EU COMPETITION LAW

For instance, we consume less coffee if

the price of it is higher. Whereas, if the
rice is accessible, er tend to consume
more. There can be the situation of
substitutes. For example, if we consume
less coffee because it is expensive,
people will start consuming more tea,
using this product as a substitute.

Coffee is not a good example, because the more you go

into detail when it comes to its characteristics, the
les interchangeable it becomes.

When it comes to supply, the amount of products

manufactured increases with the price. If we
combine both graphs we will find the optimum
point of supply + demand. Elasticity is also a cultural
phenomenon. This graphs represent “the market”.

 What is a perfect market? What is the idea of

perfect competition? → The components/beliefs for a perfect market are:
o There is a large number of buyers and sellers.
o Each company makes a similar product. Homogeneity.
o Buyers and sellers have access to perfect information about price. All the sellers need to
maximise their costs and the buyers need to minimise their expenses. In the real world,
manufacturers know about the products more than the consumers do.
o There are no transaction costs → all the costs that making a transaction comes with.
o There are no entry or exit barriers from the market. Also no barriers to expansion. →
Barriers to entry, exit or expansion are basically costs that you need to exit, enter or expand
the market. Really difficult to eliminate barriers of expansion.
o No externalities.
o No economies of scale.
o No network effects.
o Perfect maximisation.
 Relevant market → every time we talk about market, especially the market, we talk about a
“relevant market”. What is this concept? It is the class of products in actual competition with each
other. We have to define the range of products. This concept is purely accessory to the
determination of a market share. To define competing products, we have to define:
o Define the product itself.
o Define the geographical extension of the competition.
o Define the temporal factor. Timewise we usually do not care about the general market.
  Temporal market → when we talk about the temporal aspect of the market it is usually because
some factors do not remain constant. Product-wise is the same market, for example in a t-shirt
market. Short-sleeve t-shirts are sold mainly during the summer, whereas sports t-shirts are sold
consistently throughout the year. We do
 In competition law, we can say that someone having less than a 40% share of the market cannot be
considered to have dominant position.
 Again, with the t-shirts example: everybody loves our sport shirts but not our t-shirts. Usually, when
we want to expand our share in a specific market, we use some strategy. We leverage our position
in sports shirts, by offering a discount in t-shirts with the purchase of a sports shirt.

CASE STUDY
If there’s a company, “A” with a 70% of the market share and “B” and “C” have 3-6% each, what may
happen if “A” raises the prices 15% (in a perfect market, with no barriers to entry) → “B” and “C” would
need to increase their production and keep their prices steady. To do this they would need to invest.
The main source of money to fulfil this investment comes from banks. But bank money involves a cost.
To counteract the increase of share “B” and “C” would get, “A” should not raise their prices that high.

What would happen if “A” lowers their prices 15% → if “A” are leading means they have two basic
strategies:
 This first strategy depends on the range of products we sell. If our range is varied, we may be
able to survive with one range. Let’s say “A” sells different pieces of furniture and some desk
accessories.
 The main source of clients in a perfect market (no barriers to entry) are new clients.
 The rule goes: “the more you produce, the cheaper you produce”, usually.
 Eliminating your competition is, sometimes, legal. In the case of smartphones this is unlikely.
Why is that? → because of the nature of the product (character of the product, software). What
is the nature of the product? Because the product is not homogeneous (They all have different
cameras, screens, software… It is also a question of branding and status).
 When a company is as huge as “A”, barriers in the market do not matter as much. Economies of
scale do not work anymore.

If a firm has a 100% market share in the EU, it is not dominant because there are no barriers of entry.

If a firm has a patent in a specific country, let’s say The Netherlands. The patent makes this firm dominant
because of one factor → if there is a market for re-dripping coffee, it makes the firm dominant. If there are
one hundred patents, there is no dominance whatsoever.

If a firm has a 50% of the Polish market, and its competitors have 35%, 10% and 5% each, it is extremely
likely that they have a dominant position. But as one of its competitors has 35% share, we cannot
consider the first firm dominant.

What is a relevant market?

 Commission Notice on the Definition of a relevant market → this is a summary of case law.
 Product aspect
 Interchangeability due to characteristic, price and intended use
 Market of substitutes → substitutions, the cellophane fallacy:
o Cellophane before WWII was a new product. It was produced by one manufacturer and
enjoyed a monopoly because of the patent. Its price was significant because of this → the
competition authority in the US decided to go after this manufacturer because they
considered there was an abuse of a dominant position because their high prices and
monopoly. The cellophane company won their case in the US Supreme Court because the
ruling considered there were substitutes, even though they were not cellophane. The Court
 considered there was a common market shared by cellophane and other products, not an
individual market for cellophane. It is called fallacy because the Court was completely
wrong. Later on, it was discovered that the substitution only works if prices are on the level
of market prices. They don’t have to be exactly market prices, but on the same vibe.
o SSNIP Test (Small but not significant increase in price), between 5-10%.
 Geographical aspects
o Traditionally: homogeneous conditions for competition.
o Also: impact on an undertaking’s behaviour
 Temporal aspect

BSSPJ is the sole company providing transportation from Grand Central Airport somewhere between Lodz
and Warsaw. What is the relevant market? The product market is transport (trains, buses and cabs), the
geographical market is the triangle is the airport, Lodz and Warsaw.

21/04/2022

Questions to analyse a case with? ASK THESE 3 QUESTIONS WHEN DEALING WITH AGREEMENTS (when we
are analysing a case with no agreements/associations, we look for a dominant position, if there is no
dominant position there is no element related to competition involved).
 Is there an agreement? → when referring to cases of joint ownership (case of the association of
banks to protect consumers against bad loans).
 Is there a restriction of competition? → we are talking about the case of banks associating to create
an online information platform so consumers can be protected against bad loans. If there are at
least 2 restrictions to competition (the following two examples) one can say there is, indeed, a
restriction.
o In the case of the association for protecting consumers for bad loans, having all the banks
share all the information may produce a restriction in competition when it comes to interest
rates, because all the banks will disclose their positions.
o There will be a restriction in the availability of loans.
 Is the restriction to competition justified?
o In the majority of the situations where the firms exchange information on prices is with the
sole purpose of fixing prices (not formally).
 When is an agreement not proportional?
 The EU Commission takes other factors (different from the 50% market share threshold) into
account in its assessment of dominance, including the ease with which other companies can enter
the market - whether there are any barriers to this; the existence of countervailing buyer power;
the overall size and strength of the company and its resources and the extent to which it is present
at several levels of the supply chain (vertical integration).

CASE 3: a car manufacturer sells cars through local distributors (those advertise nationally, these locally).
Basically, the distributors get a 15% over the manufacturer’s price, all of them, and this was agreed
between the firms. Also, each distributor is expected to sell at least 20 cars per year. The cars are delivered
from the factory at the expenses of the manufacturer.
 Are these conditions for distribution compatible with EU Competition Law?
o First, we assume there is no dominant position because we have no information.
o The problem is that we are facing a true agency agreement, where it is the manufacturer
who gets the money and is basically selling the cars (even though it is in an indirect way).
The distributors are selling the cars for the benefit of the manufacturers. The risks are all
attached to the manufacturer. Under this doctrine there is no restriction of competition.
 o The manufacturers are bearing the costs of storing the cars, of nationwide advertisement,
etc. But if the agents do not sell the 20 expected cars, these are loses. If the manufacturer
acted directly in contact with the customers, these costs would transform into benefits.
 There is a risk of not selling a car.
 In this context, this 20 car minimum is “okay-ish” → not incompatible with EU Comp.
Law. The risk presented is minimal.
 The risk of the customer not paying is not on the agents but on the manufacturers.
 We have to consider advertising as a investment. If your advertising is bad, and you
fail, you have no profits, and that consists of a risk.
 Would the answer be different were the distributors obliged to advertise the cars at a national level
as well as to arrange their outlets according to the manufacturer standards and keep five cars for
sale therein?

Restricted practices in competition → concerted practices???

Pay attention of article 101(3) TFEU

Cosas que analizar al hacer el ensayo:

1. Set an example
2. Ask yourself the following:
a. Do we have undertakings? Yes, because we are engaging in economic activity → go to the
next one. No → Competition Law does not apply.
b. Is there an agreement? Yes, go to the next one. If there is no agreement, competition law
does not apply.
c. Is there a dominant position? Yes, then ask the next one.
d. Is there a restriction to competition? No, then it is legal. Yes, then ask the next one.
e. Is there an applicable exemption? If not, it is illegal (void, fine, damages, etc.).
i. Rule of reason: if there is no rule of reason justification your agreement is illegal. The
conditions are listed in article 101(3) TFEU.
ii. Block exemptions: these are codified exceptions under the rule of reason. In the
regulations there are strict conditions so as to identify them.
iii. “De minimis” What does this mean? → the proper meaning: no appreciable
restriction on competition, then the agreement is considered legal. On the other
hand, the second meaning of this expression refers to the situation when there is no
appreciable effect on trade between member states, then domestic law applies and
no EU Competition Law.
1. If an agreement is between actual or potential competitors: 10% of the
market share together. If not: it is 15%. Minus hardcore restrictions.

WHAT IS AN AGREEMENT?
 Not only outright cartels.
 Some form of collusion (C-238/O5, Asnef-Equifax)
 “a concurrence of wills between economic operators on the implantation of a policy, the pursuit of
an objective, or the adoption of a given line of conduct on the market” (T-41/96, Bayer). Examples:
contracts, government-approved contracts, oral agreements, non-binding agreements, agreements
with no sanction, settlements, best practices, rules of conduct, codes of ethics, agreements forced
on one of the parties, unimplemented agreements, participation in meetings, etc.
 What are best practices? → non-binding guidelines issued by a Government or by associations of
undertakings (State Agencies, Colegio de Abogados, etc.). This practices will tell you how you should
act against some kind of situation or practice.
 Concerted practices: any collusion in absence of an agreement. Coordination without reaching an
agreement. Like sharing info on future behavior. Coordination between undertakings which,
without having reached the stage where an agreement, properly so called, has been concluded,
knowingly substitutes practical co-operation between them for the risks of competition.