EU Competition Law - Essay Example

EU Competition Law Introduction A free market creates a competitive game for business. Businesses find themselves in temptation to avoid competition and create their own rules in the market. Players in the market undertake measures that are meant to outdo small competitors. These unethical practices in the industry have made the European Commission to play a key role of ensuring fair play. It does not allow creation of cartels that make strong firms to control the market in terms of price fixing and removing any form of competition with such competition cartels are able to set high prices for low quality products. These cartels have negative impacts and it has been made illegal under EU rules on competition. The EU Courts to such cartel firms can impose heavy fines. Pursuit of EU competition laws has been huge but there have been doubt as to their exact goals of their laws. Comparison of laws in the decentralized EU competition enforcement with other national laws on competition reveals parallel pursuits in its application. This essay analyses an overview of competition laws by the EU and its members and looks into detail the enforcement system of the EU competition law and any inconsistencies noted in application of the rules. It also analyzes duties of such authorities when matters of enforcement of Section 101 and 102 of the TFEU are to be effected. Enforcement system of the EU and its Inconsistencies According to Ezrachi, 1competition law is very important to the European community and its organs. Its core platform of EU is to facilitate the industry. The industry due to its competitive nature provides advantages for people involved and ensures proper functioning of its market and the European industry. Therefore, the EU nature must protect effective protection of such competition. The EU fosters obligatory requirement for member states to embrace converged forms of substantive procedures for enforcement of such laws. This has always posed a major challenge in realization of unified competition laws. National laws on competition are radical towards creation of right policies on competition regulations. These laws have been regarded as relevant for publicity of the Commission in creating effective policies. Power 2 explains that total reliance on the commission for effective enforcement into national procedures and its institutions has created absence of clarity in the goals of its laws.EU competition law drafters lacked a clear focus on its goals since they failed to think of the best enforcement regime. This laws lack procedures for uniform practices to all members states. The notification and the authorization system are seen as an obstacle for effective enforcement and do not perform duties it was required to. Basedow3 explains the system application of Article 101 is seen as a monopoly and is a disadvantage in fulfilling of the law of the European Commission especially by such authorities of the law. According to Szydło4 firms that are in breach of article 101 claim that all their agreements meet its conditions and are legal. National bodies do not have the power to apply article 101 and their enforcement action becomes very difficult. Mostly national action is suspended until the Commission makes a decision. This creates unnecessary delays and paves a way for disincentive in application of the EC competition law. Kennedy 5states that practically it can be said that the organization of Europe is the only committee that can enforce the law. Marcos 6 explains that the notification fails to show claims that are advantageous to investigations. Most lawyers inclusive of companies have knowledge of what is prohibited and are to be exempted and therefore the Commissions benefits do not apply to cases of violations that are serious however, they are used to verify illegality and confirm the law is properly applied. The Commission by empowering such authorities applies treaty articles creates a platform for not appropriately applying the law but it could be solved by using proper solutions. The line, which divides application of national completion laws and community competition laws, is always unclear. If anti-competitive practice happens in the common market then community law applies. If anti–competitive practices happen in single member states then national laws apply. There is an increasing overlap between community completion laws. Marcos7 states there are two enforcement mechanisms that is the public and private enforcement system. Public enforcement is aimed at deterrence while private enforcement deals with compensation. There is an insufficient deterrence effects of EU antitrust fines where there is need to combine other restrictions to make them effective. Number of cartels is increasing tremendously and the fines given are totally insufficient. There is need to increase the fines to the maximum It can be said that private enforcement are improperly outlined in dealing with certain rights since issues exist that face victims of infringements especially in bringing damages actions. These obstacles are complexity of casualty, disclosure rules and cost and uncertainty. Most private parties incur large costs in developing their case that exceed the expenses of such claims. Such parties always stay isolated especially against big companies since they have large legal support, resources, and big investigative procedures. Most consumers are sometimes do not notice when such hardcore cartels harm them. According to Power,8 public competition officers are serious with violation of laws that issue such remedies where currently they seem to be insufficient in ensuring deterrence. Farber9 states this is because there have been an increasing number of cartels and the existing fines prove to be insufficient in persuading them to follow the law. Collective redress systems can solve such issues that depend on mode of action given and whether it issues good guidelines in bringing overall actions. The action fails to work in state areas and is better suited in tackling issues that have low participation rates and sub- optimal deterrence. Promoting Efficient Enforcement To be able to promote effective enforcement of the competition there needs to be a new system that enables the system to use its benefits in cases that present real threats to competition that is to the detriment of the competition industry and to consumers. The Commission can step up its enforcements procedures with hardcore restrictions like resale price maintenance and introduce procedures that violate proper competition. It can sanction heavy abuses of dominance like tying; fidelity rebates and removes anti- competitive state measures like rights that are exclusive that fail to obtain justification to the society. The Commission must involve the state competitive enforcers in enforcement of such laws relating to competition. Abolition of the authorization procedure and the organizations system over the law provided by section 101 needs to be taken away. This allows the system establishing sections of the law to effectively ensure completion guidelines are followed. This will remove multiple notifications with the view of seeking lenient authority. Kokkoris10 states that creation of a network of competition authorities will deal with the problem of forum shopping and complaints. This network will have rules for issuing claims to reduce a lot of power, inefficient actions, and repetition of similar duties. To have proper formulation by the authorities they must have help from fellow member in the system. It is important for such cooperation between enforcers to assist for purposes of exchanging vital information. Articles 101 and Article 102 of the TFEU New arrangements for applying competition laws governed by Regulation the No 1/2003 promotes proper usage of such laws for interests of consumers and businesses. Article 101 TFEU prohibits cartels, applies both vertical and horizontal restraints on competition, and cuts to all economic activities. This article has three elements that include an agreement between undertakings; trade must be affected between parties and change of rules in the industry. Article 101 TFEU is usually unclear where consumer welfare considerations are relevant. The purpose of the EU is to maintain openness and unify internal markets that ensure economic efficiency in the market industry. Rizzuto11 notes that this article makes clear the target of completion law especially undertakings. This describes any person engaged in an economic activity and prohibits services that are based on solidarity for social reasons. Article 101 states that all rules that fall under it must affect trade between all members’ states. It creates exemptions where practice is beneficial for consumers and exempt agreements of minor importance and it applies mostly to small companies. It also offers exemptions to different types of contracts especially vertical agreements that include permitted contract terms. Article 101(1) TFEU prohibits against undertakings that is aimed to classic cartels referred to as horizontal competition and deals with restrictive agreements between retailers and manufacturers. The EU investigates breaches of this article .Undertakings that amount to price fixing are fined by the Commission. The Treaty does not actually define the term undertaking but it includes legal and natural persons that are involved in commercial transactions in provision of goods and services. Nicolaides 12 explain that EU has jurisdiction of investigation of any premises in the EU either on spot or anywhere. Areas outside the EU are not subject to EU jurisdiction .The Enterprise Act of 2002 clearly states that if an individual runs a cartel they can be jailed or be disqualified from their position. In Chemiefarma v Commission of the European Communities13 statements agreed are confined together with contracts that are binding but also to informal gentleman’s agreements therefore there isn’t a legal document to check for parties to rely on which is supported by article 101 (1). In BMW Belgium v Commission of the European Communities14 it was established that verifying copies while taking them back it not being a contractual document amounts to an agreement. This means that for there to be an agreement it is enough for the undertaking to demonstrate wishes in conducting their activities in the industry. This article also applies to all agreements as mentioned above. Such agreements are between parties, which operate in the same level of the distribution and production chain. Agreements that are referred to as vertical operate especially in agreement that involve a distributor and the manufacturer. In Consten and Grundig v, Commission 15 the Court stated that it is good to check whether the market losses according to the agreements intention. This case has an effect in that it overall not only based to agreements that are horizontal and other undertakings but also to agreements referred to as vertical also by parties that are not in competition that aim to remove competitors in the market. Article 101 also places a ban on institutions that put in place agreements that affect EU trade for purposes of restriction, prevention, and distortion of competition. It has an exemption if such agreements improve the production and distribution of goods that promote economic growth and progress. Nicolaides16 points out that the “de minimis” regime places a carve from prohibitions of anti- completive agreements where it places a safe harbor for institution to put agreements that are non-appreciative effects on competition. Article 102 of the treaty prevents undertakings that hold dominant positions in the market from abusing their power. It regulates monopolies that restrict competitions in the industry and is a key provision after article 101. Such abuses include imposing unfair purchase and limiting production markets or applying dissimilar conditions in trading parties. ECJ, In Völke v. Vervaecke,17 the court held that an exclusive dealing agreement with absolute territorial protection with regards to weaker parties position in the market may escape protection of article 85(1) (now article 101). Kallaugher18 explains that such rules on competition are run according to the laid provisions that include restrictions on competition and fair share that would help in eliminating unfair competition. Therefore, it balances the positive and negative effects of agreements on consumers and the market. It does not exclude certain types of agreements and covers all agreements that fulfil the conditions laid out in Article 101(3) TFEU. Price exploitation is covered under article 102 (2) (a) that deals with indirect imposing unfair purchase or selling prices, which is termed abusive. Limiting production is in section 102 (2) (b) and covers such prejudices where the customer is termed abusive by dominant undertakings. Price discrimination is covered under article 102 (2) (c) where application of dissimilar conditions with different people involved in such agreements that places parties at an unfavorable position is termed abusive. In Microsoft Corp v Commission of the Competition19 it dealt with the issue of dominant position where the court held that there were infringement of the stipulation s due to refusal of the dominant undertaking in supply and use of information. The court offered remedies of appointing a monitoring trustee and fines that were proportionate to the offence. Role of Authorities Nicolaides 20argues that the EU legislator set up a framework that enables the national authorities to be able to work together with the organization to safeguard the application of Article 101 and Article 102 uniformly. The European Competition Network for the cooperation between NCA s and the Commission is a powerful mechanism for cohesion especially when it comes to application of the two articles. The Regulation has guidelines that supervise and follow restrictive issues that violate flow of the market trade by member states the organization has certain authority to rule against powers that restrict trade and that meet the stipulations of section 101 and 102 TFEU. This decentralized system has established the competitive culture in Europe where the articles interpretation was uncertain. Larouche21 explains that authorities know the stipulations that have good effects from Article 101 and 102 of TFEU. Regulation 1/2003 has changed the powers that were deemed absolute in the spectrum of competition by the entire network. This system of enforcers all European guidelines on members acting cooperatively and allows for allocation of cases where every case is handled by a single authority. They are empowered to apply the articles with the direct applicability of the laws stipulates in case laws. State officers responsible for guidelines of competition have the power to withdraw benefits obtained from EU exemptions. National courts apply the European guidelines on competition in claims in courts among national authorities and personal individuals. According to Farber22 national courts are able to apply Article 101 and 102 of the TFEU in three ways that is, the contractual liability proceedings this are disputes that arise from parties in an agreement. They also have the proceedings that do not involve contractual liability which are cases that involve other parties not privy to it or another in a contract and in formulation of remedies like injunctions. They may ask the Commission for information on opinion on any points that concern the applicability of the European Competition Law. National courts play a key role in enforcement of completion laws. They usually apply article 101 and 102 of TFEU in scenarios that involve where courts have jurisdiction in lawsuits of private parties like contract cases and torts that end up in damages. Some act as review courts and others as public enforcers. In applying national competition law, the national courts are obliged to apply EU Competition law especially where there is effect on trade among member states. According to an article written by Schweitzer23 he states that the application of anti competition guidelines brought by the Regulation ensure full implementation of laws on competition for purposes of customers and businesses interest. They also ease the administrative burden of companies that carry out business in Europe. The national competition authorities are given authority in application of the two articles of the law in facilitating that at all activities are not restricted or changed .National courts apply this provisions to protect individuals ensured by the Treaty. The Council Regulation (EC) No1/2003 of 2002 deals with implementation of procedures in competition law laid out in Article 101 and 102 of TFEU. It has centralized monitoring system where agreements are liable and restrict trade among EU member states. Szydło 24 explains that the Commission has authority to make any contracts agreed that curtail such competition but also go hand in hand with article 101. For purposes of making formalities simpler, the commission in dealing with effective action against violation of competition rules, it created the publication of the 1999 White Paper. This reform is a transition to a system that has exemptions regarding use of rules of competition that add more duties of the authorities especially in enforcing the law that guarantees that properly used. Geradin25 is of the view that the regulation has specific rules for implementing TFEU provisions that relate to agreements and undertakings that restrict completion and abuses that are in dominant positions. Exemption guidelines guaranteed by the law increases the rules of activities and no notifications is required but ensure that nothing is done using bad faith that all contracts are in line with good protection and violate any laws. Competition austerities like the national courts assume greater responsibility by making sure that EU competition rules are followed to the letter In facilitation of information changing hands between parties to competition and the authorities, the regulation creates a proper network for proper competition that involves authorities to facilitate exchange of confidential information that helps enforce violations of guidelines of competition. In his book, Basedow 26 elaborates that the national officers have the duty of giving information to the organization regarding issues that arise like prohibitions that relates to the Articles. European system ensures all the rules on competition of decisions of practices that restrict trade under the law especially concerning abuses from persons in dominant positions that are liable to competition breaches are uniformly governed in terms of application. Gerard 27 explains that the commission is given authority to make rules and give out remedies or appropriate punishment. Such authorities are exercised after conducting inquiries using its directions and imitative where the two Articles have been violated. The Commission can make a decision terminating an infringement and may require the undertaking and associations of undertaking to end the violation. It may also offer interim measures in cases of justified urgency by prima facie findings order such measures. It also makes decisions to be binding for specified periods. It can also open proceedings when facts of a case change. It also makes decisions to make findings of Article 101 and 102 to be inapplicable especially in matters of EU public interest the organization are required buy the law to give any vital information that is exchange between parties in an agreement. Wijckmans28 states that Article 3 Para 1 of the Regulation 1/2003 has the power to enforce obligation on member states national competition authorities to apply the two articles to its guidelines. This means that state guidelines must be in line with European rules of the provisions when applied. The commission and national competitive authorities create an environment of competition that is authorized to punish violations of the article. The Regulation delegates executive functions to national competitive authorities and national courts for application of laws. This system of enforcement contributes to the European Commission a law that enables cooperation between both parties. This article does not allow contracts among market operators prohibits that violate such competition It covers agreements that are referred to as horizontal and vertical It has limited exceptions for general prohibition Some of this prohibitions include creating cartels among competitors that encourage price fixing and market sharing. The law does not allow firms that have superiority over small firms to violate other position by charging unfair prices or limiting production or refusal to innovate to the detriment of the customers. In his book, Andenæs29 elaborates that the European Commission is empowered by the Treaty to govern these rules and has investigative powers of inspection of the abusiveness premises and request for information. In Prezes Urzedu Ochrony Kobkurencji Konsumentow, v Tele2 Polska30 The European Court of Justice stated that national competition authorities in states do not have the authority to declare violation of the laws of competition. This means that firms accused of violating competition laws by NCA as opposed to other competition are deemed of breach of competition laws. This case has two effects where NCAs are not in a position to give decisions with finality of non-infringement of the two provisions of TFEU. They are also precluded from giving out individual exemptions under article 101(3) TFEU. The judgment in Tele2 Polska case opens a variety of issues. Decisions from non – infringement and personal exemptions issued by the NCAs under EU law was called into question which was given before May 2004. The full duties of such authorities still remains uncertain and very unclear especially when it comes to evaluating non- infringement. According to Hofmann31 these authorities have the authority to use and apply this provision in personal claims. This authority must act on their own initiative when a complaint is made and may order interim orders, accept commitments, and impose fines. Conclusion Article 6 of the Regulation gives courts of law authority in enforcing article 101 and 102. According to Tele2 Polska case, courts can use the rules without exemptions or any hindrance. Power32 elaborates that even though national judges settle individual rights issues when they apply EU Competition law they ensure that they can be applied properly. Courts of law also use decisions that are negative that regulate only parties’ from the proceedings with a small impact. Fines and remedies offered and enforced in law guides compliance with Article 101 and 102 and fulfillment of duties in associations as regulated by the Regulation. Authorities that deal with competition guidelines work in line with the organization in Europe with intention of maintaining the efficiency of the system to ensure no laws are changed and promote application of the law. Rizzuto33 explains that to promote proper application of the European system guidelines and effective running of mechanisms provided in Regulations 1/2003, the national courts, and authorities that deal with competition guidelines use the two provisions as discussed above in contracts agreed and practices that affect trade among member states. References Case Law BMW Belgium v Commission of the European Communities (1979) ECR 2435 Chemiefarma v Commission of the European Communities (1970)ECR 661 Consten and Grundig v Commission (1966)ECR 299 Microsoft Corp v Commission of the Competition (2007) Prezes Urzedu Ochrony Kobkurencji Konsumentow v Tele2 Polska Sp.z o.o (now Netia SA)(C- 375/09)(2011) OJ C 186/4 Völke v. Vervaecke, (5/69)(1969) ECR 295 Articles Farber, Daniel A. "Federal Preemption of State Law: The Current State of Play." UC Berkeley Public Law Research Paper 1740043 (2012). Geradin, Damien, and David Henry. "Abuse of Dominance in the Postal Sector–The Contribution of the Guidance Paper on Article 82 Ec." (2009). Geradin, Damien, and Nicolas Petit. "Judicial review in European Union competition law: A quantitative and qualitative assessment." (2010). Gerard, Damien. "EU Antitrust Enforcement in 2025:'Why Wait? Full Appellate Jurisdiction, Now'." Full Appellate Jurisdiction, Now'(December 9, 2010). CPI Antitrust Journal 1 (2010). Kallaugher & Weitbrecht, “Developments under articles 101 and 102 TFEU in 2010” (2011) ECLR 333-342 Marcos, Francisco. "When Competition is the Last Concern: The Battle for the Control of ENDESA." Instituto de Empresa Business School Working Paper No. AJ8-189-I (2012). Nicolaides, Phedon, and Maria Geilmann. "What is Effective Implementation of EU Law?." Maastricht journal of European and comparative law 19, no. 3 (2012): 383-399. Power, Vincent JG. "The Relative Merits of Courts and Agencies in Competition Law—Institutional Design: Administrative Models; Judicial Models; and Mixed Models." European Competition Journal 6, no. 1 (2010): 91-127. Rizzuto, Franco. "Article 5 of Regulation 1/2003: the limits to national procedural autonomy." European Competition Law Review 32, no. 11 (2011): 564-572. Rusu, Catalin Stefan. European merger control: the challenges raised by twenty years of enforcement experience. Vol. 7. Kluwer Law International, 2010. Schweitzer, Heike. "The European Competition Law Enforcement System and the Evolution of Judicial Review." In European University Institute, Robert Schuman Centre for Advanced Studies, EU Competition Law and Policy Workshop, European University Institute, Florence. 2009. Szilágyi, Pál. "How to give a meaningful interpretation to the efficiency defence in European competition law?." Available at SSRN 1920463 (2011). Szydło, Marek. "National parliaments as regulators of network industries: In search of the dividing line between regulatory powers of national parliaments and national regulatory authorities." International journal of constitutional law 10, no. 4 (2012): 1134-1166. Books Top of Form Bottom of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Andenæs, Mads Henry, Mads Tønnesson Andenæs, and Camilla Baasch Andersen, eds. Theory and practice of harmonisation. Edward Elgar Publishing, 2012. Basedow, Jürgen, and Wolfgang Wurmnest. 2011. Structure and effects in EU competition law: studies on exclusionary conduct and state aid. Alphen aan den Rijn: Kluwer Law International. Ezrachi, Ariel. 2014. EU Competition Law. Bloomsbury Publishing. http://www.myilibrary.com?id=681028. Hofmann, Herwig, Gerard C. Rowe, and Alexander Türk. 2010. Administrative law and policy of the European Union. Oxford: Oxford University Press. Kennedy, T. P., Dermot Cahill, and Vincent Power. 2011. European law. Oxford: Oxford University Press. Kokkoris, Ioannis, and Ioannis Lianos. 2010. The reform of EC competition law: new challenges. Alphen aan den Rijn: Kluwer Law International. Larouche, Pierre, and Péter Cserne. 2013. National legal systems and globalization: new role, continuing relevance. The Hague, The Netherlands: T.M.C. Asser Press. Piszcz, Anna. 2011. Competition law in comparative perspective. Białystok: "Temida 2", Wydawnictwo Stowarzyszenia Absolwentów Wydziału Prawa Uniwersytetu w Białymstoku. Wijckmans, Frank, Filip Tuytschaever, and Alain Vanderelst. 2006. Vertical agreements in EC competition law. Oxford: Oxford University Press. Read More