Academic Year 2009-2010 - Notes EU Competition Law-Jeroen de Mets

EU Competition Law
Academic year 2009-2010 – notes EU competition law- Jeroen De Mets 1

1. Introduction
A. The origin of competition rules
§ 1 Historic introduction
It might seem a little surprising that the EU Treaty contains rules directed at undertakings.
After all, a treaty is essentially an agreement between states. However, the EEC Treaty of
1957 already contained provisions on competition rules.
The GATT 47 agreement had an decisive influence and the Treaty of Rome. The GATT 47
agreement was primarily directed towards states. It stipulated rules states should follow in
order to allow for a liberalisation of trade in goods. E.g., the GATT 47 agreement
contained a principle of non-discrimination. Foreign goods could not be treated
unfavourably. The influence on the Union is evident: the idea of the common or internal
market is that in transnational transactions, Member States may not discriminate against
foreign goods or services. However, the GATT 47 agreement did not rules on competition.
Even when the GATT was reformed in 1994 (becoming WTO 94, and having a much broader
scope), competition rules were still not included.
The Treaty of Rome literally copied some provisions from the GATT 47 agreement.
However, the Treaty went further and included provisions addressed to undertakings,
limiting their action on the market in order to ensure competition. The parties felt this
was necessary now that the freedom of establishment would give rise to more competition
between European undertakings. These considerations were still visible in the Nice Treaty,
where art. 2 EC mentioned “a high degree of competiveness” as one of the Union’s
objectives. Art. 3(1)(g) EC then made clear that in order to achieve the internal market,
there should be system “ensuring that competition (…) is not distorted”. The EC Treaty
thus named competition as an indispensable component to the internal market. This is not
a purely symbolic gesture. The ECJ has used art. 2-3 EC to interpret other treaty
provisions.
§ 2 Relation to the internal market

Competition rules are closely related to the four freedoms of the internal market. In
practice, there is a lot of interference.
The internal market is meant to be a unified market with unified competition standards
that leads to an optimisation of scarce resources. In the internal market, resources are
employed there were they can be used the most efficient. This should lead to peace and
stability trough economic integration (the theory of economic interdepedence).
To establish the internal market, member states should remove barriers that limit the free
movement of persons, goods, capital and undertakings. Rules and standards should be the
same trough out the Union. European directives and regulations are used to attain this
objective. Because of the principle of subsidiarity, regulations are (in theory) only used
where directives are not efficient. This is only one aspect. The Treaty drafters also agreed
that undertakings should not be allowed to resurrect these barriers and reinstate some
kind of private borders. Here competition law becomes important.
However, in practice, the internal market is still a faraway dream. One of the main
reasons is that several barriers still remain. This is important for competition law, as
undertakings often argue that is unfair that they should comply with competition rules

whilst the member states still don’t fully comply with the rules of the internal market. For
competition law however, undertakings are expected to assume that the internal market is
completed. Commission research (the ‘internal market scoreboard’) shows that most
member states often fail to implement directives on time. Whilst member states now score
better in this aspect, directives are now often implemented incorrectly.
In conclusion, competition was never an objective in itself. It has always been a necessary
element of the establishment of the internal market, which was meant to provide peace
and stability. This helps explain why the nature of EU competition law is different than the
nature of US competition law.
§ 3 The choice for workable competition

The treaty drafters had the choice between two main economic systems: they could chould
choose a centralized economic, or they could choose a system of free competition. In such
a system, undertakings make the important decisions: they choose what and when to
produce, and at what price to sell their products. For the member states the choice was
clear however: they believed in a system of free competition.
Now that they agreed that competition played an important role in the Community, the
treaty drafters were faced with another important question: what kind of competition do
we need? Within free market economics, there are two main theories. The theory of
perfect competition has two main premises:
 The principle of allocated efficiency: scarce resources will be employed in the
market in exactly the quantities consumers take.
 The principle of productive efficiency: products will be available on the market
against the lowest possible price. The producer is a ‘price taker’. This requires that
four conditions are met:
o There is perfect information available on the market.
o Consumers act rationally (ration choice).
o There are no entry barriers (anything making it difficult or impossible to
enter the market).
o Goods are able to flow freely.
The treaty drafters opted for a different theory however: the theory of workable
competition. This theory shares the premises of the free competition system, but believes
the government should intervene in order to prevent market failures and to maintain a
competitive market structure. According to this theory, the government should intervene:
 To prevent horizontal and vertical collusion. Collusion occurs when two or more
undertakings try to limit competition. There is horizontal collusion when these
undertakings are on the same level of the production process, whilst there is
vertical collusion when the undertakings are a different level of the production
process (e.g. a manufacturer and a distributor).
 To ensure that dominant undertakings cannot prevent competition by preventing
the emergence of new undertakings.
 In markets with an oligopolistic structure (where there is a collective market
dominance).
 In order to prevent mergers which could damage the competitive market structure.
So, undertakings should be able to take all the big decisions themselves, but they must
also take these decisions themselves.

B. Competition in the EU Treaty
§ 1 Relevant provisions
The Treaty on the Functioning of the European Union (TFEU) has two articles on
competition. The first Is art. 101 TFEU (the former art. 81 EC, which was art. 85 EC before
Amsterdam), the second is art. 102 TFEU (which was art. 82 EC before Lisbon, and art. 86
EC before that). Art. 101 TFEU deals with horizontal collision (the first correction
mechanism in the theory of workable competition), whilst art. 102 TFEU deals with abuse
of a dominant position (the second and third correction mechanism). The fourth correction
mechanism, merger control, is not found in the Treaty. This is because in 1958, there were
no big companies. This is why merger control is dealt with in a 2003 regulation. Until the
‘80s, there was but some case law of the ECJ to rely on. However, as the ECJ itself
admitted, this was not sufficient. When the Single European Act named the internal
market as an objective of the EEC, it became clear that mergers could have an influence
on the market structure. Against this background, the first merger regulation was adopted
in 1989.
§ 2 Objectives of competition rules

(1) The original objectives of the EU
The objective of EU competition law has never been competition as such. Traditionally,
competition law aimed at creating an open and unified market and at maintaining a
competitive market structure. Later, maintaining a certain degree of fairness in the
market also became an objective. Competition rules were meant to protect small and
medium sized enterprises, as well protect consumer interests. This becomes clear from
art. 101 TFEU, which in its exemptions stipulates that the agreements should allow
consumers “a fair share of the resulting benefit”. Hence, competition rules serve a
combination of economic and social objectives. This was criticised, because it does not
include economic efficiency.
(2) The USA and its influence on the EU
American competition law has a quite different objective: economic efficiency. Here, the
USA system has been influenced by the Chicago school (Friedman a.o.). According to this
school of thought, the market regulates itself trough the play of offer and demand.
Therefore, there is no need for the government to protect consumer welfare. The
government can however intervene in a limited number of cases where the market fails to
regulate itself. For example, the government may intervene to discourage free riders,
where someone profits from the costs made by somebody else. Monopolies, however, are
not a reason for government intervention. The Chicago school asserted that the market is
not static: if there is a monopoly, the market will undermine it over time. If that does not
happen, it means there are entry barriers. Likewise, vertical restrictions are not a problem
unless they lead to horizontal collusion.
This has had an influence on the EU. The globalisation of the economy made economic
efficiency a new objective for competition law. EU undertakings had to be efficient to
compete on the global market. Today, economic efficiency might be the most important
objective for the modernisation of the internal market, although the process also tries to
reconcile economic efficiency with social objectives.

§ 3 Is the EU approach too legalistic?
The EU competition policy has been criticised for being too legalistic. According to critics,
it did not take the situation of the market into account often enough. This is only true in
part: the EU has always, to a certain extent, taken the economic reality into account.. The
modernization of the internal market changed this. The EU now tries to look at the
economic situation and has move more towards an impact based competition law.
However, this has been done at the cost legal certainty. A legalistic system has predictable
results, whilst an impact based system is judged on a case by base basis. Then again, a
case by case approach is more flexible and has more attention to the specific needs of
undertakings.
§ 4 The influence of the Lisbon treaty

At first sight, the Lisbon Treaty has changed little. Art. 101 TFEU and art. 102 TFEU are the
exact equivalent of art. 81 and 82 EC. The secondary law is still there. However, there is a
more theoretic discussion going on the nature of competition law. In the Nice Treaty,
undistorted competition was mentioned as an objective (art. 3 (g) EC), that would help
reach the primary objectives (art. 2 EC) of the Community. Within the EC, there was some
discussion on the role of competition. To people like Neelie Kroes, competition was
quintessential. People like president Sarkozy however, felt competition was not an
objective in itself, but merely a means in reaching other objectives.
In the Constitutional Treaty, free and undistorted competition was mentioned as on
objective, but some felt this had gone too far. This stirred a debate, in which Sarkozy took
a protectionist stance. The EU should not interfere with ‘domestic champions’. Therefore,
in the Lisbon Treaty, competition was degraded to a mere means of achieving the internal
market. In the Treaty itself, competition is not even mentioned anymore. The only thing
art. 3 mentions as an objective is the attainment of ‘highly competitive social market’.
The lack of competition as an objective may seem theoretical, but it is important to note
that the Court often used art. 3 (g) EC to interpret art. 81-82 EC. As a reaction, in the nick
of time and after the ECJ and the Commission repeated that economic efficiency was
important for our global competiveness, the parties added protocol nr. 27 to the Treaty,
stating that the internal market includes a system to assure that competition is not
distorted. This is of course not the same as the Constitutional Treaty, which mentioned
‘free competition’. However, is the Lisbon Treaty also a step back from the Nice treaty?
There is discussion on this. Some people point at the fact that the protocols have the same
legal value as the Treaty. Therefore, legally, nothing seems to have changed. They see the
EU Treaty as a ‘toolbox’: you just need to find the right tool. Other claim the EU Treaty is
more like a symphony. Even if you have the all the same notes, if the composition changes,
the legal results are different. So, we’ll have to see how things turn out in practice.
§ 5 A look at the main competition provisions in the TFEU

(1) Overview
The TFEU contains a chapter entitled ‘rules on competition’. Art. 101-106 TFEU contain
the rules applying to undertakings, and the procedural rules enforcing them.
(2) Art. 101 TFEU
(A) CONTENT
Art. 101 TFEU is an antitrust provision. According to the first paragraph, it concerns
“agreements”, “decisions by associations of undertakings” and “concerted practices”.
Thus, two or more undertakings are required. These practices are forbidden if they occur

between undertakings and “affect trade between Member States” or if they aim at
distorting competition within the internal market. The provision then gives some
examples, inter alia price fixing. The second paragraph gives a civil sanction: agreements
or decision contrary to this article are void. The third paragraph gives the possibility of an
exemption from the prohibition under the first paragraph if certain conditions are met.
There are two positive requirements and two negative requirements (
(B) INTERPRETATION
The application of art. 101 TFEU raises some questions. For example, the application
ratione loci is very important. The article applies to ‘the internal market’. Another
example is the criterion of ‘distortion’. Is this horizontal distortion, or vertical, or both?
The main idea is that if companies may take decisions freely, they must in fact take them
freely.
(3) Art. 102 TFEU
Art. 102 TFEU prohibits the abuse of a dominant position if this abuse affects trade
between the Member States. Hence, only one undertaking is required. The article contains
some examples, like limiting production to the prejudice of consumers. There are no
exemptions in the text, although the Commission does try to read an exemption art. 102
TFEU. It does not seem likely that this legally possible, however.
Of course, the interpretation of art. 102 TFEU is not an easy task. What is ‘abuse’ and
what is a ‘dominant position’? The concrete situation plays a big role in this assessment.
(4) Art. 103 TFEU
Art. 103 TFEU deals with procedural issues. The Council may further implement art. 101-
102 TFEU, for example by imposing sanctions.
(5) Art. 105 TFEU
Art. 105 TFEU states that the Commission ensures the application of art. 101-102 TFEU. It
may take action to stop certain actions.
(6) Art. 106 TFEU
Art. 106 TFEU states that in creating public undertakings, Member States must still respect
competition rules. Also, public undertakings too must respect competition rules, unless
their behaviour is necessary for the execution of their public task.

2. The concept of ‘undertakings’
A. Introduction
After fifty years of practice and case law, we still do not have a clear European definition
of what an ‘undertaking’ is. Whilst for most enterprises, things are quite clear, there a
some grey areas This is mostly explained by the constantly changing economic context, but
also because of the growing EU competences. This means new areas of the economy are
now within the range of EU competition law. This is explains why discussions on e.g. the
applicability of competition law in the social sector have only recently come to the
surface.
B. The first description of an ‘undertaking’: the Mannesman case

(1962)
The Court was confronted with the concept of undertaking for the first time in the
Manesman case (1962). Like so often with basic concepts, the Court gave a broad
interpretation. This assures uniformity, because more cases fall within the EU
competences. Unfortunately, rather than giving a clear definition, the Court gave a
description. According to the Court, an undertaking is a structure of certain personal
tangible and intangible elements united in an autonomous legal entity, pursuing a given
long-term economic aim. With this description, the Court tries to develop a functional
criterion. So, the Court looks at the way an entity behaves, rather than the way it formally
presents itself. So, the legal structure of an undertaking is irrelevant. The status of an
undertaking, public of private, is also irrelevant. So, in a way, the Court puts the definition
upside down. It first looks whether a certain activity could fall under art. 101-102 TFEU,
and then looks whether the legal entity concerned is an undertaking.
The Commission consequentially copied this description, inter alia in the Christiani-
Nielsen decision (1969).
C. The first comprehensive definition: the Höfner and Elser case

(1991)
It was only in 1991 that Court, in the Höfner and Elser case, gave a comprehensive
definition of the concept ‘undertaking’. The Court defined an undertaking as ‘an entity
engaged in an economic activity, regardless of its legal status or the way in which it is
financed’. In casu, there was a discussion about a public employment agency. According to
the German government, the agency served social purposes and was a part of the state.
Therefore, the agency was not an undertaking. And, even if the were an agency, the
German government pointed out, its behaviour on the market was necessary to perfom the
tasks assigned to it (art. 106 (2) TFEU).
However, the Court disagreed. It pointed out that
D. The discussion on the concept of an ‘economic activity’

§ 1 The definition of ‘economic activity’: the Commission v. Italy case
(1987)
In the Commission v. Italy case (1987) the Court defined what should be understood under
an ‘economic activity’. An economic activity is ‘the offering of goods or services on the
market’. This definition is important for the interpretation of the Höfner definition (cf.
infra). As we will see however, there are lots of grey areas.

§ 2 Public undertakings
(1) The Eurocontrol case (1994)
In the Eurocontrol case (1994), the Court addressed the question whether public
undertakings should be treated differently. Eurocontrol is a public organisation for the
safety of air space. The Court confirmed that even public undertakings are undertakings in
the sense of art. 101-102 TFEU, unless they have regulatory capacity and do not engage in
an economic activity. The Court concluded that Eurocontrol was not an undertaking.
(2) The Selex case (2007)
The Selex case (2007) again concerned Eurocontrol. Firstly, the Court confirmed that
Eurocontrol is not an undertaking. It carried out activities that are typically those of a
public authority and which are not, taken as a whole, of an economic nature. This does not
mean that it can not have certain economic activities. It is not relevant that these
activities are not actually also being offered by private undertakings. It is sufficient that
they could potentially also be offered by the private sector. Also, the non-profit making
character is irrelevant.
However, in casu there were no economic activities.
§ 3 Semi-Public undertakings
(1) The bar
In the Wouters case (2002), a lawyer complained that he was not allowed to have a
professional partnership with another professional, like an accountant. The bar claimed it
was not an economic actor and was not an association of undertakings. The Court started
by concluding that lawyers are in fact undertakings, even though their activity is of a
complex technical nature. The Court then makes a distinction between art. 101 and 102
TFEU. Here, Mannesman returns: the Court first looks whether the provision could be
infringed, and then investigates whether we are dealing with an undertaking. However, in
this case, this leads to two differents results. So, the bar is both an undertaking and not
undertaking. This is not really coherent and rather strange: the Court mostly uses one
definition for both articles (Jones 2007). For the application of art. 102 TFEU, the Court
concluded that the bar did not constitute an undertaking, because it does not carry on a
economic activity. Also, because there is a high degree of competition between lawyers,
the bar would not be able to eliminate competition. However, the bar is an association of
undertakings in the sense of art. 101 TFEU, because it exercising its regulatory capacity, it
carries on an economic activity, because it is not required to use this capacity for the
public interest. However, in casu art. 101 TFEU was not breached, because the
infringement was deemed necessary for the practice of the profession. Here, the Court
referred to the fact that unlike lawyers, accountants have no legal confidentiality duty.
The Wouters case still left some questions. For the bars, it has difficult to assess what is
‘necessary’. Also, the question enquired whether the bar was an association of
undertakings only if and in so far it acts in the undertakings interest. The Court did not
answer this directly. It just determined whether the bar was an undertaking. The reasoning
is also different from the AOK case (cf. supra).
(2) Social security
(A) INTRODUCTION
Social Security institutions are an interesting grey area, because they are often semi-public
institutions, because social security is a Member State competence, and because the

financial aspect is very important. Because the Treaty only applies when to economic
activities, an activity must also a be an economic activity for art. 101-TFEU to be
applicable.
(B) THE POUCET-PISTRE CASE (1993)
The Poucet-Pistre case (2003) concerned a social security institution (‘Caisse social’) that
was assigned the task of managing social security schemes. Was this to be seen as an
economic activity? Foremost, it is important to note that social security is a national
competence. So, the EU has to be careful not to infringe upon this competence.
The ECJ concluded that the institution was not an undertaking. It gave three reasons.
Firstly, the institution fulfilled an exclusively social function. Secondly, it was based upon
the principle of solidarity. Thirdly, it was entirely non-profit. So, the institution did not
have an economic activity.
However, it remained unclear what the decisive criterion is. It was unclear whether the
non-profit making criterion was necessary or sufficient. Also, it was unclear when
something became an ‘exclusively social function’. For example, in Höfner, there was
apparently no exclusively social function.
(C) THE FÉDERATION FRANÇAISE DES SOCIÉTES D’ASSURANCE CASE (1995)
Some answers were given in the Féderation Française des Sociétes d’Assurance case
(1995). The case also concerned a social security scheme, but here, there was an optional
old-age pension scheme, based on capitalisation. The Court concluded that the Féderation
is in fact an undertaking, notwithstanding the fact that the organisation was non-profit
making, had a social function, was established by law and had some elements of solidarity.
As an additional element, the Court pointed that the Féderation competed with private
insurers. So, whilst it became clear that elements were in themselves not sufficient, a lot
of questions still remained. For example, does the fact that the Court mentioned ‘some
elements of solidarity’ mean that a scheme should be compulsory, or that there should
simple be more solidarity?
(D) THE PAVLOV CASE (2000)
The Pavlov case (2000) concerned a medical specialist who refused to pay contributes to a
compulsory pension fund. This fund was a non-profit making organisation, based on the
principle of solidarity, and had a social function. The Court recalled the Poucet Pistre case
and the Drijvende Bokken case (1997). In that case, employers and employees had set up a
pension fund by collective agreement. However, employees are not undertakings and
collective agreements are mentioned in the Treaty. The Pavlov case, however, concerned
the liberal professions. The Court concluded that medical specialists are engaged in an
economic activity, and are therefore undertakings. The question was therefore whether
the pension fund constituted an association of undertakings. However, in casu, medical
specialists were end users. So, the question was whether the pension fund was an
undertaking. The Court pointed out that the fund used capitalisation. The height of the
pension benefits depended on the profits made by the pension fund. Also, the fund
competed with private insurance companies. So, the Court concluded, the pension fund
was in fact an undertaking, not withstanding it social function, non-profit character or
elements of solidarity. These criteria made the fund less competitive, but were not
sufficient in themselves.
(E) THE CISAL CASE (2002)
In the Cisal Case (2002), a clear answer was finally given. The case concerned an
institution providing compulsory insurance against accidents at work and occupational
diseases. Here, the Court concluded that this did not constitute an economic activity.
Here, for the first time, the Court says very clearly that the social aim is important, but in
itself is not sufficient. However, two other elements are essential. Firstly, solidarity played

an essential role in the compulsory insurance at hand. There was no connection between
the contributions and the benefits. Secondly, there was strong state supervision. So, the
compulsory character was justified by the importance of solidarity and by the need for
financial balance of the institution.
(F) THE AOK CASE (2004)
The AOK case (2004) concerned a sickness funds providing statutory sickness insurance.
The fund had set maximum prices for certain medical products. However, the Court found
that the funds were in fact not undertakings, even though there was some competition
between them. They fulfilled an exclusively social function, founded upon the principle of
solidarity and were entirely non-profit. For example, the Court found that the benefits
were not directly linked to the contributions. So, the Court reaffirmed its reasoning from
Poucet-Pistre and Cisal. However, the Wouters discussion continued. In Wouters, the Court
had looked at the behaviour to determine whether the bar was an undertaking. Here, the
Court first determined whether AOK was an undertaking (quod non) and then looked at its
behaviour. It concluded that a pension fund might carry on certain activities that do not
have a social function. However, this was not the case here.
§ 4 Sports
(1) Introduction
Already in Walrave-Koch, the Court had concluded that sports might constitute an
economic activity. Players are paid and even on an amateur level the public pays to see a
match. This is important, because the EU Treaty only applies to sports when it constitutes
an economic activity. So, again, even after deciding whether or not we are dealing with an
undertaking, we must investigate whether the behaviour falls within the scope of Treaty.
(2) The Piau Case (2002)
The Piau Case concerned a players’ agent who was required to obtain a licence from the
FIA. The Court had to answer the question whether FIFA is an association of undertakings.
The Court started by confirming that professional football clubs are undertakings.
Therefore, the national football associations are associations of undertakings, even though
the majority of football clubs is amateur. Lastly, because these national assocations
engage in economic activities, like partaking in the World Cup, they are also undertakings
themselves. So, FIFA as well is an association of undertakings. Also, the activities of a
players’ agent constitute an economic activity that does not concern the specificities of
sports. So FIFA regulated an economic activity. Because it is not a public institution, it
must respect art. 101-102 TFEU.
(3) The Meca-Medina case (2006)
The Meca-Medina case (2006) concerned two professional swimmers who tested positive
for a prohibited substance and were suspended by the swimming association. The Court of
First Instance had decided that sport needs to an economic activity to fall within the scope
of the Treaty. Doping control however, was a purely sporting activity for the internal
market. Therefore, art. 101-102 TFEU did apply as well. The ECJ did not agree. Purely
sporting activities may still fall within the scope of competition rules. The Court of First
Instance should not have assessed this in abstracto and should have investigated the
application of art. 101-102 TFEU separately. In casu, the Court concluded that the
suspension was in fact a decision by an association of undertakings. However, it was
proportionate and necessary to attain a legitimate objective and did therefore not infringe
art. 101-102 TFEU. So, again, an undertaking may conduct certain behaviour that is not-
economic, but this must be assessed in concreto.

§ 5 Conclusion
So, a lot of questions still remain, and the Court is still to develop a coherent theory. It
seems we have to look at every case in concreto. There are few criteria that are in
themselves sufficient. Also, the Court seems to reason in two steps. First, it investigates
whether an economic entity is an undertaking. However, an undertaking can still have
some non-economic activities, and a non-economic entity can have some economic
activities (cf. AOK). It is not clear how much economic activity is required for an entity to
become an undertaking. However, it is not clear whether this is relevant. Perhaps it would
be better to simply see whether a certain activity is an economic activity, as is done it
Wouters. This would provide a much simpler solution.
What is clear however, is that the Court continues to broaden the scope of art. 101-102
TFEU.

3. The territorial application of EU Competition Law
A. Intra-community application
§ 1 In general
The question of the intra-community field of application concerns the division of
competences between the EU and the Member States. In other words: when does EU law
apply, and when does national law apply? The main criterion is the effect on intra-
community trade. As soon as there is an effect on intra-community trade, EU competition
law had to applied. It is not relevant whether or not all the undertakings involved are
situated in one or more Member States.
§ 2 The effect on trade

(1) The test
(A) CONSTEN-GRUNDIG (1966)

Art. 101-102 TFEU seem to require an adverse effect on trade. According to the theory of
economic balance, this requires that after the contested behaviour, there is less trade
than before. However, the ECJ expressively rejected this theory in the Consten-Grundig
case (1966). In casu, Grundig choose Consten as the sole distributor for France. Consten
was prohibited form exporting the products, though. According to Grundig, this agreement
was pro-competition. In France it give way to more inter-brand competition (between
Grundig and other producers) and it give way to more trade, as the quantity of trade in
Grundig products had increased. Vertical restrictions are simply meant to prevent intra-
brand competition.
However, the Court pointed that out that is was irrelevant that intrabrand restrictions
increased interbrand competition or that there has been an increase in trade. This is
because the two objectives of art. 101 TFEU: preventing the resurrection of barriers and
protecting consumers. So, the effect on the internal market is essential (cf. Dassonville).
Also, the Treaty does not make a distinction between inter-brand and intra-brand
competition or between vertical or horizontal restrictions. These two elements bring the
Court to conclude that neither a positive effect on trade nor more inter-brand competition
prevent art. 101-102 TFEU from being applicable. This is so because an intra-brand
agreement may resurrect barriers and therefore poses a direct or indirect threat to trade
between Member States. This fits the purpose of the principle, which is merely to delimit
EU law and national law.
(B) LATER: MORE ATTENTION TO ECONOMIC EFFICIENCY
This position is different from the USA position, which applies the theory of economic
efficiencies. According to the Chicago school, vertical restrictions are not a problem.
However, economic efficiency was completely absent from the Court’s case law at first.
However, the changing global economic environment forced the EU to pay more attention
to economic efficiency. As a result, the EU is now more lenient towards intra-brand
agreements.
(C) THE CURRENT SITUATION
The Commission now chooses between two tests, as made clear from the guidelines it has
issued. The first possibility is the pattern of trade test. This test implies that we look at
the qualitative effects on trade. Would trade have developed differently without the
behaviour? The second test is the competitive market structure test. For this test, we look

at whether the behaviour leaves room for workable competition. This goes back to the
origins of competition law. So, we not only directly protect consumers, but also indirect.
(2) Intermediary products
The BNIC v. Clair case (1985) confirmed that it is not relevant whether the restrictions are
placed upon intermediary products, rather than end products. In casu, restrictions had
been established on the alcohol used for cognac.
(3) An appreciable effect
In the Völk v. Vervaeck case (1969), the Court concluded that in order for community law
to be applicable, there needs to be an appreciable (‘considerable’) effect on trade
between Member States. Against this background, the Commission issued a de minimis
notice, declaring a threshold for art. 101-102 TFEU to be applicable. The boundaries are
different for competitors and non-competitors. For… Below this limit, the Commission will
never act. Above the limit, the Commission is however not obliged to act, and may still
decide not to act. The notice is binding to the Commission only. However, it is an
inspiration for the national courts.
§ 3 Undertakings within one Member State

As mentioned before, it is irrelevant whether the undertakings are situated in one or more
Member States. In the Belasco case (1989). In this case, Belgian producers of roofing had
agreed upon production quota. The Commission and the undertakings disagreed on the
question whether EU competition law was applicable. According to the ECJ, the agreement
did have an effect on trade, because it made it more difficult for undertakings from other
Member States to enter the Belgium market.
B. Extra-community application
There has been some discussion as to whether art. 101-102 TFEU apply to companies
outside the EU. In the Dyestuffs case (cf. infra), there was a UK company involved. In
response, the Commission applied the effects doctrine. However, the Court refused to
answer to this theory, and instead pointed out that the company had a Belgian subsidiary.
In the Woodpulp case (cf. infra) however, there was no such subsidiary. Here, the Court
could no longer avoid the effects doctrine. However, it did not accept it, and instead used
the implementation doctrine. The application of EU law is triggered by the
implementation of an agreement, decision or concerted practice within the Union. The
main difference is that the implementation doctrine does not catch negative behaviour.
So, a company outside the EU refusing to sell in the EU does not fall into the territorial
application of art. 101-102 TFEU.

Article 101 TFEU
C. Introduction
§ 1 Structure of the provisions
Art. 101 TFEU has three paragraphs. The first paragraph contains a prohibition and gives
some examples of prohibited behaviour. The second paragraph contains a civil sanction.
The third paragraph gives exemptions. It sets out four conditions, of which two are
negative and two are positive. The positive effects of an agreement must be balanced with
the negative effects. If the positive effects are greater, an exemption will be given.
Exemptions can be given to a group of undertakings (block/group exemptions) or to
individual undertakings.
An exemption can be given if the behaviour improves the distribution or production of
goods, or contributes to technical or economic progress, while still allowing consumers a
fair share of the benefits. However, the restrictions placed upon negotiations should be
strictly necessary. Also, the parties may not have the possibility of eliminating all or a
substantial part of competition.
§ 2 Conditions
Five conditions need to be fulfilled for art. 101 TFEU to apply:
 There have to be or more independent undertakings, or two more undertakings
grouped in an association of undertakings.
 There has to be some sort of collusion. This collusion may consist of an agreement,
a concerted practice or a decision by an association of undertakings.
 There needs to be an anti-competitive effect or object.
 This effect should be appreciable (substantial).
 There needs to be an appreciable effect on trade between Member States.
D. First condition: an agreement, a concerted practice, or a

decision by an association of agreements
§ 1 Defining the concept of an agreements
(1) Definition
The Bayer case (2004) dealt with the definition of an ‘agreement’. The Court of First
Instance defined an agreement as a concurrence of wills, irrespective of its form and
irrespective of its validity and enforceability before a national court. This definition is
autonomous and very broad. For example, gentlemen’s agreements or notes of agenda may
be an agreement in the sense of art. 101 TFEU.
(2) Burden of proof
The burden of proof primarily lies with the Commission or the plaintiff before the ECJ.
They must prove the existence of the agreements and a distortion of competition.
However, if the existence of an agreement and a distortion of competition have been
established, the burden of proof shifts to the defendant, who must prove art. 101 (3) TFEU
applies.
The existence of an agreement is often hard to prove. This is why the Commission uses
techniques like leniency (cf. infra).

(3) Unilateral conduct vs. agreements
(A) PROBLEM
Unilateral conduct falls outside the scope of the provision. However, the distinction is not
always easy to make. For example, this is the case with selective distribution networks,
where, trough a vertical agreement, products can only be sold to selected consumers.
(B) ILLUSTRATION
In the AEG-Telefunken case (1983), a producer of consumer electronics used a selective
distribution network and obliged its resellers to maintain a high level of resell prices. In
the Ford AG case (1984), an undertaking stopped selling right-handed cars to its German
resellers, who exported to the UK, in order to stop parallel trade. There was no ban in the
contract with the resellers. However, the resellers had implemented the request. The
Sandoz case (1990) provides a clearer example of tacit acceptance. A pharmaceutical
company tried to stop parallel trade of their product. On its invoices, Sandoz printed
“export prohibited”. The ECJ concluded that since the resellers did not protest a clear
invitation to act in a certain way. In the BMW case (1995), the contract did not include an
export prohibition. However, BMW sent a letter to its German resellers prohibiting them
from selling to leasing companies outside Germany. In these three cases, the Court
decided that there was in fact an agreement, because the unilateral actions took place
within the existing contractual relationship between producers and resellers. By signing a
contract, the resellers are bound to accept foreseeable unilateral modifications by a party.
So, they implicitly accepted the decision.
In the Bayer case (1996), a pharmaceutical company reduced its supply to stop parallel
trade. The situation is similar to Sandoz, but there, Bayer applied a more subtle tactic.
Also, the resellers adapted their policy. The Commission tried to qualify this as an
agreement, but the ECJ did not follow this reasoning. Bayer’s unilateral policy could be
conducted without the cooperation of another party. However, this difference is hard to
distinguish in practice.
In the Volkswagen case (2003) however, the Court came to a different conclusion. Here,
Volkswagen had send letters to resellers, asking them not to give discounts on a certain car
model. Here too, this was not foreseen in the contract. Here, the Court decided that the
unilateral conduct was not foreseeable and that the Commission had not demonstrated
that resellers had complied with the request.
(4) Agreements outside the scope of art. 101 TFEU
(A) INTRAGROUP AGREEMENTS

(I) THE VIHO CASE (1996)
Like the Christiani-Nielsen decision, the Viho case made clear that if there is a single
economic entity composed of multiple legal entities, internal allocation of tasks cannot be
seen as an agreement. As mentioned before, art. 101 TFEU requires several undertakings.
This triggers a new discussion: when can an economic entity be seen as multiple
undertakings? This was the matter at hand in the Viho case (1996). Viho complained that
Parken-Pen divided the internal market by ordering its subsidiaries to only sell in a certain
territory. So, the question was whether art. 101 TFEU could apply. According to the ECJ,
we need to look at the economic reality. So, the legal structure of a grouping is not
relevant. We need to look if they form an economic entity. The criterion, according to the
Court, is whether the subsidiary has real autonomy in determining in its course on the
market. In casu, Parken-Pen held 100% of the shares of its subsidiaries. Also, area teams
appointed by the parent company control essential elements of the sales. So, art. 101
TFEU could not apply and Viho had to resort to art. 102 TFEU. This might make clear that

there is a gap in the Treaty, but the Court of First Instance and the ECJ felt they could not
fill that gap themselves.
By established case law, the Court looks at three criteria. Firstly, whether there are
structural links between and daughter. Secondly, whether the subsidiaries can have an
independent course of action on the market. Lastly, whether there is an internal division
of tasks. The Viho case dealt with the first and the second criterion. It became clear that
the third criterion was no longer relevant. The first and second criteria can be assessed by
looking at the shareholder structure, the composition of the board, equity, etc.
(II) THE MATELL CASE (1999)
In the Matell case (1999), Matell had a joint venture with DMD. The question was whether
Matell and the joint venture formed a single legal entity. The Court looked at the
economic reality. Both companies had 50% of the share in the joint venture and appointed
half of the board of directors. Also, the joint venture sold liquors not sold by the parent
companies and had its own sales personnel. So, the Court concluded, we were dealing with
separate undertakings.
(III) SO, PRO’S AND CON’S OF A SINGLE ECONOMIC ENTITY?
This legal discussion makes clear that in order to have maximum flexibility, you need a
single economic unit. This way, you can impose limitations and set prices. However, the
parent company will almost always be liable in case a subsidiary breaks competition rules
(which is good for the Commission, since the parent company mostly has better solvency.
Also, fines will be higher). Also, art. 102 TFEU may still play.
(B) AGENCY
An agency is an agreement in which a principal empowers an agent to conclude
agreements on his behalf and in his name. According to the Court, art. 101 TFEU is not
applicable, since the agent must follow instructions.
The Court gives ‘agency agreement’ an autonomous definition. It looks at the economic
reality: what risks does the agent bear? In the Daimler-Chrysler case (2005) for example,
the Commission had imposed fines on Daimler-Chrysler because it imposed obligations on
its resellers. Daimler-Chrysler asserted its agreement was an agency agreement, an the
Court agreed. The agents sold the cars without first possessing them. The property rights
remained with Daimler-Chrysler. So, as the agents did not take any risks of loss, this was a
genuine agency. Another example is the CEPSA case (2006), which concerned petrol station
agents. The Court investigated four conditions. Firstly, whether the property rights
remained with the principal. Secondly, whether the transport costs remained with the
principal. Thirdly, whether the principal had made all specific investments. Fourthly,
whether the principal bore the advertising costs. According to the Court, some risks are
acceptable, but the majority of risks should remain with the principal.
So, restrictions are possible. However, this only relates to the economic activities of the
agent. With respect to his services as an agent, he still serves as an agent. So, a principal
requiring an agent not to sell other products might infringe art. 101 TFEU.
§ 2 Defining a ‘decision by a group of undertakings’

A decision by a group of undertakings occurs when a group of undertakings, which is not a
single economic entity, takes a decision. Here, there is strictly speaking, only one party.
For example, an association of insurance could lower premiums all together. The Wouters
case is another example.

§ 3 Defining ‘concerted practice’
In the Dyestuffs case (1972), the Court defined ‘concerted practice’ as a form of
coordination between undertakings which, without reaching a stage where an agreement
has been concluded, knowingly replace competition by practical cooperation. Three
elements distinguish this from mere parallel behaviour. Firstly, there has to be some form
of contact between the competitors, like an announcement, a meeting or an exchange of
information. Secondly, the contact must be contrary to normal competition practice (you
normally don’t share your business plan with your competitors). Thirdly, the contact can
be assumed to have an effect on the market. So, the reaction on the market can be an
indication, but is not sufficient. For example, in the Woodpulp case (1985), the
undertakings were able to demonstrate that their parallel behaviour was normal
commercial practice, as it followed from evolutions on the market.
E. Second condition: anti-competitive elements

For an agreement, concerted practice or decision to infringe art. 101 TFEU, there need to
be anti-competitive elements. Two types of agreements have this. Firstly, agreements may
have the restriction of competition as an object. In this case, it is sufficient to
demonstrate the existence of the agreement. This is inter alia the case with agreements
that include price fixing. A second category is formed by agreements with an anti-
competitive effect. Here, we balance out the negative and positive effects of an certain
behaviour. To this end, the Commission has introduced the concept of consumer welfare:
we see whether there is an negative effect for consumers. To this end, the Commission
checks whether the parties have sufficient market power. Below a certain threshold, the
Commission will not act, unless we are dealing with an agreement that contains certain
prohibited clauses.
F. Third condition: rule of reason

§ 1 Introduction
The rule of reason was originally a concept in the USA. It involved a balancing of the pro-
and anti-competitive effects of a given behaviour before deciding whether there was an
infringement of competition rules. The EU approach is different, as is apparent from the
structure of art. 101 TFEU. First, we decide whether there is infringement of art. 101 (1)
TFEU. The, we see whether there is an exemption under art. 101 (3) TFEU. This is
important, because the burden of proof changes (cf. supra). The differences are not purely
theoretical. The EU approach is stricter, because we can only use the elements of art. 101
(3) TFEU. However, there are examples of cases where the ECJ exempted an agreement,
decision or concerted practice from art. 101 (1) TFEU without using art. 101 (3) TFEU.
However, this is still no real ‘rule of reason‘.
§ 2 The theory of ancillary restraints

(1) The Metro-Saba case (1977)
In the Metro-Saba case (1977), Metro, a cash and carry retailer, was not allowed to sell
Saba products, because it did not fulfil certain requirements. Metro challenged the legality
of this distribution system. The ECJ concluded that Saba’s distribution system had a
restricting effect on competition. However, the Court decided that two kinds of criteria
needed to be distinguished:
 Qualitative criteria (for example, staff of reseller needs to be qualified). The Court
concluded that these criteria do not infringe art. 101 TFEU if they are applied in a

non-discriminatory manner, if they relate to high quality consumer products and if
they would lead to lower prices, which would be beneficial for consumers.
 Quantitative criteria (e.g. a minimum turnover) have a direct effect on retailers,
and therefore go beyond what is necessary for the functioning of a selective
distribution network. So, they infringe art. 101 TFEU.
(2) The Nungesser case (1982)
In the Nungesser case (1982), INRA, a breeders right holder issued a license to Nungesser, a
German Company. INRA promised not to enter the German market, not to hand out
licences for the German market and to prevent other producers from selling in Germany.
According to the Court, the first part constituted an open exclusive license. Because
parallel trade remains possible, this in itself does not infringe art. 101 TFEU. However,
because Inra promised to prevent parallel trade, there was in principle an infringement for
that clause. However, the Court thought this to be acceptable, because without this
protection, Nungesser would never take the risk of exploiting the licence. So, competition
on the German market may in fact benefit from this agreement.
(3) The Pronuptia case (1986)
In the Pronuptia case (1986), the ECJ investigated the validity of a franchising agreement,
that allowed partners, in exchange for a fee, to use the Pronuptia name. A German partner
refused to pay the fee. The Court accepted that the restrictions on competition were
necessary to protect Pronuptia’s good name. However, restrictions between different
franchisees are in fact an infringement of art. 101 TFEU, because they are not necessary to
make the franchise-agreement work.
(4) Ancillary restraints
So, the Court accepted that you can have restrictions on competition, if the agreement
does not have an anti-competitive objective and if the restriction is needed to for the
larger agreement to work. At first, this seems like a rule of reason, but in fact, it does not
go that far. The Court merely accepts that some restrictions may be necessary. It has
stated clearly that it does not accept the rule of reason theory.
Two cases however, seem to go towards a rule of reason concept. The first is the Wouters
case (cf. supra). Here, the Court went further than the ancillary restraints theory. The
Court ruled that the restriction was necessary for ensuring the independence of legal
services in the Netherlands. Here, the restraints served an objective not related to a pro-
competitive purpose. The Court merely investigated whether the objective was legitimate.
The second case is the Meca Medina case. The ECJ ruled that anti-doping rules were
restrictive of competition, but were justified because they were intended to safeguard
equal changes for athletes, to protect their health and the ethical objectives in sports.
G. The sanction in art. 101 (2) TFEU

Art. 101 (2) TFEU stipulates that an agreement or decision infringing art. 101 TFEU is
automatically void. So, no prior decision by a court is required. However, this only catches
the infringing provisions, if they can be separated from the rest of the agreement.
The consequences of the sanction are non-enforceability. Also, fines may be imposed and
reparations may be claimed.

H. Art. 101 (3) TFEU and block exemptions
Art. 101 (3) TFEU involves a balancing out of several elements. This is a difficult
assessment. Therefore, the Commission issues block exemption regulations, which describe
under what conditions an exemption is automatically granted. These regulations have
direct effect and therefore provide a safe harbour of legal certainty.
For example, block exemptions are used for several vertical agreements. Also, there are
block exemptions using a market share threshold. As a basic principle, an agreement,
decision or concerted practice is exempted if the producer and supplier control less than
30% of the market. However, there is “back list”, containing provisions that are always
prohibited. These include price fixing and restrictions of sales to consumers. A second
threshold applies if the distributor has a 30% market share. This is useful, because it is
easier to asses. However, there are specific exemptions having different threshold.

4. Art. 102 TFEU

5. Merger control
A. Introduction
Mergers can have beneficial effects. Undertakings may profit from the economics of scale
and may eliminate certain risks (e.g. when a supplier and a producer merge). However,
mergers may also be used to eliminate actual or potential competition.
However, merger control is an aspect of competition law that cannot be found in the
Treaty. This is because in 1989, there were no big undertakings. However, in the
Continental Can case (1973). Continental Can had (with a hostile take-over) bought an
undertaking in Europe. It was not possible to directly investigate this take-over. However,
Continental can was in a dominant position, and the Court concluded that there was abuse.
However, the EEC learned that art. 102 TFEU was not a good way of handling damaging
mergers, and that they could be used to circumvent art. 101 TFEU. Therefore, a separate
regulation was issued in 1989 and was based on art. 3 (1) (g), 83 and 308 EC. This
regulation has been replaced by Regulation 139/2004. On this basis, the Commission has
issued notices and policy documents.
B. Notification
§ 1 Concentration
Under the current system, agreements have to be notified if they consist in a
concentration. This is the case with mergers (A and B become C), acquisitions (A buys
control of assets or decisions of B. This a qualitative aspect: there has to be lasting change
in control) and joint ventures. A concentration is not the same as a transaction. A
concentration can consist of multiple transactions, which individually do no meet the
threshold.
§ 2 A Union dimension
(1) In general
The EU has a one stop shop principle: once you notify the Commission, you do not need to
notify in all the different member states. So, its important to see whether the merger has
an European dimension. This is decided on by two cumulative thresholds. This is simpler
than other systems, where the market share is relevant.
(2) First threshold
Firstly, the combined aggregate world turnover of the undertakings concerned must
exceed 5 billion. Secondly, the aggregate EU turnover of each undertaking must exceed
250 million. This is to see whether the merger has a significant impact in the Union.
(3) Second threshold
If the fist threshold is not met, there should still be notification if the aggregate worldwide
turnover is more than 2,5 billion, the aggregate EU turnover of each undertaking is over a
hundred million, the combined aggregate turnover is more than a 100 million in at least
three Member States and the aggregate turnover of each undertaking in each of these
Member States is more than 25 billion.
(4) Exception

For both thresholds, there is an exception. There is no Union dimension if an undertaking
makes more than 2/3 of its turnout in one Member State. Of course, this would not affect
the internal market as much.
(5) No Union dimension?
However, if there is no Union dimension, we need to look at the thresholds in every single
Member State involved.
(6) Locating the turnover
It is not always easy to ‘locate’ turnover. Usually, the Commission looks at the place of
delivery. For services like airlines or telecommunication, the turnover is divided 50/50
between the county of origin and the country of destination.
§ 3 What?
First, the undertakings must request that a Commission will be allocated to their case.
Next, the undertakings must send in the ‘form CO’. This form must include all the
information that is relevant for the Commission. So, the undertakings must let the
Commission know what the relevant market is, what markets are affected, etc. If both
companies combined control only 15% of the relevant market, a smaller form may be used.
C. Assessment
After receiving the notification, the Commission has 25 working days to conduct an
investigation to see whether the agreement might potentially be anti-competitive.
However, this period is halted when the Commission requests certain information.
The Commission will look at the coordinated (for example, an oligopoly is created) and
unilateral (dominance) effects. For example, there may be an effect on competition, as
the new undertaking may acquire dominance. In Regulation 139/2004, this is called the
SIEC-test. The agreement must significantly impede on effective competition. This must be
assessed having regard to the situation on the market, for example the market share of the
different undertakings. Also, the Commission takes into account the benefits of th merger.
For example, concentration may lead to economics of scale and thus lower prices. This
would be beneficial for consumers.
If the Commission does not clear the agreement, it may start the second phase of the
investigation, which takes 90 days.

6. State aid

7. Competition law and intellectual property rights
A. Introduction
§ 1 Definition of intellectual property rights
Intellectual property rights are exclusive rights that protect creations of the human mind.
The reason for this is that these creations are immaterial, and can’t be materially
prevented from being copied. Ever since they first emerged in the 19 th century, their scope
has become ever broader. Also, they have a close connection to trade. This is why the
TRIPS agreement foresees that its parties must offer a basic protection.
§ 2 Categories
There are three categories of intellectual property rights:
 Industrial property rights (like patents).
 Intellectual property rights (like, again, patents).
 Commercial property rights (like trademarks).
However, the ECJ just talks about ‘intellectual property rights’. However, as we will see,
the different categories have a different impact on competition.
§ 3 Characteristics
(1) Exclusivity
Intellectual property rights are exclusionary rights. They give a legal right to prohibit a
third party from using (e.g. commercialising) a certain intellectual good. Of course, this
has an impact on competition. If you e.g. have a patent, you can prevent competitors from
selling the same product. During 20 years, you have a “patent monopoly”. This time limit
is meant to balance out the deadweight losses and the costs for research & development.
Also, a patent must be made public, so that other may use it for further research.
A copyright protects the original form of an expression. This is not the idea itself. Only the
expression is protected. So, the idea might be expressed in a different way. A copyright is
valid until 70 years after the death of the author. This is because the impact on
competition is not as big. Industrial design protects the original form of an industrial
product. Competitors may make the same product if it looks differently. However, there is
a must-fit exemption. A design may be copied if it is dictated by technical necessities.
Trademarks guarantee the origin of a product by protecting the name of a product or
undertaking. This makes undertaking responsible for the quality of their own products, and
prevents free riding. Other undertakings could profit from a well-known name. There is no
time limit, because the impact on competition is marginal.
(2) Territorial limitation
Intellectual property rights are, in principle, limited to a given national territory. So,
different states may offer different levels of protection. For quite some time, there was no
harmonisation in the EU. Now, there are optional European rights for trademarks and
industrial designs. However, intellectual property rights remain mostly national law,
although the Lisbon treaty allows further steps to be taken.
However, the territorial limitation of intellectual property rights means that by attaining
an intellectual property right in a certain state, an undertaking may prevent imports form
other member states. This parallel trade occurs when the price of a product is lower in one
state than another. For traders, it then becomes profitable to buy in one state and sell in

another. However, intellectual property rights can prevent these products from being sold.
According to the ECJ, this is not necessarily bad, but the problem is big in practice. Almost
everything is protected by one or more intellectual property rights. This means
undertakings have a potential instrument they can use to install barriers and borders,
creating islands of exclusivity, in which they can overprice their products.
B. The first cases

§ 1 The EEC Treaty
The EEC Treaty made only one reference to intellectual property rights, namely as an
exception to the free movement of goods (now art. 36 TFEU). However, the Court
expanded this to free movement of services, inspired by the TRIPS agreement, which
obliged all parties to offer a minimum level of protection. However, this exception
pertains only the internal market. We cannot by analogy apply this exception to the
internal market.
§ 2 The Consten-Grundig case (1966)

The first case dealing with intellectual property rights and competition was the Consten-
Grundig case (1966) (cf. supra). Consten had registered a trademark in France, Grundig in
the rest of the Community. So, Consten and Grundig asserted, the export limits do not
follow from our agreement, but from national law. The ECJ rejected this reasoning.
Firstly, the ECJ decided that nothing in the Treaty, not even art. 36 TFEU, limit the field
of application of art. 101-102 TFEU in favour of intellectual property rights. Also, it was
the agreement that sparked the registration of the trademark. Next, the Court makes a
distinction between the existence of the intellectual property right under national law,
and the exercise of that right by its holder. The exercise of the intellectual property right
is caught by art. 101-102 TFEU. However, this distinction is very hard to make in practice.
Also, it seems to strip intellectual property rights of their core: the right to exercise the
right. However, these questions were not answered here, as the ECJ concluded that there
was a clear intent to circumvent art. 101-102 TFEU.
§ 3 The Park-Davis case (1968)

In the Park-Davis case (1968), a Dutch pharmaceutical company had tried to stop the
import of generic products from Italy (where there was no patent protection) into the
Netherlands. The question was whether the patent holder was trying to divide the market.
The Advocate-General stressed that he did not: he was merely exercising the very essence
of this patent. So, unlike In Consten-Grundig, there was no abusive exercise. The ECJ
concurred. The Court made a distinction between ‘normal’, ‘acceptable’ exercise of an
intellectual property right and ‘abusive’, unacceptable exercise. However, this line is verty
thin. Recently, there is even discussion as to whether it is possible to abusively reach
exclusivity.
C. The more recent evolutions

§ 1 Intellectual property rights and inter-brand competition
(1) The Volvo v. Veng case (1988)
The Volvo v. Veng case (1988), Veng had imported Volvo car parts to the UK. Volvo was of
course not happy and tried to prevent trade by calling upon his intellectual property right.
The Court started by conforming that the normal exercise of an intellectual property right

is not caught by art. 102 TFEU, even if this means excluding competitors, even if they offer
a reasonable royalty. However, the exercise may be prohibited if there is an extra element
that leads to an abuse of a dominant position. The Court did not explain this, but gave
three examples: the refusal to produce spare parts if there still a lot of cars in circulation,
the arbitrary refusal to supply spare parts to independent repairers, fixing prices at unfair
level. So, whilst the Court made clear that there is a difference between normal and
abusive exercise, a lot of questions still remained. Also, the examples the Court gave are
no longer used, as we now have the Magill criteria (cf. infra).
(2) The Magill case (1995)
The Magill case (1995) concerned an undertaking that brought a TV guide onto the market,
but was sued by the TV channels. The Commission decided that the TV channels were
obliged to give a licence against a reasonable royalty. This affirmative obligation was
challenged before the ECJ, which accepted that it might be the only of stopping the
infringement of art. 102 TFEU. According to the Court, the abuse mentioned in Volvo was
possible on three conditions:
 The refusal to licence for a new product for which there is consumer demand.
 The refusal without objective justification.
 Excluding all competition on the secondary market.
In casu, the Court concluded that since there was demand for the TV guide, the TV
channels excluded competition on the market for TV guides and since the refusal was not
objectively justified, there was in fact an abuse.
(3) The IMS Health case (2004)
The IMS Health case (2004) clarified that the Magill criteria were cumulative. IMS Health
had developed a system that could be used for market research in the medical sector. This
product had become the de facto standard in the industry. When a new competitor tried a
new system, the consumers did not buy it. So, the competitor adapted more the IMS Health
system. However, IMS Health called upon its intellectual property right and refused to give
a licence, since they did not feel they needed to help a new competitor. The essential
facilities theory did not really apply, because it was, in theory, possible to come up with a
new system. However, in practice, nobody wanted another system.
The ECJ did not say whether IMS Health’s refusal constituted an abuse, as this concerned a
preliminary ruling. However, trough clarifying the Magill criteria, the ECJ left little room
for the national court: IMS Health’s refusal almost has to be abusive. Firstly, the Court
clarified that the Magill criteria are in fact cumulative. This is important, because it
protects the holder of the intellectual property right. Secondly, the Court ruled that in
order to have a secondary market, a hypothetical market is sufficient. It is sufficient to
have two production stages, where one product is needed to produce another. Thirdly, the
ECJ stated that ‘new’ referred to products of services not offered by the holder of the
intellectual property right (but cf. Microsoft case). The elements explain the Court’s
reasoning. Firstly, there was de facto standarisation, where it became economically
impossible to use a different product. The IMS Health system has an indispensable nature.
This theory was applied in the Bronner case. In that case too, it had become unprofitable
for others to use a different system. However, the intellectual property right should be
preserved, to make sure there is an incentive for research and development. The mere
copying of products should be preventable.
So, the Court tries to balance these two things out. However, it gives a rather broad
interpretation, which is in casu maybe explained by the fact that the industry had helped
in producing the IMS Health system. Only after establishing dominance did IMS Health
provoke his intellectual property right.

In conclusion, the Court lays a responsibility on intellectual property holders in a dominant
position. They may not prevent competition.
(4) The Microsoft case (2004)
(A) INTEROPERABILITY
In the event that led up to the Microsoft case (2004), Microsoft had refused to supply other
software companies with information needed to procedure certain applications for
Windows. When one of these companies filed a complaint, the Commission imposed
compulsory licences under FRAND Conditions (Fair, Reasonable and Non Discriminatory).
Microsoft appealed.
Here again, it is important to note that Windows had become the de facto standard. Only
then did Microsoft invoke its intellectual property right. The COFI therefore concluded that
the Windows system was indispensable for other software companies to use. However, the
question was whether there was a new product. According to Microsoft, its competitors
wanted to make products that were just like theirs. The Court rejected this: the
competitors would still have to make a different product. However, it was not clear how
much difference there should be for a product to be new. Microsoft defended the
maximalist view: the product should be entirely different. However, the Court followed
the minimalist view: it was sufficient that there was one new element. Of course, this goes
very far.
The second question was whether Microsoft excluded competition on the secondary
market. The Commission asserted that the consumers were harmed, because competition
was damaged. Microsoft asserted that consumers’ interest was not harmed, because
Microsoft provided innovation. However, the Commission replied, innovation is also
brought by competitors. Microsoft tried to lock-in its consumers. Microsoft concluded by
stating that had to keep innovating, because consumers would stop buying their products.
However, the Court followed the Commission’s reasoning. However, Magill mentioned that
all competition should be eliminated. Microsoft pointed out that there were other
competitors, and that these were growing. However, the Court pointed out that the
Commission should not wait until all competition was eliminated. It could act when there
was the prospect of eliminated competition.
The last question concerned the objective justification. According to Microsoft, their
intellectual property itself provided an objective justification. The Court rejected this
argument as too theoretical. If an intellectual property right becomes an objective
justification on itself, then abuse becomes impossible. During the procedure, there was
some discussion whether there are intellectual property rights that are so important that
they should always be protected, but this question was not answered by the Court.
In the end, Microsoft did not appeal again. This might seem surprising, but Microsoft had
nothing to gain. It had already succeeded in its lock-in strategy. This practical result had
not been undone by the Court. Also, Microsoft would still receive royalties.
(B) TYING
The second part of the Microsoft case dealt with tying. Microsoft had bundled Microsoft
Media Player with Windows. According to the Commission, this was unlawful tying and an
abuse of a dominant position. Microsoft claimed that its product was free, and therefore
beneficial to consumers. The Commission asserted that it was impossible to know if the
price might not have been lower without Windows Media Player. Also, there were
alternatives on the market, and Microsoft made it hard to uninstall Windows Media Player,
whilst making it hard to install other products. The Court investigated four conditions: it
has to concern two separate products, the undertaking has to have a dominant position on
the market (not contested), it may not be possible to get one product without the other,
and this practice eliminates competition.

The Court firstly concluded that it did concern two separate products, seeing their
technical specificities and the situation on the market. Then, the Court saw no reason as
to why a free product could constitute unlawful tying. Lastly, the Court concluded that
Microsoft eliminated competition. By tying its product, Windows Media Player could profit
from Windows’ market domination, instead of competing on the basis of price and quality.
(5) The Astra Zeneca decision (2005)
Astra Zeneca had a patent on certain medicines, and tried to call upon the ‘Supplementary
Protection Certificate’, giving the undertaking some extra years of protection. This
compensates the time needed for ‘market authorisation’ (the permission to sell a certain
medicine). Attaining this prolongation would prevent generic products from entering the
market. According to the Commission, the artificial acquirement of a SPC could as such be
an abuse of a dominant position. However, Astra Zeneca had claimed that it had not yet
exercised its intellectual property right. This was of course controversial, as intellectual
property rights are in principle not affected by the Treaty. Then again, Astra Zeneca had
provide misleading information to the authorities, in order to prolong its dominance, which
in itself could constitute an abuse.
A second point is that at the time, generic products could only be sold if the market
authorisation still existed. However, Astra Zeneca had strategically withdrawn certain
market authorisations in order to prevent generic products from competing with its own
products. According to the Commission, the withdrawal of a product was in itself not an
abuse, but the competitive market structure could not be damaged and consumer could
not be harmed. After this case, the law was changed so that this condition for generic
products no longer existed.
§ 2 Intellectual property rights and intra-brand competition

(1) Deutsche Grammophon Gesellschaft (1971)
In the Deutsche Grammophon Gesellschaft case (1971), a German LP producer sold LP’s in
Italy at a lower price in order to penetrate the market. Also, there was a fixed price by
law. However, the undertaking wanted to prevent parallel imports and claimed exclusivity
in Italy. However, unlike the Park-Davis case, there was intra-brand competition. This is a
problem for the internal market, because the undertaking may resurrect barriers. So, the
Court goes further and introduces, as a compromise, the principle of union exhaustion.
This principle states that an intellectual property right can no longer be invoked if its
‘specific subject matter’ has been used. This principle is of course extended to the EEA.
(2) The Centrapharm case (1974)
The Centrapharm case (1974) concerned a pharmaceutical company invoking intellectual

property rights to stop parallel imports of a medicine. Here, the Court defined what the
‘specific subject matter’ is: the exclusive right to produce and put products on the market
for the first time. At this point, he has been rewarded for his creative investments.
However, after that point, the holder of the intellectual property right can no longer
invoke his intellectual property right. This is the reward theory: the reward for a creation
is crucial.
(3) The Merck case (1981)
In the Merck case (1981), Merck had exported medicines to Italy, where there was no
patent protection. Because of this, there were generic products. Therefore, Merck
products were cheaper because of competition. The products were then imported to other
Member States, where Merck did have patent protection. Merck tried to prevent parallel

import by claiming he had not yet been rewarded on the Italian market. However, the
Court rejected this argument and put the consent theory forward. According to the Court,
a reward is only a possibility. But, since there is only one internal market, and since
Merckt has decided to sell in Italy, he must face the consequences. However, this has been
criticised. Because of the negative consequences, Merck would probably simply not have
exported to Italy. This cannot be good for neither the internal market or competition. So,
the ECJ might have favoured the internal market over competition too much.
(4) The Merck II case (1996)
In the Merck II case (1996), the ECJ confirmed the first Merck case. There was reason for
changing its reasoning, especially now that the TRIPS agreement forced all Member States
to offer some protection. However, in practice, problems still remained. Now, the Lisbon
Treaty offers the possibility to harmonize IPR protection. This should solve a lot of
problems.
(5) The Silhouette case (1998)
The Silhouette case (1998) dealt with international exhaustion. Silhouette produced
glasses and had dumped its old models on the Bulgarian market. The question was whether
Silhouette could invoke its intellectual property right to prevent parallel import from
Bulgaria. In other words: can we say there is a principle of international exhaustion? Art. 7
of the trademark regulation only mentioned union exhaustion. So, the Court was faced
with three options:
 Allowing the Member States to choose. However, this would distort the internal
market and competition.
 Extending the union exhaustion principle to international exhaustion. However, this
option was expressively rejected during the drafting of the regulation because it
would damage intellectual property rights.
 Reject the idea of international exhaustion. This is option following from the text
itself, and the option the Court chooses.
However, this risks leaving the EU isolated, as every intellectual property holder may
choose to isolate the EU. So, agreements should be concluded to counter this.
(6) The Javico case (1998)
In the Javico case (1998), Yves Saint Laurent had set op a distribution network in Russia
and the Ukraine, and had in its agreement prohibited its distributors (a.o. Javico) from
exporting back to the EU. The question was whether this agreement infringes art. 101
TFEU. The Court concluded that in order to have an infringement, there should be an
effect on competition and an effect on intra-community trade. The Court then gives a
whole bunch of criteria, but this is not really a clear solution. However, in casu, the Court
concluded that the agreement was acceptable, because its objective was not to limit
competition, but to penetrate a new market. However, invoking an intellectual property
right is never caught by art. 101-102 TFEU, and is a better solution.
(7) The Davidoff- Levi Strauss case (2001)
The Davidoff-Levi Strauss case (2001) concerned undertakings that had brought perfumes
on the market outside the Union, and invoked their intellectual property rights to prevent
parallel import. The other parties argued that because there was re-import prohibition in
the contract, Levi-Strauss and Davidoff had given their implicit consent. They pointed out
that UK Law foresaw this implicit consent. However, the ECJ concluded that European law
required one system, so also one interpretation of implicit consent. Under European law,
implied consent may be possible. There is implied consent is the judge can, beyond any

doubt, derive from the facts and circumstances that the right to prohibit re-imports has
been forsaken. According to the Court, the following are not sufficient:
 The absence of a label on the goods saying they may not be re-imported.
 The good faith of the re-importers.
 The absence of a non-re-import clause.
So, in practice, it seems that implied consent will rarely occur. In this way, Davidoff-Levi
Strauss reinforces the lack of international exhaustion. By merely possessing an intellectual
property right, you may prevent re-imports from outside the Union.
(8) The Micro Leader case (1999)
In the events leading up to the Micro leader case (1999), Micro Leader had bought
Microsoft products on the Canadian market and exported them to France. However,
Microsoft invoked his intellectual property right. Of course, this is bad for European
consumers. The Commission however did not see a problem with Microsoft’s actions. The
COFI agreed that there was no international exhaustion, but ruled that that use of the
intellectual property could be abusive if there is an additional element. So, the
Commission should investigate whether the price difference, between comparable
markets, constitutes an abuse. So, here, the COFI left an opening for ‘international’
exercise of an intellectual property right to be abusive. Here, the EU market as a whole
suffered.
D. Summary
So, in summary:
 The Consten-Grundig case stated that intellectual property rights are not an
exception from competition rules. Therefore, we look at the exercise of the right,
not the existence.
 The Park-Davis case made clear that there is a difference between normal and
abusive behaviour.
o The Volvo, Magil and IMS Health cases made clear that for an exercise to be
abusive, there needs to be an extra element.
o The prevention of inter-brand competition is normal exercise.
 However, the Deutsche Grammophon Gesellschaft case made clear that the
exercise of an intellectual property right in intra-brand competition may be in
violation of the internal market rules. So, the internal market prevailed.
o The use of an intellectual property right to prevent parallel imports of one’s
own product is limited by the EEA exhaustion principle. This principle is
based upon consent, not upon reward. However, there is not international
exhaustion principle. On the global market, different rules apply.
 However, the Micro Leader case made clear that the EU market as a whole may
suffer, and there might be abusive exercise if there is an additional element. So,
the balance shifts back to competition law. However, this requires a dominant
position.
 Also, the summa divisio between exercise and existence is challenged, and the
attainment or prolongation of an intellectual property right might constitute an
abuse.
 So, in conclusion, we need a grand theory to balance out intellectual property
rights, the internal market and competition rules.

8. Enforcement of competitions rules
A. Institutions
§ 1 The Commission, the nation competition authorities and the
European Competition Network
(1) The role of the Commission before Regulation 1/2003
The Commission is the most important institution in competition law. Before Directive
1/2003, under Regulation 17 (1962), there was a centralised system. In principle, the
Commission alone was competent to enforce the European competition rules. This is
because the Commission is the ‘guardian of the Treaty’. It safeguards its correct
application. Therefore, the Commission checks whether art. 101-102 TFEU is correctly
applied (art. 106 TFEU). It may take measures to end infringements. For example, it may
impose sanctions. This also means the Commission has a certain margin of appreciation,
and therefore makes policy.
(2) The road to a decentralised system
Under Regulation 17, the exemption in art. 101 (3) TFEU did not have direct effect. To
solve this, there was an individual notification system. Undertakings who thought they
could get exempted needed to notify the commission of their agreement, decision of
practice. The Commission would then give an ‘individual exemption’ and the undertakings
would no longer risk a sanction. However, this system was established in a time when the
EEC had but six member states, of which three were rather small. But already in the ‘90s,
the Commission felt it was barely capable of handling all the notifications it received, and
was not able to focus on defining a policy. The Commission tried to cope with this trough
different measures. For example, they would use comfort letters. Such a letter would be
send after the Commission concluded the notification was prima facie not in violation of
art. 101 TFEU. The Commission promised that it would not take action. However, these
letters were not binding to the national courts. Another measure taken was the defining of
group exemptions (‘block exemptions’). The Commission would put forward certain
criteria and if these were met, the Undertaking could assume its agreement, decision or
practice was acceptable. These practices are still used today.
However, when it became clear that ten new Member States would join the Community in
2004, further action had to be taken. This resulted in Regulation 1/2003 (entry into force
May 1st 2004), which installed a decentralised system. Several changes were made. Firstly,
the national courts could now directly art. 101 (3) TFEU. Individual notifications were
therefore no longer required. Secondly, in the different Member States, National
Competition Authorities were established, which were assigned the task of applying art.
101-102 TFEU In their respective national territories. The national courts serve as instances
for appeal. However, this system has the risk of giving way to different interpretations of
the European competition law. This is remedied in two ways. Firstly, the national courts
may ask for a preliminary ruling when a question of interpretation arises. Secondly, the
European Competition Network was established. This is an informal network that fosters
cooperation between the different NCA’s. Some discussion arose on the question whether
an NCA may ask for a preliminary ruling. This was addressed in the Syfait case (2004). The
Greek competition authority had a question of interpretation and decided to send a
question to the ECJ, which had to investigate whether the Greek competition authority
could be qualified as a “national court”. For three reasons, the Court decided it could not.
Firstly, the Greek minister of development could review decisions made by the Greek
competition authority. Therefore, the Greek competition authority was not independent

and did not fit the definition. To qualify as a national court, the body in question should
inter alia be established by law, be permanent, be compulsory, have a procedure inter
partes, should apply rules of law, take decisions of a judicial nature and be independent.
Also, when an appeal against a decision by a NCA is brought before a national court, the
NCA becomes a party. It can therefore not be seen as a national court. Lastly, a NCA, such
as the Greek authority, fulfils the tasks formerly fulfilled by the Commission, which could
not request a preliminary ruling.
(3) The role of the Commission since Regulation 1/2003
Since Regulation 1/2003, the Commission only deals with cases that are important for the
development of competition policy and cases in which at least three Member States are
involved. Because of this, the Commission now has more time to focus on policy issues, for
which it has exclusive competence.
§ 2 The national judge, The General Court and the European Court of
Justice
Both art. 101 and 102 TFEU have direct effect. Therefore, the national judges must apply
them directly. For example, the national judge has to apply to the civil sanction in art.
101 (2) TFEU ex officio. When a question of interpretation arises, a preliminary question
may be asked to the ECJ. Also, as mentioned before, the national judges hear the appeal
against decisions by the NCA’s.
Decisions by the Commission may be subject to judicial review by the General Court. The
ECJ serves as a second instance.
B. Overview of Regulation 1/2003

§ 1 Objectives
The preamble sets out the objectives of Regulation 1/2003. The Regulation aims at
establishing a decentralised system, while still ensuring the uniform application of art.
101-102 TFEU trough out the Union. The centralised system, especially the application of
the exception in art. 101 (TFEU) could no longer ensure the effective application.
Therefore, a more decentralised system would be established, and art. 101 (3) TFEU would
get direct effect.
§ 2 Principles
(1) The application of art. 101-102 TFEU
The Regulation gives art. 101-102 TFEU full direct effect. No prior decision is required for
an agreement, decision or concerted practice to be prohibited. The same goes for the
abuse of a dominant position.
The burden of proof lays with the party claiming an infringement or claiming the benefit of
an exemption (actori incumbit probatio).
(2) The relationship between art. 101-102 TFEU and the national competition laws
In principle, both national and European rules may be applied by the NCA if the actions by
the undertaking(s) concerned affects trade between Member States. However, the national
instances can not call upon national law to prohibit agreements, decisions or concerted
practices that, although they affect trade between Member States, are not prohibited by

art. 101 TFEU. The same is not true for abuse of a dominant position. Behaviour not
prohibited by art. 102 TFEU may still be prohibited by national law.
§ 3 Competences
(1) The National Competition Authorities
The National Competition Authorities are competent for individual cases. For these cases,
they have the same powers as the Commission (applying sanctions, taking different
measures,…). They may not give group exemptions, however. The NCA’s may also conduct
investigations within its national territory.
When the Commission starts a procedure however, the NCA’s are no longer competent and
will be merely consulted if a procedure was already underway.
(2) The national courts
The national courts fully apply art. 101-102 TFEU.
(3) The Commission
(A) FINDING AND TERMINATION OF INFRINGEMENTS

If it finds an infringement, the Commission may impose certain measures in order to end
the infringement. These measures may include behavioural or, if a change in behaviour is
not sufficient, structural remedies. The Commission may act on its initiative or after
receiving a complaint by a natural or legal person having a legitimate interest. So, the
Commission may impose positive action or itself take action. Also, the sanctions may
impose proportionate sanctions (cf. infra). The ECJ has decided that the Court as well may
impose these measures.
(B) INTERIM MEASURES
The Commission may impose interim measures in the case of urgency because of serious
and irreparable damage. These must be limited in time, although they may be renewed.
(C) COMMITMENTS
During negotiations with the Commission, undertakings sometimes make certain
commitments in order to avoid sanctions. The Commission may, by decision, make this
commitments binding to the undertaking. However, this is not binding to the national
court. If the commitments are broken, if there has been misleading or if the facts have
changed, the Commission may reopen the procedure.
(D) FINDING OF INAPPLICABILITY
If the conditions for art. 101 or 102 TFEU are not met, the Commission, when the
Community public interest requires so,, may decide that these provisions do not apply to a
certain agreement, decision or concerted practice.
(E) GROUP EXEMPTIONS
Although this is not explicitly mentioned in the Regulation, the Commission may decide on
group exemptions.
(F) POWERS OF INVESTIGATION
(I) INVESTIGATIONS INTO SECTORS OF THE ECONOMY AND INTO TYPES INTO AGREEMENT
The Commission may investigate certain sectors of the economy or certain types
agreements, and may request information from undertakings or conduct inspections to this
end.

(II) REQUESTS FOR INFORMATION
In carrying out its duties, the Commission may require undertakings to prove all necessary
information.
(III) POWER TO TAKE STATEMENTS
The Commission may interview any person that consents to be interviewed.
(IV) THE COMMISSION’S POWERS OF INSPECTION
The Commission has broad inspections powers. It may conducts all necessary inspections.
They may inter alia enter any property of an undertaking, examine the books, take copies
and seal off premises or books.
At the Commission’s request or the NCA’s request, NCA officials may assist the
Commission. The NCA may also call upon the police. The Commission can also request that
a NCA conducts a certain inspection.
(V) INSPECTION OF OTHER PREMISES
The Commission may also inspect other premises, including private homes. However, they
need authorisation by a national judicial authority. However, the judge may not question
the lawfulness or necessity of the Commission’s decision. It may only investigate whether
the envisaged measures are not arbitrary or disproportional.
§ 4 Cooperation and coordination

(1) Between the Commission and the NCA’s
The Commission and the NCA’s are required to cooperate closely. To this end, the
Commission sets forth certain guidelines. There is also a continuous exchange of
information. The division of competences has been explained supra.
(2) Between the NCA’s
When an NCA receives a complaint and finds that another procedure regarding the same
agreement, decision or concerted practice is already underway before another NCA, it may
suspend or terminate the procedure.
The NCA’s cooperate in the European Competition Network.
(3) Between the Commission, NCA’s and the national courts
National courts may ask the Commission (an amicus curiae) for information or an opinion.
The Commission may also submit observations on its own initiative. NCA’ may also submit
written observations. To this end, they may ask that the Court sends them any relevant
documents.
§ 5 Penalties
(1) Fines
The Commission may impose fines. Fines up to 1% of the total turnover of the previous
business year may be imposed for not cooperating with an investigation. Fines up to 10% of
the total turnover of the previous business year may be imposed for infringing upon art.
101-102 TFEU or for failing to comply with a binding commitment or interim measure.
However, the fine must be proportionate.
(2) Periodic penalty payments

In order to force them to comply with art. 101-102 TFEU or to compel an undertaking to
cooperate with an investigation, the Commission may impose periodic penalty payments up
to 5% of the average daily turnover of the undertaking.
(3) Limitation periods
These penalties have to be imposed with a certain period of time, most often five years.
§ 6 Exemption regulations
As mentioned before, the Commission may provide for a group exemption. However, when
the Commission or an NCA finds that an individual agreement, decision of concerted
practice has effects contrary to art. 101 (3) TFEU, it may withdraw the benefit of the
exemption for that particular agreement, decision or concerted practice.
§ 7 Some other important provisions

(1) Publication of decisions
The Commission publishes all the decision it makes.
(2) Judicial review
The Court of Justice and the General Court may fully review Commission decisions, and
may cancel, reduce or increase fine or periodic penalty payments imposed by the
Commission.
C. Tackling cartels
§ 1 Introduction
As explained before, cartels have negative effects for consumers. Therefore, both
§ 2 Institutional aspects
(1) EU
In the EU, competition rules are enforced by on the one hand the Commission and the
national competition authorities, and on the other the national and European courts.
(2) USA
In the USA, competition rules are enforced by the Department of Justice, who works with
the FBI. In the USA, the courts are involved in an earlier stage, and have to confirm the
sanctions during a grand jury meeting.
§ 3 Sanctions
(1) EU
In the EU, apart from a civil sanction, there are only corporate fines. Individuals can never
be targeted under EU Law. However, they may face sanctions under national law (for
example, the UK has criminal sanctions).

(2) USA
In the USA, apart from corporations, individuals face criminal sanctions. However, every
element of proof they provide cannot be used against them (tag-along immunity).
§ 4 Procedure
(1) EU
(A) INVESTIGATION
The Commission may open an investigation for several reasons:
 After it has received a complaint.
 After conducting sectoral investigations, or other sources of market intelligence.
 After a referral from an NCA.
 After a whistleblower wants to apply for leniency.
 After a civil law suit has been started somewhere in the EU.
The investigation might take up to three years. The Commission has extensive investigation
powers (dawn rating).
(B) PROCEEDINGS
When the Commission has connected enough evidence, it opens proceedings. It does so by
sending a statement of objection to the undertakings involved. This statement contains
the facts the Commission has. An informal appeal is possible and is addressed to a hearing
officer. Also, undertakings have the right to respond to the Commission. In the end, the
Commission ask the opinion of the advisory committee (composed of representatives of the
NCA’s). However, the decision to fine is adopted by the college of commissioners (all 27).
After this, the NCA’s cannot act anymore, unless there are new elements.
Compensations have to claimed trough the national courts.
(C) FINES
Fines are calculated in three steps:
 First, the basic amount is calculated. This is the worldwide turnover of the
undertaking in the last fiscal year, directly or indirectly relating to the products
involved in the conspiracy. From this amount, we take a percentage based on the
gravity of the infringement (0-30%). This amount is then multiplied by the duration
of the infringement (in years). After its termination, the infringement is barred
after 5 years. Finally, the Commission may add 15-25% as ‘detterence’.
 Second, the Commission may adjust the fine if there are aggravating (e.g.
recidivism) or mitigating factors (e.g. you ratted on the rest).
 Lastly, a fine may not be higher than 10% of the undertaking’s worldwide turnover
of the last fiscal year. However, this can sometimes be as high as one billion euro’s.
The fine goes to the EU budget.
(2) USA
(A) PROCEDURE
In the USA, the Department of Justice will open the investigation. The Department will
issue an indictment by a grand jury and send a target letter. In practice, this almost
always ends in plea bargaining, however, a judicial procedure may be possible as well. The
Department of Justice will recommend a fine to the judge, according to two maxima:
 For corporations: 100 millions dollars or twice the gain or loss resulting from the
infringement as a whole. The harshest sanction will be recommended.
 For individual: 10 million dollars, or up to 10 years in jail.

The final decision lies with the judge.
(B) FINES
The calculation of fines is governed by several acts. Here too, there are different steps,
and the calculation is quite similar to the EU’s:
 First, the basic amount is calculated. This is the volume of affected commerce (all
the sales which were affected by the conspiracy). This is not a clear concept. For
example, are prices that should have been asked included? Or the prices agreed
upon?
 Next, scores are given for certain actions. For example, if an undertaking was the
leader, he gets +2, if the undertaking cooperated, he gets -3, etc. This points are
counted. The result is linked to certain multipliers. For example, a score of five is
linked to 3-4. These two multipliers are applied to the basic amount to give a
range.
 Next, within this range, a fine may be chosen. So, there is still a small margin of
appreciation, e.g. to take the financial capacity of an undertaking into account.
Also, in cases where there has been extreme damage, the range may be ignored.
§ 5 Leniency
(1) Concept
In order to destabilise cartels and to tempt undertakings into dissolving information, the
EU and the USA have leniency programs. The USA started this practice in 1978, the EU
followed sometime later. In 2006, a new notice on leniency was issued. This notice was
inspired by the USA. In all, leniency is a success: almost 90% of cartel proceedings are
started after leniency has been applied.
In general, two aspects are taken into account: the relevance of the information provided
by a whistleblower, and whether the undertaking is the first to dissolve this information.
This is done trough the marker system. The Commission will note down that you’re the
first one to dissolve certain information. In the USA, there are no further requirements. In
the EU, it is required that the undertaking dissolves at least the name of the member, the
nature of the infringement, the duration and the products and industries affected.
(2) Rewards
(A) EU
The first undertaking to dissolve information will get immunity from fines. The next
undertakings get a reduction in fines. However, the leader of a cartel can never get
immunity.
(B) USA
In the USA, only the first undertaking/individual to dissolve information gets immunity.
However, cooperation may be taken into account during plea-bargaining. Individuals are
protected from criminal fines and get tag-along immunity. Leniency does not protect from
civil claims, but prevents trebling. Normally, the other party can asked to treble the
damage, but a protected undertaking can ask to detreble. Also, the leader of a cartel can
never get immunity.
§ 6 Settlements
(1) EU

In the EU, you can get a flat 10% discount if you agree to waive certain rights (like the
right to acess to a file). This meant to make the procedure more efficient. This is only
possible after the investigation has been closed. The settlement is no negotiation, but
simply a proposal from the Commission. The right to appeal can never be waived.
(2) USA
In the USA, plea-bargaining is possible is possible if the undertaking has cooperated candid,
active and complete. This is possible at any moment. There is no appeal.

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EU Competition Law

Academic year 2009-2010 – notes EU competition law- Jeroen De Mets 1

§ 2 Relation to the internal market

Academic year 2009-2010 – notes EU competition law- Jeroen De Mets 2

§ 3 The choice for workable competition

Academic year 2009-2010 – notes EU competition law- Jeroen De Mets 3

§ 2 Objectives of competition rules

(2) The USA and its influence on the EU

Academic year 2009-2010 – notes EU competition law- Jeroen De Mets 4

§ 4 The influence of the Lisbon treaty

§ 5 A look at the main competition provisions in the TFEU

(2) Art. 101 TFEU

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(3) Art. 102 TFEU

(4) Art. 103 TFEU

(5) Art. 105 TFEU

(6) Art. 106 TFEU

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B. The first description of an ‘undertaking’: the Mannesman case

C. The first comprehensive definition: the Höfner and Elser case

D. The discussion on the concept of an ‘economic activity’

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(2) The Selex case (2007)

(2) Social security

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(2) The Piau Case (2002)

(3) The Meca-Medina case (2006)

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§ 2 The effect on trade

(A) CONSTEN-GRUNDIG (1966)

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(2) Intermediary products

(3) An appreciable effect

§ 3 Undertakings within one Member State

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D. First condition: an agreement, a concerted practice, or a

(2) Burden of proof

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(4) Agreements outside the scope of art. 101 TFEU

(A) INTRAGROUP AGREEMENTS

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§ 2 Defining a ‘decision by a group of undertakings’

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E. Second condition: anti-competitive elements

F. Third condition: rule of reason

§ 2 The theory of ancillary restraints

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(2) The Nungesser case (1982)

(3) The Pronuptia case (1986)

(4) Ancillary restraints

G. The sanction in art. 101 (2) TFEU

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(2) First threshold

(3) Second threshold