Treaty on the Functioning of the European Union - Essay Example

? “I like aggressive competition – including by dominant companies – and I don’t care if it may hurt competitors – as long as it ultimately benefits consumers. That is because the main and ultimate objective of Article [102] is to protect consumers...” (Commissioner Neelie Kroes, Speech delivered at Fordham on 23 September 2005) Discuss this statement, explaining how far you agree that it is an accurate reflection of the purpose and application of Article 102. Article 102 – TFEU – “(Treaty on the Functioning of the European Union)” - Competition Introduction Any misuse by one or more business enterprises of its principal position within major part of EU internal market or whole internal market of EU “shall be barred as contrary within the domestic market as far as it may impact commerce between Member Nations.” Such misuse may, especially, include the following: Imposing unfair selling or purchase prices either indirectly or directly or existence of other unfair business stipulations; Limiting technical development, markets, production to the discrimination of end users. Positioning the commercial parties at an economic drawback by employing divergent stipulations to comparable transactions. Placing supplementary obligations to the business dealings where there is no connection with the main contract thereby putting the other party to the contract at disadvantage1. The article 102 deals with the anti-trust procedures which will ensure more efficient enforcement of the EUs competition directives to safeguard the interest of the businesses and consumers. Article 102 TFEU forbids the misuse of dominant positions on markets. It figures out various types of probable infringement, which included price discrimination and excessive pricing, bundling, tying and predatory pricing. Article 102, especially, is employed as a mechanism to confront possible misuse of dominance after fortifying of an already dominant status through acquisition of rival business in markets in which competition is not adequately safeguarded by, for instance, supply-side substitution and low barriers to entry2. EU antitrust institution has imposed Article 102 in the guise of both justice and fairness as if the antitrust rules were provisioned against unfair competition and to maintain redistribution and equity, so as to facilitate wealth transfer to the advantage of consumers3. As per European Commission, the main objective of the Article 102 is to protect the consumer welfare. Thus, the main agenda of Article 102 can be said that it intended to safeguard the “competition on the European market” as a mechanism for increasing the consumer welfare and of making a competent sharing of resources. It is to be observed that Article 102 is intended to protect the competition and not the competitors as such. Thus, it is meant to safeguard competitors from genuine competition of dominant companies footed on elements like novel products, higher quality, better performance and opportune innovations4. Of late, European Commission (EC) is very active in reassessing competition matters that may happen under TFEU and especially, in the last 3 years, the EC has examined the following: Once a dominant company’s technology is incorporated in a standard, whether such company by allegedly charging excessive royalties and thereby infringing the Article 102? Where such dominant company by consenting to offer licence of its patents under FRAND condition, especially at the time of adopting the standard, but later supposedly charges non-FRAND terms immediately the standard has been implemented thereby committing an infringement of Article 102? By purportedly failing to implement standards, where a dominant company commits an infringement of Article 102 of TFEU. By purportedly cheering companies to join standard -setting institutions and by approving a specific standard, whether a dominant company commits a violation of Article 102 TFEU5? In ICI V Commission6 and in AstraZeneca v. Commission, it was held that the significance of In ICI V Commission case, the commission on 19 December 1990 held that ICI had misused its leading status on the “soda ash market” in EU by awarding financial incentives and loyalty rebates to clientele purchasing the majority or all of their needs from ICI only and by restriction their procurement of their rival products to a particular quantity7. In “AstraZeneca v Commission” 8 case, the General Court upheld on 1 July 2010 the findings of commission that AstraZeneca (AZ) has misused its leading status in” anti-ulcer drugs’ market “so as to delay or prevent the ingress of standard drugs but the court later minimised the fine levied on the company. In AstraZeneca (AZ) case, the originator company had the ability to employ their privileges of their patent to keep out their generic rivals. In this case, the General Court viewed that high market concentration or share of major portion of a market for a long phase of time as a proof of dominance. It also viewed that by employing the public regulatory schemes to limit rival’s capacity to vie will result in misuse of a dominant status. Further, the General Court viewed that the a variety of distortions made by AZ as a linear and consistent way of demeanour which was unleashed on a company that was not a rival on the standing and thus, AZ infringed the “unique accountability “obliged by leading companies not to deform the competitive practice in the region and as a result, consumer has to rely upon on limited competition.9 In E.ON10 case, Commission found that E.ON infringed in German markets as a dominant company by engaging in booking, on a long-run basis, as it owned the lion’s share of transportation capability especially at the starting stages into its “gas transmission system in Germany” thereby denying other suppliers of gas from entering into German Gas market. The Commission viewed that these long- run bookings were a misuse by E.ON due to its leading status in opposition to “Article 102” thereby limiting on the downstream supply of gas in German market and as a result, consumer has to pay higher prices11. In French Electricity Supply Markets (EDF) case 12,Commission found that EDF had misused its dominant status for the supply of power in French market to large industrial undertakings. EDF assured the commission that will initiate various steps to distort its dominant position in French market like limiting its contract period for supply of electricity for industrial consumers to a period of five years; where a customer will be given an opportunity either to buy from EDF their whole of their demand or to buy additional power from the alternative supplier13. In Tomra v Commission, the Commission’s finding was upheld by the General Court which levied a fine of €twenty-four mn on the “Tomra group” of companies for misuse of leading status. It was found by the Commission that Tomra had employed a stratagem intended to eliminate rivals in 5 nations in the national markets. The verdict of the General Court has reconfirmed the well-known rule that no anticompetitive impacts are required to be established so as to corroborate a misuse under Article 102. The general court refused to take into account the significance of a result-oriented strategy to “Article 102” infringement and endorsed the commission’s verdict that Tomra’s contracts, by excluding a major or not non-major provinces of the market, had blocked the admission of few rivals and had hence restricted the “veracity of rivalry “on the market where consumer’s welfare was impacted. The General Court was of the view that to corroborate a violation under “Article 102”, it was enough to demonstrate that the demeanour of the subject was competent of limiting, or appear to limit, competition. Some critics are of the view that General Court should avail this occasion to acknowledge the effects-oriented approach to infringement cases instead of form-oriented “European courts’ jurisprudence” which has been strongly condemned, especially as applied to rebates. However, the General court followed the customary form-oriented approach to Article 102 infringements, and viewed that there is no obligation on the part of the commission to carry out a fiscal study of Tomra demeanour prior to locating an abuse14. In Deutsche Telekom AG (DT) v Commission15, ECJ upheld the General Court verdict that DT had infringed its leading status on the German retail and wholesale telecom markets and inflicted a fine of € 12.6 million on the DT. Earlier , the General Court held that DT had actually fine tuned its retail prices to end-users for access services and thus that the” National Regulation Authority (NRA) regulation” did not stop it from placing a full stop to “the margin squeeze”. The ECJ was of the view that DT’s capacity to fine tune its selling price was not impacted by the probable misuse of “Article 102 by the NRA itself”. In this case, ECJ was of the view that finding of General Court in viewing that a “margin squeeze” was competent of resulting in a misuse “under Article 102”, devoid of having to prove that both the retail and whole-sale costs were offensive in themselves, and the findings of the” General Court “was absolutely correct as DT’s misuse emanated from the “unfairness” of the spread, the variation between the retail and whole-sale prices and its exclusionary impact on rivals as efficient as DT where a consumer may have to pay higher prices due to market squeeze. In Swedish Electricity Interconnectors’ Market16 (Svenska Kraftnat) case, the commission found that SvK had misused its leading status in the”market of Swedish electricity transmission.” The commission was of the view that though SvK may have restricted export transmission ability available so as to ease jamming within SvKs network structure in the domestic market of Sweden. This tradition had the impact of fragmenting the home market by earmarking locally manufactured power for end-users in Sweden thus refusing consumers situated in adjacent Member Nations entry to the power system17. In Continental Can case18, ECJ interpreted the phrase “abuse” in Article 10. The acquisition by Continental Can in Europe was regarded to be an abuse under Article 102. ECJ held in this case, the provisions of Article 102 not only intended at restricting the exercises which may create injury to end users directly but also those actions which are injurious to them through their effect on an efficient competition composition. ECJ viewed that any indirect action which would destabilise the competition structure in the market which will be viewed as a practice of abusing of dominant position thereby consumers’ interest welfare will be at stake. Thus, the ECJ held that Continental Can’s acquisition in Europe restrained competition and hence, it may cause indirect harm to the consumers19. In Commercial Solvents (CSC) 20case, ECJ held that if a dominant company in the market who refused to supply a raw material to its regular customer and wanted to manufacture the end product through its subsidiary resulted in an action of trying to weed out all competitions will not only be abusing of its dominant position under Article 102 but also an effort to destabilise the consumer’s welfare21. In Hoffmann-La Roche AG v Commission case22 , ECJ viewed that practice followed by the Hoffmann by binding its customers through exclusive purchasing rebates so as to stimulate them not to buy the products from their competitors. ECJ held that Hoffmann’s practice of binding its customers with purchase rebates and not allowing them to buy from their competitors amounted to abuse its dominant position. It may be regarded the ECJ view might have been based upon the premise that the change in the market structure is likely to have ended in loss of consumer welfare in the guise of preference or choice, lowering in quality and increase in price23. In Akzo case24, AKZO was found to weed out one of its rivals namely ECS – by quoting price reductions to ECS customers. Commission’s view was that the price offered was so low and hence its intention was to see that ECS is not functioning in the market. ECJ held that AKZO was engaged in the offence of “predatory pricing.” AKZO like any other dominant company was engaged in the destabilising the competitive structure in the market and the ECJ was seemed to have more concerns in the welfare of the consumers. In its first report in 1972, European Commission stated that “competition is the best motivator for economic activity as it assures the broadest practicable freedom of action to all. In its second report in 1973, EC stated that under article 102, the commercial practices which were censured as improper practices by dominant companies in their dominant status perpetrated either to weed out supplies to a rival or to prevent commercial freedom of dealers. This in turn can be construed that EC intention through Article 102 is to enhance the welfare of the consumers by abolishing unwanted dominance by dominant undertakings25. The “Guidance Paper “(GP) issued by Commission in December 2008, which entailed the application of Article 102 to exclusionary misuses. In Para 19 of GP, it was enumerated that the main objective of Commission to bar exclusionary demeanour mainly to make sure that dominant companies do not prejudice efficient competition by preventing their rivals in an anti-competitive style, thus resulting in an adverse effect on consumer welfare, whether in the guise, higher price to the consumers or by restricting consumer choice or effective competition. In para 5, the commission stated that it will spotlight on varieties of conduct that are most injurious to consumers or demeanour which would have adverse effect on consumer welfare. Since 1957, Article 102 (b) has barred “the restriction on markets, productions, technical development to the discrimination of consumers. For example, in Continental Can decision, the need to safeguard the consumers has been emphasised by ECJ. However, it is to be observed that the consumer injury was not the ultimate litmus test of the Article 102, but more attention has been given to the competitive process. It has been debated that in the European competition law, Article 102 has been regarded as the last unmodernised piece. Thus, the safeguard of efficient competition can only be an objective due to the advantages it delivers to the consumers of Europe26. Some critics argue that there prevails a power structure between consumer welfare and the economic efficiency, where the former is considered to be superior. From the examination of Article 103 (3), one can comprehend that agreements that limit competition can only be permitted if “’fair shares’ of the efficient benefits are passed on to the ultimate consumer. Thus, the competent division of resources must not to make them worse off or work for the advantage of consumers least27. In the words of Mario Monti, erstwhile Commissioner, the main objective of the European Union competition policy is to safeguard welfare of the consumers by maintaining a high magnitude of completion tin the common market. He further added that competition is “ all in the interest of the consumer28. “ In Osterreichische Postsparkasse AG v. Commission case29, it was held that the ultimate aim of the EU competition policy is to make sure that competition is not distorted in the internal market which is mainly aimed to increase the well-being of consumers30. In GlaxoSmithKline Unlimited v. Commission31 case, CFI (General Court) not only referred about the well-being but also to the welfare of consumers: thus, the main intention of the competition provisions of the Community is to bar companies from plummeting the wellbeing of the ultimate consumers of the products in question32. However, the view of the CFI in GlaxoSmithKline case, ECJ condemned the approach followed by the CFI and held that if a contract has an anti-competitive aim, it is not essential that the ultimate end-users be divested of the benefits of the efficient “competition in terms of price or supply”. In British Airways case33, ECJ has also taken a contradictory view that Article 102 is not mainly intended at those exercises which may result in harm to consumers directly but also at those which have a constraining impact on competition34. Through the efficient usage of limited resources, competition will try to achieve through a mechanism of benefiting society on the whole. Article 102 TFEU safeguards the competition by controlling the market demeanour of dominant companies that have a strong position of economic strength that facilitated them to stop efficient competition. The main aim of the Article 102 TFEU of safeguarding competition in the interest of consumers demonstrates that the ultimate intention is to promote welfare of the consumers. For instance, in United Brands35, the ECJ held that the dominant company had misused its market status, that the demeanour impacted trade between Member States, especially by dividing national markets36. Despite the fact that the main aim of safeguarding competition in the interest of consumers and the broader objectives of the EU law normally concur, even though , they may potentially diverge. Further, one of the main aims of the Article 102 TFEU is to safeguard the competition as a way of furthering economic efficiency, in the interest of consumers. Thus, the provision of Article 102 is aimed to safeguard competition as ways of offering lower prices and better quality services and products to the advantages of consumers. While the safeguard of consumers is the aim of Article 102 TFEU , it does not inevitably adhere that “ prejudice of consumer “ or “ consumer welfare “ are the major yardstick for differentiating legitimate competition from exclusionary abuses by dominant companies37. To sumup , I agree with the statments of both Neelie Kroes and Mario Monti, erstwhile commissioners that ultimate objective of Article [102] is to protect consumers. This is supported by many EC verdicts like ICI V Commission, AstraZeneca v Commission” , E.ON , French Electricity Supply Markets (EDF) ,Tomra v Commission, Deutsche Telekom AG (DT) v Commission, Continental Can case ,Commercial Solvents (CSC) ,Hoffmann-La Roche AG v Commission case ,Akzo case ,Osterreichische Postsparkasse AG v. Commission case ,GlaxoSmithKline case where Article 102 TFEU is maintained to safeguard the competition as a way of furthering economic efficiency, in the interest of consumers Bibliography Adolphson U, Article 102 TFEU, Aimed at Serving the Ordoliberal Agenda or European Consumers? (Uppsala University 2010) American Bar Association, Federal Antitrust Guidelines for the Licensing of Intellectual Property. 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