What makes an agreement anti-competitive: the Legal Perspective

Time to rewrite Art. 101 TFEU ?

11th GCLC conference, Brussels 26 November 2015

Luc Gyselen, Arnold & Porter, Brussels

Overview _______________________________________________________________________

Notions of ‘competition’ and ‘distortion of competition’

Shortcomings of Art. 101 TFEU’s current dualist structure

Time to rewrite Art. 101 TFEU into a monist provision?

Support for a monist Art. 101 TFEU

How rewrite Art. 101 TFEU?

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Notions of ‘competition’ and ‘distortion’ of competition’

Competition :

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

provide everyone in Europe with better quality goods and services at lower prices. Competition policy is about applying rules to make sure companies compete fairly with each other. This encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality’ (DG COMP website).

Distortion of competition :

– Process elements: ‘companies compete fairly’ – ‘wider choice for consumers’ .

– Outcome elements: ‘better quality goods and services at lower prices’.

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Shortcomings of dualist Art. 101 : general _____________________________________________

Art. 101-1: process-oriented view of competition (rivalry), no room for outcome-oriented view (consumer welfare)

Art. 101-3: process-oriented view prevails over outcome-oriented view

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Shortcomings of dualist Art. 101 : its first paragraph _______________________________________________

Focus on rivalry process, no room for consumer welfare: see ECJ in GSK

(2009).

Admittedly, ECJ introduced economic realism in Art. 101-1: see e.g. Technique Minière (1966), Völk / Vervaecke (1969) or Delimitis (1991).

However, this case law does not eliminate the structural shortcomings of Art. 101 because the balancing of an agreement’s anti-competitive effects on the rivalry process and its pro-competitive effects on consumer welfare effects is postponed until Art. 101-3: see General Court’s references to the ‘effectiveness’ of Art. 101-3 in Métropole Télévision v. EC (2001).

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Shortcomings of dualist Art. 101 : its third paragraph

___________________________________________________

Art. 101-3: process-oriented view prevails over outcome-oriented view

Standard of proof: EC 2004 Guidelines

3rd condition governs 1st condition: Guidelines §§ 39 and 79.

4th condition governs 2nd condition: Guidelines §§ 92 and 105.

Burden of proof : ECJ in VBVB/VBBB (1984).

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Time to rewrite Art. 101? _____________________________________________

Art. 101-3 TFEU has become a legal exception since 2004: dualism abandoned in procedural and institutional terms – time to abandon dualism in substantive terms?

Most Art. 101 decisions since 2004 are commitment decisions and the reasoning in these decisions with regard to Art. 101-3 is usually succinct or cryptic.

Art. 102: enforcement policy for unilateral conduct has been contaminated by dualist enforcement policy regarding agreements under Art. 101.

The TFEU’s rules on competition already contain a monist provision (Art. 106-2).

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Support for monist Art. 101 : 1956 Spaak report _____________________________________________

Focuses exclusively on formation of ‘monopolies’ within the common market.

Identifies three types of unlawful company behaviour:

Market partitioning agreements

Agreements that ‘limit production or curb technical progress’

‘Absorption or domination’ of relevant market by a single enterprise.

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Support for monist Art. 101 : first draft texts in 1956

_____________________________________________

June 1956 - July 1956: single antitrust provision for agreements and

monopolization, with no exemptions.

September 1956: dualist French proposal based on legal exception

in Art. 59bis and 59ter of national law, with only the 1st and the 2nd

conditions of current Art. 101-3.

November 1956: dualist German proposal based on administrative

authorization in draft national law, with all four conditions of current

Art. 101-3.

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Support for monist Art. 101 : case law on Art. 101-1 _____________________________________________

ECJ in Technique Minière (1966) : introduces notion of ‘counterfactual’ in Art. 101-1 (thus importing the 3rd condition set forth in Art. 101-3)

ECJ in Gottrup-Klim (1994): balances pro- and anti-competitive effects of agreement under Art. 101-1.

ECJ in ASNEF (2006) : refers to consumer welfare under Art. 101-1 (thus importing the 1st and 2nd conditions set forth in Art. 101-3).

ECJ in MERFA (2014): emphasizes need for meaningful assessment of ‘content’, ‘objectives’ and ‘context’ in Art. 101-1 (thus also importing the 1st and 2nd conditions set forth in Art. 101-3).

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Support for monist Art. 101 : Art. 101-3 red herrings ______________________________________________

Standard of proof: no room for non-competition related considerations

in Art. 101-3?

Art. 173 in fine TFEU

Case law: references to non-competition related considerations are either obiter dicta (see ECJ in Matra Hachette (1994) or competition related considerations (see EC in VBVB / VBBB on culture (1981) or in CECED on environment (2000).

Burden of proof: not fully on parties to agreement

ECJ in Gründig Consten (1966)

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How rewrite Art. 101? _____________________________________________

By object:

Per se prohibition for cartels, subject to benign neglect for companies with

de minimis market share

Presumptive illegality for other ‘by object’ infringements, e.g. resale price

maintenance – with burden of proof as now.

By effect:

balancing pro-competitive and anti-competitive effects – with softened burden of proof (allocation as in US ‘rule of reason’ cases).

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