Comparative Competition Law - Final Exam
What are the different kinds of vertical agreements?
- Distribution Agreements - Purchase or supply exclusivity - Resale price maintenance
What does the Sherman Act (1890) prohibit?
- anticompetitive contracts, trusts and combinations (Section 1) - monopolies and attempts to monopolies (Section 2)
How does a dominant position get evidenced under EU antitrust law?
- assessing market structure by taking into consideration: + market position of the dominant undertaking and its competitor (analysis of market shares and degrees of concentration on relevant market) + test: can concerned untertaking profitably increase its prices above the competition level for significant time period?
Methodology to qualify an abuse under US antitrust law: What is a "conspiracy to monopolize"?
- conspiracy = an agreement between undertakings to infringe antitrust laws + specific intent to monopolize + overt act in furtherance of conspiracy (= anticompetitive conduct): US vs Yellow Cab (1947) - not necessary to demonstrate + violation of Section 1 of Sherman Act (under discussion following NYNEX Corp vs Discon Inc, 1998) + actual monopoly according to some Circuit Courts
What is prohibited when it comes to dominance?
- having a dominant position / monopoly power: not unlawful in itself - combining (I) a dominant position / monopoly power and (II) an abuse of this position / power -> unlawful
Explain the notion of "per se"! Name important cases which show the development of application!
= conduct which is by itself deemed anticompetitive: collusive bidding, tying, price fixing and resale price maintenance - Standard Oil Co. of New Jersey vs. US (1910): + SO established a monopoly in oil industry through use of trusts + violations of Sherman Act to be determined by using the rule of reasion -> first application - Dr. Miles Medical Co. vs. John D. Park & Sons Co. (1911): + Dr. Miles: vertical price fixing agreement between a wholesaler and its retailers + vertical prixe fixing = per se violation -> first enforcement of the notion of per se infringement - Continental T.V, Inc. vs GTE Sylvania, Inc.: + restrictions imposed by franchisor on its franchisees' activity + application of rule of reason to decide whether vertical restriction are anticompetitive -> first restriction to the scope of the per se prohibiton - Leegin Creative Leather Products, Inc. vs PSKS Inc.: + resale price maintenance + assessment of a resale price maintenance practive through the rule of reason -> overruling Dr. Miles
What is a "patent abuse"?
= dominant undertaking utilizes intellectual property administrative procedures or regulations to foreclose a market
What are "patent troll(s)"?
= enforcing patent rights on alleged infringers to collect royalties without producing goods or services based upon these patent rights - patent abuses and ambushes are not limitied to patent trolls
Technology marker
A form of product/service market: composed of IP rights licensed separately from relating products and or services competing against each other.
Define enforcement
Application of specific conduct or case of a body of rules by public authorities or courts
Detail tools initiated by third parties
Complaint (EU and US) Plea agreement (FTC) Leniency application (EC)
How does compensation work in the US?
Federal violations: Compensation ONLY for direct purchasers under the Clayton Act in the form of treble damages, injunctions, cost of reasonable attorney fees State violation: Depends on the state laws
Name the types of claimant who can bring a civil suit (US)
Natural or legal persons suffering harm of violation of antitrust law Parens patriae (US)
Explain the allocation of cases between the courts in the US
Strict demarcation: State courts enforce state law and federal courts enforce federal laws
Supply substitution and its determinants
*Only used to verify the demand substitution effects of a product* Ability of suppliers to switch from one product service or technology to a new one Determined by: - response to small but permanent relative price increase, - short term, - incurring no additional risk or cost.
How is an agreement ruled anticompetitive in the European Union?
- Article 101 (1) TFEU: Agreements having as their object or their effect the appreciable restriction of competition + restriction by object: restriction of competition + restriction by effect(s): limiting competition - Task of European Commission: evidencing the existence of an anticompetitive object or effect - Exempetions under Article 101 (3) TFEU: + benefiting all agreements infringing Article 101 (1) + balance of interests: harm to competition vs. improvements to the market structure
Why does EU competition law not give room for the "rule of reason"/"per se" distinction? Name relevant case law for this development!
- Functioning of Article 101 (1) TFEU: + infringement by object: not limited to obvious infringements + infringement by effect: no balance of interests + no objective justification under per se/rule of reason - Functioning of Article 101 (3) TFEU: + applicable to all infringements, including "per se" + wider scope of balance of intersts that rule of reason: taking improvements to the structure of the market in consideration - Cases: + Société Technique Minière vs Maschinenbau Ulm GmBH: first mention of object/effect distinction + Métropole Télévision e.a. vs Commission: excluding application of rule of reason under EU antitrust laws + Matra Hachette SA. vs Commission: excluding existence of per se infringements under Article 101 TFEU + GlaxoSmithKline Services Unlimited vs Commission: standard to establish the existence of an agreement having a restricting object -> checklist + Meca-Medina e.a. vs Commission: objective justification of an anticompetitive conduct which cannot be exempted
What is the main difference between enforcement in the US vs. EU?
- In the EU enforcement in mainly administrative vs US which is mainly civil - There is no criminal sanctions in EU law, as opposed to the US
What are limits imposed on "forum shopping"? Name relevant case!
- abuse of law (= formal observance of a rule without achieving its aims) - international public order: + body of national rules enforcement cannot be avoided by the use of international private law tools + impossible to choose antitrust agency within EU; exclusive choice of the European Commission - Case: Hewlett Packard vs. Oracle
What is the "presumption of dominance"?
- according to scholars (!) - market share > 50%: sufficiently important market to qualify as dominant - related case: Akso Chemie BV vs Commission (1991)
What are horizontal agreements?
- agreements between actual or potential competitors on the same market(s) --> maximum restricting effects on the market
Why are some types of information exchange prohibited?
- effects of information exchange on market: + equalising conditions of competition in a case of an information asymmetry + increasing transparency on the market: availability of confidential data - increasing transparency: not always good + abolishing uncertainity on competitor's future or current behaviour + anticompetitive transparency when * limiting/avoiding the risks generated by competition * increasing the risk of coordination between competitors - prohibition depends on + type of information exchanged: "strategic commercial information" + market situation
How does "standard setting" work?
- establishing a single standard by polling all essential technologies to the standard which were patented by different persons - providing a single FRAND (fair, reasonable, and non-discriminatory) license for the use of these technologies exp.: GSM, UMTS, LTE Advanced
Which dimension of information exchange are assessed unde the rule of reason?
- nature and quantity - how recent is data? - publicily available? - concentrated industry structure? - structure and frequency of exchange: direct + frequent -> bad - safeguards to prevent or limit access to sensitive data
Methodology to qualify an abuse under EU law: What are "exluded defenses"?
- no de minimis under Article 102 TFEU: importance of the dominant undertaking on the market which always makes an abuse significant - no exemption mechanism + not provided by Article 102 TFEU + contrary to antitrust laws of other jurisdictions
How many undertakings having monopoly power (US)?
- no equivalent to the EU collective dominance under US antitrust law - conspiracy to monopolize prohibited by Section 2 of Sherman Act -> sanctioning an agreement between undertakings seeking the creation of monopoly power
How does the existence of monopoly power get evidenced under US antitrust law?
- no need to bring direct proof of a control over prices or a power to exclude - two items to be taken into consideration in combination: + high market share + high entry barriers
Explain the notion of "dominance"!
- notion of "dominant position" (EU/US) / "monopoly power" (US) + specific degree of market power + situation in scope of EU and US antitrust laws - notion of "economic dependency" + degree of power on a client which cannot switch to another supplier + outside of scope of EU and US antitrust laws, but inside of other jurisdictions
How is "dominant position" defined under EU antitrust law? Name relevant cases!
- position of strength enjoyed by an undertaking: Preventing the maintenance of an effective competition on the relevant market by allowing it to behave independently of its competitors, its customers and consumers - United Brands vs Commission (1978) - Hoffmann-La Roche vs Commission (1979)
Why are antitrust safety zones designed?
- to provide participants in a competitor collaboration with a degree of certainty - in situations in which anticompetitive effects are so unlikely that agencies presume th arrangements to be lawful without inquiring particular circumstances - safety zones for competitior collaboration in general: combined market share > 20 ; infomartion exchange: rule of reason - safety zones for research and development competition: agencies consider nature, scope, and magnitude of effors
What did the court in the case of US vs United States Gypsum (1978) conclude?
- traditionally: exchanges of price information = per se infringement - US vs United States Gypsum: application of rule of reason to price and other information exchanges
How is the market share threshold regulated under US antitrust law?
- unclear - no equivalent presumption to EU's "presumption of dominance" - US Supreme Court: never specify the lower bound + lowest market share allowing constitution of monpoly power: 66,66% (US vs American Tobacco Company, 1911) - US Circuit Courts: Market share > 50% at least to constitute monopoly power
Methodology to qualify an abuse under EU law: What does "objective justification" mean?
- unilateral and anticompetitive conduct does not infringe Article 102 TFEU when the conduct is objectively justified - relevant case: Tomra Systems ASA e.a. vs Commission (2012)
Methodology to qualify an abuse under US antitrust law: What is meant by "attempted monopolization"?
- unilateral conduct - anticompetitive conduct - specific intent to monopolize - dangerous probability of obtaining such monopoly power (Spectrum Sport vs McQuillan, 1993)
Methodology to qualify an abuse under US antitrust law: What kind of monopolization is prohibited?
- unilateral conduct (= conduct attributable to a single undertaking) - to be distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident - willful acquisition or maintenance of a monopoly power (US vs Grinnell Corp, 1966)
Of how many undertakings does a dominant position consist (EU)?
- usually: only one - collective dominance possible + limited number of undertakings which adopt the same conduct on the market (Gemeente Almelo (1994) + useless to have an anticompetitive agreement or concerted practice -> market structure (Compagnie Maritime Belge de Transport e.a. vs Commission (2000)
Explain the process by which a case follows (note differences between US and EU where appropriate)
1)Formal decision to initiate proceeding (EC) 2) Statement of objections (EC) / Complaint (US) 3)Full access to agency's file (Both) 4)Right to respond to charges and to be heard by the agency (Both) 5) Judicial Review (Both)
What are vertical agreements?
= agreements between undertakings operating at different levels of the production or distribution chain
Explain the notion of "abuse"!
= any behaviour resulting in a restriction of competition
Methodology to qualify an abuse under EU law: What is an "unilateral conduct"?
= conduct attributable to + a single undertaking enjoying a dominant position + various undertakings in a situation of collective dominance (= behaving as a single one)
Methodology to qualify an abuse under EU law: What is an "anticompetitive conduct"?
= conduct resulting from the use of methods which are different from those which condition normal competition in products and/or services (Hoffmann-La Roche vs Commission, 1979) - How is a method deemed beyond normal means of competition? + anticompetitive objects (=aims of the conduct) + anticompetitive effects on relevant market + no need to have both objects and effects
Explain the notion of "concerted practices" (Article 101 TFEU)!
= coordination between undertakings which have knowingly substituted practical cooperation for the risk of competition - no need of an agreement
What is a "patent ambush" or a "patent hold-up"?
= dominant undertaking intentionally hides patent rights protecting a technology essential to an industry standard + discloses these rights once the standard setting process is completed in order to levy excessive royalties
What are cartels?
= form of horizontal agreement, concealed to the public and antitrust agencies; most serious restriction(s) to competition
What is Hub & Spoke exchange?
= indirect exchange of information: - using middle person to forward the information between competitors; middle person to make the exchange to look legal prima facies - forms of exchange + usual: retailer A -> disclosing future price intentions -> supplier B -> forwarding intentions -> retailer C + reverse: supplier A -> disclosing future price intentions -> retailer B -> forwarding intentions -> supplier C
Explain the notion of "rule of reason"! Name important cases which show the development of application!
= method of assessment of a conduct to determine whether unreasonable: balance of interests --> harm to competition vs. advantages for consumers; scope of application: all practices which are not prohibited per se - Standard Oil Co. of New Jersey vs. US (1910): + SO established a monopoly in oil industry through use of trusts + violations of Sherman Act to be determined by using the rule of reasion -> first application - Dr. Miles Medical Co. vs. John D. Park & Sons Co. (1911): + Dr. Miles: vertical price fixing agreement between a wholesaler and its retailers + vertical prixe fixing = per se violation -> first enforcement of the notion of per se infringement - Continental T.V, Inc. vs GTE Sylvania, Inc.: + restrictions imposed by franchisor on its franchisees' activity + application of rule of reason to decide whether vertical restriction are anticompetitive -> first restriction to the scope of the per se prohibiton - Leegin Creative Leather Products, Inc. vs PSKS Inc.: + resale price maintenance + assessment of a resale price maintenance practive through the rule of reason -> overruling Dr. Miles
How is "monopoly power" defined under US antitrust law?
= power to control prices or exclude competition + controlling price: having relatively high degree of market power + excluding competition: allowing the dominant undertaking to raise prices - relevant cases: + Eastman Kodak vs Image Technical Services (1992) + United States vs E.J. du Ponnt de Nemours & CO (1956)
What does "forum shopping" mean?
= using international private law to choose your court and/or regulatory agency
Fines in the EU, explain...
Administrative fines of up to 10% of the total turnover of the sanctioned undertaking, periodic penalty payment of up to 5% of daily turnover.
Define the 3 kinds of enforcement, explain each one.
Administrative- enforcement by govt bodies Criminal - enforcement by a court following a criminal investigation and prosecution Civil- enforcement by a court following civil litigation
Verical agreement
Agreements or concerted practices between undertakings operating at different level of the production or distribution chain
Quasi exclusivity
All measures having similar effects as those of an exclusivity E.g. quasi-exclusivity (i.e. commitment to purchase a substantial part of needs or to supply a substantial part of sales), loyalty rebates, non-compete clause
Parens patriae action
An action in which the state seeks compensation for losses suffered by its citizens
Geographical market
Area where products, services and or technologies compete against each other
What are the remedies for a finding of a breach of antitrust law in the US?
Cease and desist order (behavioural) Commitments
US DOJ/FTC Horizontal Merger Guidelines
Define relevant market for purpose of merger enforcement but also relevant in monopolisation cases Sole focus on demand substitution factors but suppliers behaviour is also important - hypothetical monopolist test to identity a set of products which are reasonably interchangeable
Demand substitution and its determinants
Degree to which products/service are seen as interchangeable between consumers Determined by: - all possible evidence inc technical, commercial and marketing - hypothetical small but permanent relevant price increase
What is EU antitrust law compensation dependant on?
Depends on EU Member State laws Harmonisation Directive 2014/104/EU - Violations of EU as well as Member State antitrust law - Defines compensation: Actual loss + loss of profit +interest - Facilities actions by victims and evidence disclosure
What is a the most common type of vertical agreement?
Distribution agreements: Agreements which make the condition on which products or services are made available to customers through a middle person.
What is prohibited under antitrust law in the EU and the US?
EU (Article 101 TFEU): - anticompetitive agreements: "decision of an association of undertakings", notion of "concerted practice" - abuse of dominant position US (Sherman Act Section 1 and 2): - contracts, trusts and combinations - monpoloy and attempt to monpolise
Explain the allocation of cases between the courts in the EU
EU is a one stop shop and both EU and EU member state laws can be enforced
What is the difference in legal system between the US and EU?
EU is administrative limited to oral arguments and the US is common law with an initial decision on the law and facts followed by an appeal before the full FTC who makes a final decision.
Explain the notion of "consumer interest" in EU and US competiton law!
EU: - Goal of EU: protection of market structure: interests of consumer, competitors, suppliers, clients and the public in general - GlaxoSmithKline Unlimited vs Commission US: - Goal of US: protecting the interests of consumers rather than the market structure -> no unlawful conduct when it does not harm consumers - Brunswick Corp. vs Pueblo Bowl-O-Mat, Inc: claim dismissed, harming competition, but not consumers
Cases for hub & spoke exchange?
EU: - Hasbro (2006) in UK US: - Interstate Circuit, Inc vs US (1939) - Toys R' US vs FTC (1998)
Criminal enforcement...
EU: Not in EU antitrust law but at a national level there is, due to harmonisation violation of national law = violation of EU law US: Yes, under Sherman Act enforced by US District Attorney prosecutions under DOJ. State and federal law concurrently enforced for same conduct
Explain how information is obtained in the EU compared to the US
EU: Request for information v US: subpoena witness or subpoena for production of documents (inc annual or special reports or answers to specific questions in writing. EU: taking of statements v US: subpoena for attendance and testimony of witness EU: inspection of premises and means of transportation and examining of books and other records
Name the further powers that the EC has in collecting evidence
EU: inspection of premises and means of transportation and examining of books and other records
Name the US enforcement body/bodies and their areas of responsibility
FTC: FTC Act 1914 sets up independent 'federal trade commission' to protect consumers and enforcing antitrust law - enforce FTC Act DOJ: enforcer of Sherman Act through the courts Informal co-operation between agencies
Apart from fines what are the remedies for a finding of a breach of antitrust in the EU?
Injunction (behavioural) Divestment (structural) Commitments
United Brands v Commission
Market Definition in the EU: European subsidiary of United Brands, world's biggest banana producer- question of market definition: - whether market defined as fresh fruit market or there was a separate market for bananas? -questions of consumer's preference for bananas and whether and how easily they would substitute them for other fruit - as bananas are available all year round and consumers did not change their fruit buying preferences in response to the prices of other fruits, as well as the plentiful supply of bananas meant that bananas were distinct as a market away from fresh fruit.
Fines in US, explain...
No fines issued by the FTC but civil penalty of up to $40,000 per violation
Is unilateral anticompetitive conduct where the undertaking exercises restrictions in a secondary market prohibited under Article 101 of the TFEU or Section 1 of the Sherman Act?
No, because restricted market is not market in which restriction occurs. But, may be prohibited under Art 102 if dominance or under section 2 if monopoly or attempt to. But problem is that dominated/monopolised market doesn't necessarily mean market restriction
Purchase/ Branding exclusivity
One or several purchasers belonging to a single undertaking committing to acquire a type or a range of products and/or services from one supplier or from several suppliers belonging to a single undertaking.
Supply exclusivity
One supplier or several suppliers belonging to a single undertaking committing to sell a type or a range of products and/or services to one client or to several clients belonging to a single undertaking
What was the content of the EU AstraZeneca Case?
PATENT ABUSE - AstraZeneca = Manufacturer of Losec - Active substance of Losec = Omeprazole, patented by AstraZeneca Astra Zeneca abused its dominant position on the market for proton pump inhibitors ("PPIs") by misleading patent authorities and misusing the regulatory system in order to prevent generic competition against its anti-ulcer medicine, Losec (omeprazole), in certain markets. - Findings of Commission + relevant product market: proton pump inhibitors + relevant geographic market: national scope + AstraZeneca: dominant on PPIs market in various EU Member States - Infringements + misuse of patent system where it applied for a SPC + misuse of administrative procedure relation to the marketing of pharmaceutical products where it applied for deregistration - Sanction 60 Million € Appeals before EU Courts: - requirement according to which a dominant company should only compete "on the merits" - correct application of this requirement by Commssion - Reduced fine to 52.5 million €
What is the content of the US Dell case?
PATENT AMBUSH - Dell: patents on technologies covered by VL-bus standard - no disclosure during the standardization process resulting in VL-bus standard - Threatened to enforce its patent tights on VL-bus standard users Dell Computer Corp (1996) - Consent Decree negotiated with the US Federal Trade Commission (FTC) - Commitments by Dell + No enforcement of its patent rights on VL-bus standard users + Licensing its patent rights under the conditions of the VL-bus standard, including royalties
What is the problem with using Article 101 of the TFEU or Section 1 of the Sherman Act?
Problem is doesn't fall within the prohibition of anticompetitive agreements
United States v du Pont & Co *(Cellophane)
Producer of 75% of US sold cellophane but less than 20% of flexible packaging material market was found to be part of flexible packaging material market and competition prevented du Pont possessing monopoly power. Looked at substitutability of one product for another by the buyer (cross price elasticity) between cellophane and other wrappings finding them to be substitutable. Look at the use of the commodity. Selling price between commodities with similar uses and different characteristics may vary. "Market is composed of products that have reasonable interchangeability for the purposes for which they are produced- price, use and qualities considered." Test is whether they are reasonably interchangeable by buyers "Monopoly power is the power to control prices or exclude competition"
Composition of relevant market
Product or service market + geographical market
Product or service market
Products or services competing against each other
Explain EU enforcement agencies
Regulation No1/2003 - EU Commission (EC) Competing jurisdiction of NCA (national competition authorities) and EC but obligation to enforce EU antitrust law when enforcing national antitrust law + harmonisation
United States v du Pont & Co *(Cellophane) relevant market test
Relevant Market Test: "Market is composed of products that have reasonable interchangeability for the purposes for which they are produced- price, use and qualities considered." - physical/functional similarities and differences - do these have an effect on buyer's willingness to substitute goods - price differences- higher price not proof alone of separate market -cross price elasticity at competitive prices -price trends- consumer's switch when price changes? -submarket -profits Etc
Name and explain the two types of investigations
Sectorial: gathering knowledge on a particular industry Formal: sanctioning violations of antitrust law
Name some of the alternative tools of sanctions in the EU and US
Settlement on fines and remedies (EU) Plea agreement (US) Commitment procedure (US)
Explain the notion of "agreement"!
Sherman Act + TFEU: agreements between at least two undertakings restricting competition agreement = meeting of minds which is not necessarily executed as a formal contract undertaking = entity engaged in an economic activity, regardless of its legal status and the way it is financed
Subpoena ad testificadum
Subpoena calling a witness
Subpoena ducestecum
Subpoena for documents
Name critiques of antitrust law enforcement?
Too lenient, too severe, too late
Name the types of civil enforcement
Tort, contract Tort law requires; - fault - damage - causation
Leverage effect (EU)/ Monopoly company leveraging (US)
Undertaking uses dominant position in one 'primary' market to restrict competition in another 'secondary' market
Solution to "monopoly company leveraging" in the US?
Unsettled but Eastman Kodak v Image Technical Services:
Solution to problem of prohibiting unilateral anticompetitive conduct where dominance is exerted in secondary market under the EU system ?(leverage effect)
Unsettled but Possible to enforce Art 102 TFEU when dominance but not restricted market if causal link between dominant position and restriction can be proved Only able to be established when: Reinforcing dominant position in market (Akzo Chemical) Close association link between primary and secondary market (Tetra Pak)
Name the 2 situations in which market dominance can occur
Usual: dominance/ monopolisation and anticompetitive effects in same market Leverage effect (EU)/ Monopoly company leveraging (US)
What does the Clayton Act (1914) prohibit?
anticompetitive mergers
What is prohibited under Article 102 TFEU?
any abuse by one or more undertaking of a dominant position within the internal market affecting trade between EU Member States
Explain the notion of "decision of an association of undertakings" (Article 101 TFEU)!
association of undertakings = formal group of undertakings of the same general type responsible for representing and defending their common interests decisions of an association = decision of the governing bodies of the association
What has been developed with the case GlaxoSmithKline Services Unlimited vs. Commission?
checklist to establish the existence of an agreement having a restrictive object: are the following items anticompetitive? + content of the provisioon establishing practice + purpose of practice + economic and legal context of which the practice forms a part
Methodology to qualify an abuse under US antitrust law: How is a conduct deemed anticompetitive?
enforcing the rule of reason
What does the FTC Act (1914) establish?
independent regulatory agency: US Federal Trade Commission (FTC)
What is prohibited under Section 5 (a) of the FTC Act?
unfair methods of competition