EU-Caselist Comp.txt

• Art 81-Concerted practices-widely interpreted-4 of the parties were established outside the Community. However, as the effects of their concerted practices were felt within the Community the ECJ found them liable for infringements of Art 81.
• Facts: ICI was the first of a number of businesses to raise the price of aniline dye in Italy. This rise was quickly followed by other producers of this product, accounting for 85% of the market. A similar pattern of price increases had occurred previously. The companies argued that the price coordination was simply a reflection of parallel behaviour in an oligopolistic market, where each producer followed the leader. When the matter came before the ECJ the Commission was able to demonstrate collusion. 4 of the parent companies had sent telex msgs indicating price rises to their subsidiaries within an hour of each other, and each message was similarly worded. This had happened on more than one occasion. The ECJ held that this behaviour amounted to a �concerted practice? arising out of co-ordination. This was apparent from the behaviour of the parties and was designed to replace t defined ashe risk of competition. ECJ did say that parallel pricing would not necessarily amount to a concerted practice under Article 81(1) unless it leads to competition which did not accord to normal conditions of the market. Concept of �concerted practice:�a form of co-ordination between undertakings which, without having reached the stage to where an agreement properly so called has been concluded, knowingly substitutes practical co-operation between them for the risks of competition�.

• Article 82>81/importance of defining the relevant product market/ substitutability/Art 81 & 82 sought to achieve the same aim but on different levels & therefore they cannot be interpreted in such a way that they contradict each other-the Commission argued that the companies involved had a dominant position in the market for cans for meat, cans for fish and metal tops. It did not explain why these markets were separate from each other, or from the general market in cans & containers. The Commission was faced with a series of takeovers & mergers in European companies by Continental Can. In its judgment ECJ stressed the importance of defining the relevant product market. It was necessary to identify "the characteristics of the product in question by virtue of which they are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products". The Court held that the Commission had failed to define the product market properly and the Commission's decision was quashed. The share of the German market was between 70 and 80 %. These high levels of market share were regarded by the Court as proof of dominance. The economic analysis conducted by the Commission will also take into account the financial and technical resources of the undertaking. In Continental Can the Court was influenced by the ready access to international capital markets. A further important factor is the ability of the undertaking to control production and distribution. ECJ held that a takeover or a merger could amount to the abuse of a dominant position. The Ct stated that" abuse may occur if an undertaking in a dominant position strengthens such a position..that the degree of dominance reached subsequently fetters competition". The ECJ found against the Commission but on the grounds that it had failed to conduct a sufficiently thorough analysis of the relevant product market. However, the Court also said that the Commission had restricted itself by refusing to consider Art 81. In the view of the Court, A-5
• In Continental Can and United Brands the Court focused on the importance of substitutability. The Court also indicated 2 types of substitutability. The first is demand-led substitutability, that is, the extent to which the consumer can obtain similar goods or acceptable substitutes. The second type is supply-side substitutability, that is, the ease with which other undertakings can supply goods or acceptable substitutes.

-definitions of 1-dominance/geographical market 2-Abuse:Refusal to supply-a distributor in order to punish him/her for promoting a competitor's products. United Brands were producers of bananas which they marketed as "Chiquita" bananas. They held 40% of the E.C. market in bananas. The Commission alleged that they had infringed Art 82 in a number of ways. United Brands argued that the proper comparison was not with other banana producers, but with the whole of the fresh fruit trade. They argued that bananas competed with other fresh fruits in the shops, at prices which consumers would compare with other fruit before making a decision to buy, and that bananas were only one of a number of fruits chosen as a desert. The Commission argued that there was a particular demand for bananas that could not be met by other fruits. In particular, the banana had a special dietary role in the lives of the very young, the sick and the very old. It was the specific qualities of the banana that induced customer preference and these particular qualities could not be found in other fruits. The ECJ agreed with the Commission. It held that the relevant product market was bananas and not fruit generally The Court said that the key test was "substitutability". If the price of bananas rose significantly, would customers readily switch to buying other fruits? The relevant product market turned on whether the banana could be: "singled out by such special features distinguishing it from other fruits that is only to a limited extent interchangeable with them and is only exposed to their competition in a way that is hardly perceptible." Ct of justice held that consideration was required for the opportunities for competition "with reference to a clearly defined geographical area in which the products marketed & where the conditions are sufficiently homogenous for the effect of the economic power of the undertaking concerned to be able to be evaluated".definition of the relevant geographical market- ECJ held the geographic market as �an area in which the objective conditions of competition are the same for all traders�. ECJ held that three of the (then nine) Member States could be excluded from the definition of the relevant geographical market. This was because those states, France. Italy & the United Kingdom had special rules for the import and sale of bananas. The remaining six states had a free market in bananas and thus could be defined as the relevant geographical market. The Court said that the six states formed "an area which is sufficiently homogenous to be considered in its entirety".financial and technical resources of the undertaking=significant factor in where the undertaking owned the plantations, had its own shipping fleet and conducted its own marketing.

definition of dominance extended>appreciable effect as well as hindrance/Definition of abuse-ECJ has defined abuse broadly as behaviour which has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition. Market share-held by Roche was more than 80% "Such a position does not preclude some competition... but enables the undertaking which profits by it, if not to determine, at least to have an appreciable effect on the conditions under which the competition will develop,&in any case to act largely in disregard of it so long as such conduct does not operate to its detriment." The market share must have been held for a period of time.

• Article 81/82-precise circumstances in which Article 81 breach- unclear This case concerned a complex series of share cross-holding between various tobacco companies. KORAH-the ECJ stated that the acquisition of a minority shareholding which led to control the competitor might infringe Article 81 as the acquisition restricted competition. This caused great concern as it was not clear how much of the transaction might be void by virtue of Article 81 [2]. If the acquisition of the target company's assets was void and not merely voidable, title would not have passed and great confusion might ensue when its assets were sold by the new management to innocent third parties. There was also concern that under Article 81 any perceptible restriction of competition would be forbidden. The judgment left a very unsatisfactory situation and business came to accept the need for merger control at the community level.
• The Commission had decided that the arrangements did not infringe either Article 81 or 82, but two competitor companies objected to the decision. The Court considered Article 81 and agreed that it could apply if the investing company could obtain legal or de facto control of the commercial conduct of the other company. When it considered Article 82 it agreed with the Commission that no anti-competitive object or effect had been established and therefore Article 82 did not apply either.
• This complicated state of affairs was unsatisfactory-suggested that Art 81 EC might apply where companies acquired cross-shareholdings as this would reduce competition bt them. Neither Art 81 nor 82 had been passed with mergers or concentrations in mind, and it was obvious that special legislation was required to address the special problems in this area. Indeed, the Commission had held this view for some time & shortly after the Continental Can case they had put forward a proposal for a regulation on merger control. However, it took 16 years for the Council to adopt regulation 4064/89 on the control of concentrations bt undertakings-came into force on 9/21/90 & now provides the legal foundations for Community policy in this area.

-unilateral action of 1 undertaking may still fall afoul of article 81, whereas art 82 expressly provides that it also applies to the activities of 1or more undertakings. Demonstrates that the commission&ct&applying Art 81(1), will take into account the context in which particular action operates,&will interpret the art against its literal meaning if that is necessary to suppress practices which are against the spirit, even if they seem to be within the letter, of EC competition law.Ct approved the commission's refusal to grant clearance for what appeared to be a perfectly acceptable standard distribution agreement because Ford was refusing to supply existing distributors in Germany w/ a right hand drive cars for export in UK, apparently to maintain an artificial partitioning of the market and thereby different price levels in different MS. Although there was no clear evidence of concerted action, certainly none of any agreement, the ct held that Ford's decision to cease supplies form part of the contractual relations bt Ford and its dealers. Admission to Ford's dealer network implied acceptance by the contracting parties of the policies pursued by Ford.

Art 81/Art 82-collective dominant position-may be held by 2 or more economic entities legally independent of each other, provided that from an economic point of view they present themselves or act together on a particular market as a collective entity. That is how the expression collective dominant position should be understood. What was required to establish such a collective entity was whether there were links or other factors which give rise to a connection between the undertakings concerned which enabled them to act together independently of their competitors, their customers and consumers. The Ct stated that the existence of an agreement or concerted practice between the undertakings does not necessarily create such economic links. However, an agreement or concerted practice between the undertakings can result in the undertakings concerned being so linked as to their conduct on a particular market that they present themselves on that market as a collective entity vis-a-vis their competitors. The Ct then made it clear that the parallel behaviour of oligopolies can be scrutinised in the context of Article 82 EC. Thus the parallel behaviour by an oligopoly which is legal under Art 81 EC may fall to be scrutinised under Art 82 EC to see whether it constitutes collective dominance. Behaviour which constitutes abuse of the collective dominant position is then necessary before there is a breach of the Article.

Definition of abuse/Market share-Here the Court held that to fix prices lower than average variable costs was unlawful if it was part of a scheme to undermine a competitor's position in the market. Held: a company with 50% share or above will normally be dominant. Price cuts designed to drive out the competition constitute abuse/business secrets- Court held it was up to the Commission, subject to review by the Court to decide whether a document contains business secrets

• -Test-Refusal to supply essential facilities concerned refusal to grant a licence for a data system which was protected by copyright. Held:for a refusal to supply to be abusive, 3 cumulative conditions had to be fulfilled:
• 1-the refusal prevented the emergence of a new product for which there was a potential consumers� demand
• 2-the refusal was unjustified
• 3-and it would exclude any competition on the secondary market.

a position of economic strength enjoyed by an undertaking which enables it to hinder, (prevent) the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors and customers and ultimately of consumers-United Brands

• vertical agreements-Art 81 applies/How object or effect” of an agreement distorts competitionHeld: not necessary to conduct a full market analysis if it was clear that an agreement was to restrict competition -German manufacturer of electronic goods, Grundig, entered into an exclusive dealing agreement with Consten, a French distributor. By the agreement, Consten had the sole right to distribute Grundig products in France, and had the exclusive right to use Grundig’s trademark (GINT) in France. In return, Consten agreed not to re-export Grundig products to any other Member State, effectively banning parallel imports and exports. However, another French distributor, UNEF, bought Grundig products in Germany, and sold them in France, at a lower price than Consten. Because of this, Consten brought an action against UNEF in the French court for infregement of trade mark. However, UNEF applied to the Commission who held that the Grundig/Consten agreement contravened Article 81 (1). Grundig & Consten appealed to the ECJ. The ECJ held that the agreement did contravene Article 81(1):
• “…the contract between Grundig and Consten, on the hand by preventing undertakings other than Consten from importing Grundig products into France, and on the other hand by prohibiting Consten from re-exporting those products to other countries of the common market, indisputably affects trade between Member States”.
• The Court went on to say that “there is no need to take into account the concrete effects of the agreement once it appears that it has as its object the prevention, restriction or distortion of competition. Thus Consten & Grundig decided that Art 81 applies.

• 1-demand-led substitutability-the extent to which the consumer can obtain similar goods or acceptable substitutes.
• 2-supply-side substitutability, that is, the ease with which other undertakings can supply goods or acceptable substitutes
• United Brands-Cont Can