The

exceptional influence of the EU on the CEECs’ competition rules can be demonstrated

by the fact that these countries often aligned their national laws even further than they

9
were obliged to. However, in the less visible parts of the law such as procedural rules

divergence can be substantial with important consequences for overall enforcement

outcomes. Moreover, in the CEECs there is a significant difference between the black

letter of the law and its active enforcement.

1. INTRODUCTION

Regulation 1/2003 entered into force on 1 May 2004 introducing a fundamental change

in the enforcement of Articles 101 and 102 TFEU. 1 May 2004 also marked a

fundamental change in the history of the EU: ten new Member States joined the

European Union. The modernization of EC competition law enforcement has in fact

taken place against the background of enlargement. Enlargement and the

modernization of law enforcement have been closely connected to one another. This

paper will discuss the impact of Regulation 1/2003 in the ten new Member States

situated in Central and Eastern Europe that joined the EU in 2004 and 2007. What

makes these Central and Eastern European countries (CEECs) special is their transition

from command and control economy and totalitarian rule to market economy and to

compliance with the rule of law. What makes the implementation of EU rules in CEECs’

legislation special is conditionality and the fact that the Europeanization of these

countries’ laws has been interacting with market, constitutional and institutional

reforms. Moreover, from studying the case of the CEECs general lessons can be drawn

for Europeanization strategies, for other areas of law and for the balance between

public and private governance.

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2. THE DOUBLE ROLE OF REGULATION 1/2003 IN THE NEW MEMBER STATES

2.1. Accession and modernization of EU competition law.

The role of Regulation 1/2003 in the new Member States needs to be examined

in the double perspective of enlargement and the modernization of European

competition law enforcement. The process of enlargement and the reform of EC

competition law were closely interrelated and mutually impacting on each other.

On the one hand, enlargement has opened the discourse on enforcement and it

made the relevance of enforcement for the effective working of Community rules

manifest. While previously issues of enforcement and institutional structures

were regarded to rest in the exclusive competence of the Member States,

according to the Community principles of procedural autonomy and institutional

neutrality, enlargement has pushed crucial questions of enforcement and

institutional choice to the forefront of the EU agenda. This change was visible in

the modernization of EC competition law, which was launched by the 1999 White

Paper.

1 The reform was aimed at finding more effective enforcement methods in order

to prevent outright violations of competition law and substantial economic harm

to society.

2 A number of initiatives have been taken in order to achieve this objective. The

adoption of Regulation 1/2003 decentralized the enforcement of EC competition

law establishing the European Competition Network, DG Competition reorganized

its cartel busting work, the 1996 and then later the 2002 leniency programs have

11
been revised,3 a discussion on how to facilitate private damages cases was

launched4 and the method of setting fines have been revised.

5 In fact, Regulation 1/2003 not only introduced a new procedural framework for

the application of Articles 101 and 102 and thus directly intervened in domestic

enforcement of competition law, but it has formed inherent part of the broader

EU development discussing enforcement methods. Regulation 1/2003 formed

part of the legal requirements of the candidate countries’ accession to the EU.

6 The legal obligations of accession acted as considerable political and economic

pressure and exercised the most significant influence on the way competition

laws have been shaped in the CEECs. An in-depth analysis of this extraordinary

law transfer and the way EC law still influences the competition laws in these

countries is missing. The available research covers the legal academic discussion,

which has mainly focused on the constitutional law and public administration

aspects of EU enlargement. Economic law and specifically competition law has so

far received limited attention. The discussion on the impact of European

competition law on national competition law concentrated on the question how

far the NMS managed to align their legislation with that of the EU and how

effectively and accurately the new Member States implemented the acquis

communautaire.

7 This top down approach was concerned about the ability of these countries to

meet the requirements of accession and later membership. This approach was

based on controlling compliance with conditions set by the EU. Such an approach

12
 is merely appropriate to identify whether adequate rule transfer has taken place

and to spot legislative gaps in this top down perspective, but it is not an

appropriate method to ask whether formal rule transposition has been

effectuated by effective enforcement and placed in an adequate institutional set

up. Moreover, and even more importantly, this approach does not take account

of the broader domestic developments such as the interaction with market,

constitutional and institutional reforms and the fact that the rapid adoption of the

economic regulation in the post-communist CEECs has coincided with the revival

of private law and the revision of the civil law codifications. Such codifications

were also vastly important for the establishment of the appropriate legal

framework to facilitate private transactions on the market. The relationship

between the two processes from an institutional perspective has largely been

under investigated. The revival of classical private law and the role of private law

courts in this process, however, deserves special attention also when

investigating the impact of the EU competition law regulation on the law on the

books and the law in action in CEEC’s, and, in particular, the role of the

institutions involved in adopting and enforcing the EU regulation in these

countries.

Website for the above Article:

http://www.clasf.org/CompLRev/Issues/Vol6Issue2Art1Cseres.pdf

13
 Further required reading:

http://ec.europa.eu/competition/antitrust/legislation/antitrust_enforcement_10_years_e

n.pdf

http://ec.europa.eu/competition/publications/cpn/2004_2_1.pdf

10.4 Article 102 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .174

One of the most important principles of EC law is the prohibition of the abuse of

dominant position as established in Article 102 TFEU

Antitrust procedures in abuse of dominance

(Article 102 TFEU cases)

Procedures:
Procedures: abuse of
Overview anticompetitive
dominance
practices

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits

abusive conduct by companies that have a dominant position on a particular market.

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 An Article 102 case dealt with by the European Commission or a national competition

authority can originate either upon receipt of a complaint or through the opening of an

own–initiative investigation.

Assessing dominance

The Commission's first step in an Article 102 investigation is to assess whether the

undertaking concerned is dominant or not.

Defining the relevant market is essential for assessing dominance, because a

dominant position can only exist on a particular market. Before assessing dominance,

the Commission defines the product market and the geographic market.

• Product market: the relevant product market is made of all products/services which

the consumer considers to be a substitute for each other due to their characteristics,

their prices and their intended use.

• Geographic market: the relevant geographic market is an area in which the

conditions of competition for a given product are homogenous.

Market shares are a useful first indication of the importance of each firm on the

market in comparison to the others. The Commission's view is that the higher the

market share, and the longer the period of time over which it is held, the more likely it

is to be a preliminary indication of dominance. If a company has a market share of less

than 40%, it is unlikely to be dominant.

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 The Commission also takes other factors into account in its assessment of dominance,

including the ease with which other companies can enter the market – whether there

are any barriers to this; the existence of countervailing buyer power; the overall size

and strength of the company and its resources and the extent to which it is present at

several levels of the supply chain (vertical integration).

What is an abuse?

To be in a dominant position is not in itself illegal. A dominant company is entitled to

compete on the merits as any other company. However, a dominant company has a

special responsibility to ensure that its conduct does not distort competition. Examples

of behaviour that may amount to an abuse include: requiring that buyers purchase all

units of a particular product only from the dominant company (exclusive purchasing);

setting prices at a loss-making level (predation); refusing to supply input indispensable

for competition in an ancillary market; charging excessive prices.

Investigation

The Commission's investigative powers to enforce Article 102 are detailed

in Regulation 1/2003 (the Antitrust Regulation). The Commission is empowered, for

example, to:

• Send information requests to companies;

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• In the context of an inspection:

• enter the premises of companies;

• examine the records related to the business;

• take copies of those records;

• seal the business premises and records during an inspection;

• ask members of staff or company representatives questions relating to the subject-

matter and purpose of the inspection and record the answers.

At the end of the initial investigative phase, the Commission can take the decision to

pursue the case as a matter of priority and to conduct an in-depth investigation, or to

close it.

Statement of objections and Article 7 prohibition decision

Following the investigation, the Commission may issue a statement of objections (SO).

This document informs the parties of the Commission's objections raised against them.

It gives the companies the possibility to exercise their rights of defence.

Rights of defence: To ensure an objective outcome, the parties are given certain

rights of defence. They are entitled to have access to the file – this means they can see

all non-confidential documents from the Commission's investigation. The parties may

then reply to the SO in writing within a certain delay. They may also request an oral

17
hearing, which is conducted by an independent Hearing Officer. After examining the

parties' arguments, the Commission reviews and sometimes abandons (part of) its

initial objections and may decide to close the case.

If the Commission's concerns are not – or only partly dispelled – it drafts a decision

prohibiting the identified infringement (according to Article 7 of the Antitrust

Regulation). The draft is then submitted to the Advisory Committee composed of

representatives of the Member States' competition authorities. This provides a final

check of the draft decision. If fines are proposed in the draft decision, the Advisory

Committee meets a second time to specifically discuss them. Finally, it is submitted to

the College of Commissioners which adopts the decision.

Article 9 commitment decisions

Alternatively, the Commission may take a commitment decision under Article 9 of

Regulation 1/2003. This is a quick way of restoring effective competition to the market.

Under commitment decisions, the Commission does not have to prove an infringement

of the antitrust rules and imposes no fines. It voices its concerns and parties can come

forward with commitments to address these concerns. If the Commission, after

consulting market participants, finds these commitments sufficient, it takes a decision to

make them legally binding.

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The commitments are usually valid for a specific period of time but if the companies

breach them they can be fined.

Fines

A firm that has engaged in anti-competitive behaviour and so infringed competition law

may be subject to fines imposed by the Commission under Regulation 1/2003. The

Commission's fining policy is aimed at punishment and deterrence. The fines reflect

the gravity and duration of the infringement. They are calculated under the framework

of a set of Guidelines last revised in 2006.

The starting point for the fine is the percentage of the company's annual sales of the

product concerned in the infringement (up to 30%). This is then multiplied by the

number of years and months the infringement lasted. The fine can be increased (e.g.

repeat offender) or decreased (e.g. limited involvement). The maximum level of fine is

capped at 10% of the overall annual turnover of the company.

See separate factsheet on fines.

Right of appeal

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The parties subject to a Commission decision have the right to appeal to the General

Court for the decision to be annulled. The Court can cancel, increase or reduce the fine

imposed by the Commission. Judgments of the General Court can be appealed before

the Court of Justice by the unsuccessful party (so the Commission can also be an

appellant). However, these appeals to the Court of Justice are limited to questions of

law only.

Victims' claims for damages

Any citizen or business which suffers harm as a result of a breach of the EU competition

rules should be entitled to claim compensation from the party who caused it. This

means that the victims of competition law infringements can bring an action for

damages before the national courts.

Joint/collective dominance

It should also be noted that groups of companies can also be held to be collectively

dominant on a particular market, but this is less frequent in practice.

Required reading links:

http://www.fieldfisher.com/pdf/EU-competition-law-articles-101-102.pdf

20
http://www.uio.no/studier/emner/jus/jus/JUS5310/h12/undervisningsmateriale/abuse_-

of_-dominance-_.pdf

http://www.gbv.de/dms/zbw/633047783.pdf

http://www.ee-

mc.com/fileadmin/_migrated/content_uploads/Modernisation_Article_102_03.pdf

Implementing EU competition rules: application of Articles 101 and 102 of

the TFEU

In the interest of both consumers and businesses, the European Union (EU) has rules to

outlaw cartels that fix prices or carve up markets between competitors. The EU also

seeks to prevent firms from abusing their dominant position in a market, for example by

charging unfair prices or limiting production.

ACT

Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the

rules on competition laid down in Articles 81 and 82 of the Treaty.

SUMMARY

In the interest of both consumers and businesses, the European Union (EU) has rules to

outlaw cartels that fix prices or carve up markets between competitors. The EU also

21
seeks to prevent firms from abusing their dominant position in a market, for example by

charging unfair prices or limiting production.

WHAT DOES THE REGULATION DO?

It implements the EU competition rules laid down by Article 101 (concerted practices

that restrict competition) and Article 102 (abuse of dominant position) of the Treaty on

the Functioning of the European Union (TFEU) (formerly Articles 81 and 82 of the treaty

establishing the European Community (EC Treaty). It introduced rules that changed,

above all, the enforcement aspects of EU competition policy.

It allows for competition rules previously applied by the European Commission to be

enforced on a decentralised basis by EU countries’ competition authorities. It thus

enhanced the role of national antitrust authorities and courts in implementing EU

competition law. This allows the Commission to focus its resources on enforcing the

most serious competition infringements with a cross-border dimension.

KEY POINTS

Article 101 (TFEU) procedures - antitrust

Cases to investigate anti-competitive agreements (e.g. cartels) are triggered by:

a complaint (e.g. from a competitor);

—

the initiative of the competition authority (national authority or European

—
Commission);

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 an application under a leniency programme (where a participant in a cartel may
—
avoid a fine or have it reduced if it provides information on the cartel).

Where the European Commission launches an investigation, it has wide-ranging

powers. These include the right to request information from companies but also to

enter companies’ premises, seize their records and interrogate their representatives.

If, on the basis of its initial investigations, the Commission decides to pursue an in-

depth investigation, it sets out a statement of objections (SO) which it sends to the

companies in question.

Companies under investigation may access the Commission’s file and respond to the

SO. They may also request a hearing. If, after this stage, the Commission is still

convinced there is an infringement, it may issue an infringement decision which may

include the imposition of fines on the parties.

The Commission may instead decide to adopt a commitment decision where no fines

are imposed. Here, the parties make an undertaking to address the Commission’s

competition concerns, normally for a given period. If they breach this commitment, they

may be fined.

Parties may appeal Commission decisions at the General Court.

Under Directive 2014/104/EU, victims of cartels or antitrust violations may be

compensated for damages.

Article 102 (TFEU) procedures - abuse of dominance

A national competition authority or the Commission may open an investigation on its

own initiative or following a complaint.

23
The key first step in such cases is to assess whether the firm involved is ‘dominant’.

This involves defining its market both in terms of the product(s) it supplies and the

geographic area in which they are sold. As a general rule, if the market share is under

40 %, it is unlikely to be dominant.

Other factors are also taken into account such as whether there are barriers

preventing new entrants to the market or the degree to which the firm under

investigation is involved at different levels of the supply chain (known as ‘vertical

integration’).

The next step is to find out whether this dominant position is being abused due to

practices such as predatory pricing (prices that undercut competitors), insisting that the

firm is the exclusive supplier, etc.

The competition authorities have the same investigation powers as for Article 101

procedures. Aspects such as rights of defence, the system of SOs, commitment

decisions, fines and compensation are also identical.

Lastly, a European competition network consisting of the national competition

authorities and the Commission allows them to exchange information, including

confidential information, to help them enforce violations of the competition rules.

FROM WHEN DOES THE REGULATION APPLY?

From 24 January 2003.

For more information, see the antitrust pages on the European Commission’s website.

24
REFERENCES

Act Entry into Deadline for transposition in Official Journal

force the Member States

Regulation (EC) 24.1.2003 - OJ L 1 of

No 1/2003 4.1.2003, pp. 1-25

Amending act(s) Entry into Deadline for transposition Official Journal

force in the Member States

Regulation (EC) 9.3.2004 - OJ L 68 of

No 411/2004 6.3.2004, pp. 1-2

Regulation (EC) 18.10.2006 - OJ L 269 of

No 1419/2006 28.9.2006, pp. 1-3

Regulation (EC) 25.3.2009 - OJ L 61 of

No 169/2009 5.3.2009, pp. 1-5

Regulation (EC) 14.4.2009 - OJ L 79 of

No 246/2009 25.3.2009, pp. 1-4

Regulation (EC) 1.7.2009 - OJ L 148 of

No 487/2009 11.6.2009, pp. 1-4

Successive amendments and corrections to Regulation (EC) No 1/2003 have been

incorporated into the basic text. This consolidated version is for reference only.

25
 RELATED ACTS

Commission Regulation (EC) No 773/2004 of 7 April 2004 relating to the conduct of

proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty (Official

Journal L 123 of 27.4.2004, pp. 18-24). See consolidated version.

Directive 2014/104/EU of the European Parliament and of the Council of 26 November

2014 on certain rules governing actions for damages under national law for

infringements of the competition law provisions of the Member States and of the

European Union Text with EEA relevance (Official Journal L 349 of 5.12.2014, pp. 1-19).

http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=URISERV%3Al26092
Last updated: 31.07.2015

10.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .180

European Union: Damages Actions For Competition Law Infringements In

The EU – New Law Finally Adopted

Last Updated: 4 March 2015

Article by Kiran S. Desai and Margarita Peristeraki

Mayer Brown

On 26 November 2014 the EU adopted a Directive on certain rules governing actions for

damages under national law for infringements of competition law1. The Directive seeks
26
to harmonize the relevant laws across the EU by setting the procedural framework

under which such actions can be brought in any of the EU Member States. The Member

States must transpose the Directive's provisions into their own legal systems and, thus,

adopt relevant national laws by the 27 December 2016.

Background

The Directive is the culmination of a long process that was triggered by a seminal

judgment rendered by the EU Court of Justice in 2001. In Courage and Crehan2, the

highest Court of the EU ("CoJ") ruled that the right to seek compensation for loss

caused by infringements of competition law rules is open to any individual. Such

compensation is foreseen for all antitrust infringements, that is both for abusive

conduct by dominant companies and for cartel-like behavior.

In the EU, damages actions for antitrust infringements have been (and arguably still

are) the exception. Competition law enforcement had traditionally been considered as

an administrative task and, hence, the fines imposed by the competent author around

the world) were seen as the only threat for companies involved in anticompetitive

conduct. Moreover, elements such as the diverse legal systems around the EU (that is

comities (which are amongst the highest mon law and civil law systems), or the lack of

knowledge on the part of the potential claimants of their rights rendered such actions

scarce. In recent years, such actions have increased but they remain at a very low

level, with only 25 percent of antitrust infringements being followed by such actions

according to the Commission. The Commission has estimated that because of

27
ineffective private enforce3 ment, antitrust victims forgo up to an estimated EUR 23

billion in compensation every year.4

The Commission considered that the introduction of private damages actions is an

important element that would complement its enforcement powers against illegal

antitrust conduct. However, the Commission recognized that its plan to encourage such

actions faced both difficulties and complexities. On the one hand, it had to bring

together the very different legal traditions of its 28 Member States and deal with an

array of process issues, such as limitation periods and the quantification of the harm

caused by the contested antitrust conduct. On the would not undermine the

effectiveness of existing tools in the fight against cartels, such as the Commission's

leniency program or the settlement procedure, which could be compromised by

litigation discovery rules. More precisely, the Commission's leniency programme

requires that a member of a cartel makes statements, often self-incriminatory, in

exchange for full or partial immunity from fines. Similarly, settlements are based on

such statements. If these self-incriminatory docuother, the Commission has to ensure

that such actions ments were discoverable through litigation, there was serious concern

that companies would be unwilling to make such statements. The Directive appears, at

least at first sight, to have made all ends meet. The key provisions are listed below.

Compensation

The Directive establishes the right to compensation for victims of antitrust

infringements. In this regard, it provides for full compensation for the actual harm

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suffered by the claimant. It explicitly rules out overcompensation whether by means of

punitive, multiple, or other types of damages.5

At the same time, mechanisms other than litigation are identified to obtain

compensation such as out-of-court dispute resolutions (arbitration, mediation,

settlements) and to this end the Directive provides for the process issues that would

help such mechanisms to be successful.6

Easier Access to Evidence

Under the Directive, national courts have the power to order defendants or third parties

to disclose evidence containing confidential information where they consider it relevant

to the action for damages brought before them. Such disclosure can occur upon request

of the claimant and shall be granted if it is legitimate interests of all parties involved

and of third parties concerned. justified and proportionate, taking into account

the 7 National courts will also have the power to impose penalties on the parties

concerned and on their legal representatives in the event that they fail or refuse to

comply with a disclosure order or they destroy relevant evidence.8

Currently, disclosure rules in litigation are diverse around the EU, with the UK being

recognized as the jurisdiction with the most generous disclosure regime (though still not

as generous as the US system). This asymmetry to access to information at best leads

to forum shopping and at worst discourages potential claimants from bringing an

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action. Under the Directive access to evidence is clearly established with consistent

disclosure rights around the EU and specific limitations to such rights.

The only type of evidence under the Directive that enjoys unequivocal protection from

disclosure concerns certain categories of documents produced in the context of

competition law proceedings, such as leniency and settlement statements.9 To date, the

protection of such documents from disclosure was left at the discretion of the national

judge who was expected to conduct a balancing of interests exercise on a case-by-case

basis prior to ordering such disclosure.10 This situation arguably created uncertainty as

to the protection of leniency documents and raised fears that it could hamper the

incentive of infringers to cooperate with the competition authorities. By expressly

shielding such documents from disclosure, this concern has been specifically dealt with

in the Directive.

Effect of National Decisions

Under the Directive, a claimant is able to establish the occurrence of an infringement of

competition law based on the final decision of any EU national competition authority

(Commission findings are already binding on national Courts). In the context of

harmonization, under the Directive a decision adopted by the national competition

authority in one Member State shall be binding on the national court of any other

Member State. This will make it easier for potential claimants to provide prima facie

evidence to build their case.11

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Limitation Periods

Under the Directive, the period of time within which victims can bring a damages action

shall be at least five years from the moment that the claimant knows or is reasonably

expected to know of the infringement and of the harm it suffered.12

For follow-on actions (namely, those that rely on a prior decision by a competition

authority), the limitation period of five years would be suspended or interrupted from

the moment a competition authority starts investigating an infringement until at least

one year after the infringement decision has become final. For stand-alone damages

actions (namely, those brought without relying on a prior decision by a competition

authority), the minimum limitation period provided by the Directive suggests that

existing national rules that provide for longer limitation periods will prevail. This allows

potential claimants to choose to bring their action in the EU Member State, where the

limitation period is the longest.

It is also worth noting that the limitation periods are suspended for the duration of any

consensual dispute resolution process vis-à-vis those parties that are involved in such

dispute resolution.13

It follows from the above that it will take several years before a company that is

involved in an antitrust will have to deal with, whilest it would have to gather and

maintain exonerating evidence in detail to use it in its defense several years after the

facts.

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Joint and Several Liability

Under the Directive, cartel members are jointly and severally liable for the harm caused

by the illegal conduct of the cartel in full. This means that each cartel member is bound

to compensate for the total loss suffered by a claimant until the latter is fully

compensated.14

There are two exceptions to this rule: the first concerns small companies who under

certain conditions are liable only for the harm caused to their own direct and indirect

purchasers. The second concerns immunity recipients who are only liable for the harm

caused to their direct or indirect purchasers. However, immunity recipients are liable to

other claimants only if the claimants have been unable to obtain full compensation from

the other cartel members.

On the basis that a culpable cartel member should in principle only be liable for the

harm it has caused, but recognizing that the above provisions could result in

"overpayment" in damages by a cartel member, under the Directive cartel member will

be able to recover a contribution from any other cartel member for the overpayment.

The amount of the contribution will be determined based on the relative responsibility

of that party for the harm caused. Again, the contribution allocated to immunity

recipients will not exceed the amount of the harm caused to their own direct or indirect

purchasers or providers.

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The complexity in this provision lies in the methodology to be used to calculate the

contribution of each infringer. The Directive does not provide any further guidance as to

how this quantification shall be made, and thus it remains to be seen how this element

will evolve in practice.

Passing On

Under the Directive, the defendant in an action for damages should be allowed to

defend itself against a claim by arguing that the claimant passed on the whole (or part)

of the higher cartel price (the "overcharge") to its customers.15 The burden of proving

that the overcharge was passed on would be on the defendant, who may in its turn

require disclosure from the claimant or from third parties of evidence of this passing on.

The counter-balance to this defense, however, is that a downstream customer who had

paid this passed-on overcharge (the "indirect purchaser") or believes that it has paid an

overcharge has a claim for damages, but here the claimant has the burden of proving

the existence and scope of such passing-on.

Under the Directive Member States must put in place appropriate procedural rules to

avoid situations of overcompensation or under compensation of the victims as a result

of the passing on defense. However, detailed guidance is not provided.

Quantification of Harm

Under the Directive a rebuttable presumption exists that cartel infringements cause

harm. It also provides that where the quantification of the harm suffered by a claimant

33
is practically impossible or excessively difficult to be undertaken, the national courts

shall be able to estimate the amount of such harm.16

However, the Directive does not contain any guidance to national courts as to how to

quantify the harm in question. In this regard the Commission has published a separate

Communication for the quantification of damages in antitrust infringements17 and a

practical guide18 that describes the main methods and techniques available to quantify

the harm resulting from antitrust infringements and the underlying basic assumptions.

These documents are expected to be used as guidance by national judges and

interested parties for the purpose of this exercise.

What Next?

Private enforcement of competition law is still a relatively nascent area in the EU. The

Directive should be an encouragement for potential claimants to step forward.

Moreover, the Commission encourages collective actions for damages with the view to

help particularly small and medium-sized enterprises ("SMEs") and individuals with low

value damage claims pursue antitrust offenders. To this end the Commission published

a non-binding recommendation that complements the Directive.19

As indicated above, there are already a number of private damages actions introduced

in recent years in the EU and in particular in the jurisdictions that are considered to be

more claimant friendly, such as the United Kingdom. The compensation amounts so far

have not been as eye-watering as those typically awarded in US proceedings (where

34
treble and punitive damages exist) but can still be significant. In any event, the

inconvenience caused by resource-intensive litigation and the reputational damage that

accompanies it should not be underestimated and the greatest contribution that the

Directive might make in ensuring compensation for victims of breaches of competition

law is the creating of a strong legal framework that encourages settlement by the

infringers.

It remains to be seen whether the litigation landscape in the EU will change shape in

the coming years. For the moment, there are still important issues to be decided, such

as the amount and details of evidence that a party would need to produce before the

national court or the methodology to quantify the harm suffered. A November 2014

ruling of the Brussels Commercial Tribunal, which dismissed the Commission's damages

action against members of the elevators' cartel, was a reminder of the obstacles that

exist in practice. In that case, the Commission claimed €6 million in damages for

elevators it had cartel period. The Brussels Commercial Tribunal dismissed the damages

action on the basis that the Commission had failed to provide sufficient evidence to

establish a causal link between the cartel and the allegedly higher prices of the

contracts it had entered into. In other words, the Commission failed to provide

sufficient evidence on the actual harm it sufferedpurchased and installed in its premises

during the .20

It is believed that the outcome of this case would have been different if it had been

brought to Court under the new regime given that the Directive provides for a

35
rebuttable presumption that a cartel causes harm—but this remains to be seen. In any

event, private damages actions for antitrust infringements in the EU are expected to

increase. This would not only come as a result of the Directive, but also because of the

better education of cartel victims and the facilitation of such claims by specialized

litigation bodies (such as litigation funds, or other private litigation organizations) that

have made their appearance in the EU in the recent years.

Footnotes

1 Directive 2014/104/EU of the European Parliament and of the Council on certain rules

governing actions for damages under national law for infringements of the competition

law provisions of the Member States and of the European Union, OJ L 349, 5.12.2014,

p. 1–19.

2 Judgment of the Court of 20 September 2001 in Case C-453/99, Courage Ltd v.

Bernard Crehan and Bernard Crehan v Courage Ltd and Others.

3 Presentation by Dr. Till Schreiber, CDC Cartel Damage Claims, "Private Antitrust

Enforcement", European Competition Day, Vilnius, 3 October 2013.

4 See, Impact Assessment Report in relation to damages actions for breach of EU

antitrust rules, accompanying the proposal for the Directive, paragraph 67, page 23,

available at:

http://ec.europa.eu/competition/antitrust/actionsdamages/impact_assessment_en.pdf ,.

36
5 Directive, Article 3.

6 Directive, Articles 18,19.

7 Idem, Article 5.

8 Idem, Article 7.

9 Idem, Article 6.

10 See Judgment of the Court of Justice of 14 June 2011 in Case C-360/09 Pfleiderer;

see also judgment of the Court of Justice of 6 June 2013, in Case C-536/11, Donau

Chemie and Others.

11 Directive, Article 9.

12 Directive, Article 10.

13 Directive, Article 18.

14 Directive, Article 11.

15 Directive, Articles 12 et seq.

16 Directive, Article 17.

17 Communication from the Commission on quantifying harm in actions for damages

based on breaches of Article 101 or 102 of the Treaty on the Functioning of the

European Union. OJ C(2013) 3440, 11.6.2013.

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18 Commission Staff Working Document – Practical Guide on Quantifying Harm in

Actions for damages based on breaches of Article 101 or 102 of the Treaty on the

Functioning of the European Union, SWD(2013) 205, 11.6.2013.

19 See, Commission memo, of 11 June 2013, "Frequently Asked Questions: Commission

proposes legislation to facilitate damage claims by victims of antitrust violation",

available at http://europa.eu/rapid/press-release_MEMO-13-531_en.htm.

20 Decision of the Rechtbank van koophandel te Brussel (Commercial Tribunal of

Brussels) of 24 November 2014, in case A/08/06816 brought by the European

Commission against Otis NV, General Technic-Otis Sàrl, Kone Belgium NV, Kone

Luxembourg Sàrl, Schindler NV, Schindler Sàrl, ThyssenKrupp Liften Ascenseurs NV,

ThyssenKrupp Ascenseurs Luxemboourg Sàrl. The Commission lodged an appeal

against this decision.

Originally published 2 March 2015

Directive on Antitrust Damages Actions

Directive 2014/104/EU on antitrust damages actions was signed into law on 26

November 2014 and published in the Official Journal of the European Union on 5

December 2014.

Member States need to implement the Directive in their legal systems by 27 December

2016.

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 Main changes brought by the Directive

The Directive removes practical obstacles to compensation for all victims of

infringements of EU antitrust law. The Directive applies to all damages actions, whether

individual or collective, which are available in the Member States.

Further, the Directive fine-tunes the interplay between private damages actions and

public enforcement of the EU antitrust rules by the Commission and national

competition authorities.

Main changes:

• Parties will have easier access to evidence they need in actions for damages in the

antitrust field. In particular, if a party needs documents that are in the hands of other

parties or third parties to prove a claim or a defence, it may obtain a court order for the

disclosure of those documents. Disclosure of categories of evidence, described as

precisely and narrowly as possible, will also be possible. The judge will have to ensure

that disclosure orders are proportionate and that confidential information is duly

protected.

• Similarly as a Commission infringement decision, a final infringement decision of a

national competition authority will constitute full proof before civil courts in

the same Member State that the infringement occurred. Before courts of other

Member States, it will constitute at least prima facie evidence of the

infringement.

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• Clear limitation period rules are established so that victims have sufficient time to

bring an action. In particular, victims will have at least 5 years to bring damages claims,

starting from the moment when they had the possibility to discover that they suffered

harm from an infringement. This period will be suspended or interrupted if a

competition authority starts infringement proceedings, so that victims can decide to

wait until the public proceedings are over. Once a competition authority's infringement

decision becomes final, victims will have at least 1 year to bring damages actions.

• The Directive clarifies the legal consequences of 'passing on'. Direct customers of

an infringer sometimes offset the increased price they paid by raising the prices they

charge to their own customers (indirect customers). When this occurs, the infringer can

reduce compensation to direct customers by the amount they passed on to indirect

customers. Compensation for that amount is in fact owed to indirect customers, who in

the end suffered from the price increase. However, since it is difficult for indirect

customers to prove that they suffered this pass-on, the Directive facilitates their claims

by establishing a rebuttable presumption that they suffered some level of overcharge

harm, to be estimated by the judge. The Directive contains provisions to avoid that

claims by both direct and indirect purchasers lead to overcompensation. Claims

concerning harm resulting from loss of profit are not affected by the Directive's passing-

on rules.

• The Directive clarifies that victims are entitled to full compensation for the harm

suffered, which covers compensation for actual loss and for loss of profit, plus

payment of interest from the time the harm occurred until compensation is paid.

40
• The Directive establishes a rebuttable presumption that cartels cause harm. This

will facilitate compensation, given that victims often have difficulty in proving the harm

they have suffered. The presumption is based on the finding that more than 90% of

cartels cause a price increase (as found by a study). In the very rare cases where a

cartel does not cause price increases, infringers can still prove that their cartel did not

cause harm.

• Any participant in an infringement will be responsible towards the victims for

the whole harm caused by the infringement (joint and several liability), with

the possibility of obtaining a contribution from other infringers for their share of

responsibility. However, to safeguard the effectiveness of leniency programmes, this will

not apply to infringers which obtained immunity from fines in return for their voluntary

cooperation with a competition authority during an investigation; these immunity

recipients will normally be obliged to compensate only their (direct and indirect)

customers. Furthermore, a narrow exception from joint and several liability is foreseen

under restrictive conditions for SMEs that would go bankrupt as a consequence of the

normal rules on joint and several liability.

Ordinary legislative procedure

Based on a Commission proposal of 11 June 2013 (see below), the Directive was

adopted by the European Parliament and the Council of the European Union under

the ordinary legislative procedure (Article 294 TFEU).

41
 Legislative milestones:

• On 2 December 2013 the Council adopted its general approach on the Commission's

proposal, which gives the Council Presidency the mandate to start negotiations with the

European Parliament and the European Commission with a view of reaching an

agreement in the first reading.

• On 27 January 2014, the ECON Committee of the European Parliament adopted

its Report on the Proposal and provided the Rapporteur with a mandate to start trilogue

negotiations with the Council and the Commission in view of reaching an agreement in

first reading.

• In February and March 2014, three political trilogues and several technical meetings

took place in order to reach an agreement on the text. This agreement was reached on

20 March 2014.

• On 26 March 2014, COREPER endorsed the agreed result of the trilogues.

• On 17 April 2014, the Parliament approved the compromise text of the Directive. See

Commission press release and memo.

• Following linguistic corrections, the Directive was finally adopted by the Council on 10

November 2014. See Commission press release.

• The Directive was formally signed into law on 26 November 2014 and published in the

Official Journal of the EU on 5 December 2014.

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 Key Court cases

Key Court cases The European Court of Justice held in several instances and contexts

that anyone who suffered harm through an infringement of the EU antitrust rules is

entitled to full compensation, and that national rules should ensure the effectiveness of

this right. See for instance:

• 20 September 2001. C-453/99 Courage and Crehan;

• 13 July 2006, Joined cases C-295/04 to C-298/04 Manfredi;

• 14 June 2011. C-360/09 Pfleiderer;

• 6 November 2012, C-199/11 Otis and Others;

• 6 June 2013, C-536/11 Donau Chemie;

• 5 June 2014, C-557/12 Kone.

10.6 Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .180

The main legislative texts for merger decisions are the EC Merger Regulation and

the Implementing Regulation. The Merger Regulation contains the main rules for

the assessment of concentrations, whereas the Implementing Regulation concerns

procedural issues (notification, deadlines, right to be heard,...). The official forms for

standard merger notifications (Form CO), simplified merger notifications (Short Form

CO) and referral requests (Form RS) are attached to the Implementing Regulation.

43
In the field of mergers, notices and guidelines (see list below) play an important role

for the interpretation of the Merger Regulation.

The Commission has also published "Best Practice Guidelines" which concern the

relationship between case team and parties/third parties during the procedure (pre-

notification contacts, meetings, provision of documents). To provide better guidance to

the parties when it comes to offering commitments, the Commission has also published

model texts for divestiture commitments and for trustee mandates and an explanatory

guideline.

EU Competition law – rules applicable to merger control .

Last update on 01.07.2013. This is a downloadable version of the legislation and

guidance documents in force as of this date, and available in electronic format only.

http://ec.europa.eu/competition/mergers/legislation/legislation.html

Why are mergers examined at the European level?

While companies combining forces (referred to below as mergers) can expand markets

and bring benefits to the economy, some combinations may reduce competition.

Combining the activities of different companies may allow the companies, for example,

to develop new products more efficiently or to reduce production or distribution costs.

Through their increased efficiency, the market becomes more competitive and

consumers benefit from higher-quality goods at fairer prices.

44
However, some mergers may reduce competition in a market, usually by creating

or strengthening a dominant player. This is likely to harm consumers through higher

prices, reduced choice or less innovation. Increased competition within the European

single market and globalisation are among the factors which make it attractive for

companies to join forces. Such reorganisations are welcome to the extent that they do

not impede competition and hence are capable of increasing the competitiveness of

European industry, improving the conditions of growth and raising the standard of living

in the EU. The objective of examining proposed mergers is to prevent harmful effects

on competition. Mergers going beyond the national borders of any one Member State

are examined at European level. This allows companies trading in different EU Member

States to obtain clearance for their mergers in one go.

Which mergers are examined by the European Commission?

If the annual turnover of the combined businesses exceeds specified thresholds in

terms of global and European sales, the proposed merger must be notified to the

European Commission, which must examine it. Below these thresholds, the national

competition authorities in the EU Member States may review the merger. These rules

apply to all mergers no matter where in the world the merging companies have their

registered office, headquarters, activities or production facilities. This is so because

even mergers between companies based outside the European Union may affect

markets in the EU if the companies do business in the EU. The European Commission

may also examine mergers which are referred to it from the national competition

45
authorities of the EU Member States. This may take place on the basis of a request by

the merging companies or based on a request by the national competition authority of

an EU Member State. Under certain circumstances, the European Commission may also

refer a case to the national competition authority of an EU Member State.

See more on the procedures followed by the Commission.

When are mergers prohibited or approved?

All proposed mergers notified to the Commission are examined to see if they would

significantly impede effective competition in the EU. If they do not, they are approved

unconditionally. If they do, and no commitments aimed at removing the impediment

are proposed by the merging firms, they must be prohibited to protect businesses and

consumers from higher prices or a more limited choice of goods or services. Proposed

mergers may be prohibited, for example, if the merging parties are major competitors

or if the merger would otherwise significantly weaken effective competition in the

market, in particular by creating or strengthening a dominant player.

When does the European Commission approve mergers conditionally?

However, not all mergers which significantly impede competition are prohibited. Even if

the European Commission finds that a proposed merger could distort competition, the

parties may commit to taking action to try to correct this likely effect. They may

commit, for example, to sell part of the combined business or to license

technology to another market player. If the European Commission is satisfied that the

46
commitments would maintain or restore competition in the market, thereby protecting

consumer interests, it gives conditional clearance for the merger to go ahead. It then

monitors whether the merging companies fulfil their commitments and may intervene if

they do not.

Required reading link:

http://ec.europa.eu/competition/mergers/legislation/merger_compilation.pdf

Case Law:

http://ec.europa.eu/competition/elojade/isef/index.cfm?fuseaction=dsp_merger_by_dat

http://ec.europa.eu/competition/publications/legislation_en.html

Quick quiz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .183

END OF LECTURE NOTES

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