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European Union Law Summary | Grade: 8
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A combination of the prescribed literature (No case law!) , notes and steps on article 101, 102 and 107 TFEU
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SAMENVATTING European Union Law, ALLE ARRESTEN EN LITERATUUR samengevat (Cijfer: 8)
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European Union competition law serves a two-fold purpose: to promote market integration andensure effective competition. As regards the objective of market integration, the Court of Justice
ruled in Consten and Grundig that when member states are required to remove trade barriers,
private parties or undertakings should be unable to create new ones by concluding market sharing
agreements. This objective leads to a teleological approach that has already been observed in the
context of the fundamental freedoms. Using clear-cut rules make it easy to determine whether an
action falls within the scope of the competition rules. The second objective of the competition rules
is to ensure the proper functioning of the market mechanism, which is the central distributional
mechanism in a free market economy. In a competitive market, supply and demand are more
evenly matched and it creates an incentive for suppliers to optimize their products as well as their
prices. A situation in which production is optimally attuned to consumer desires is referred to as a
state of maximum consumer welfare.
Competition can be understood as a process whereby undertakings constantly seek to produce and
sell cheaper and better products than their immediate rivals. From this perspective, the criteria for
deciding whether or not to intervene in a market are based on the conduct of the undertakings
concerned. When the barriers to entry are low, any attempt to raise prices will provoke the entry of
other undertakings that are able and willing to sell the same products more cheaply. Some forms
of government regulation, such as the requirement to obtain a licence, can act as a barrier to
entry. Thus, in order to determine whether a market is competitive, the market structure, the
conduct of the relevant economic operators as well as the performance or outcomes of the conduct
are relevant variables.
EU competition rules apply to undertakings, which are prohibited from concluding anti-competitive
agreements or abusing a dominant position. Entities that cannot be classified as undertakings are
exempt from competition law. In Höfner and Elser, the Court of Justice defined an undertaking as
every entity engaged in an economic activity, regardless of its legal status and the way in which it
its financed and, secondly, that employment procurement is an economic activity. The key question
is therefore what the term economic activity actually covers. From the judgement in AAMS, it can
be inferred that any entity that is active in a market and buys or sells products or services under
market conditions should be regarded as an undertaking. There are two exceptions to this concept
and they can be referred to as the exercise of public powers exception and the exception for non-
commercial activities, which are logical extensions for one another. The Court of Justice made a
distinction between social insurance schemes characterised by such a high level of solidarity that
they cannot be classified as a form of economic activity and funds in which the level of solidarity is
so low that they are actually able to compete with commercial providers. In this context, three
criteria are employed:
• Does the body in question pursue a profit-making or social objective?
• What is the level of solidarity?
• What is the level of government supervision?
The territorial scope of EU competition law is defined by an internal border and external border.
The internal border determines whether the applicable competition law is that of the Union or the
member states, while the external border separates the sphere of application of EU competition law
from that of the rest of the world. Undertakings based outside of the Union are however also
capable of restricting competition within the internal market, but only if the (qualified) effects
doctrine is adopted. According to this doctrine, any action that has a foreseeable immediate and
substantial effect in the EU internal market is subject to the rules relevant to the internal market.
A distinction is made between the product market and geographical market. The relevant product
market encompasses all products that compete with the product of which a potential restriction or
distortion of competition applies. Two perspectives are employed to determine which products
compete with one another, a consumer perspective and a producer perspective. According to the
first perspective, it is important to examine the extent to which consumers regard certain products
as being interchangeable with the product in respect of which a restriction or distortion of
competition is suspected. This so-called demand-side substitution can be identified using the
characteristics of the product or by asking what would happen if a hypothetical monopolist would
raise the price for that product with approximately 10%. If a price increase results in consumers
switching to another product, these products belong to the same product market. Supply-side
substitutability relates to how easy or difficult it is for producers to start manufacturing a different
product if the original product is subjected to a small but significant non-transitory increase in
price. The relevant product market is about determining the area in which the conditions of
competition applying to the product in question are the same for all traders. The relevant
geographical market concerns the place where the offer takes place. The conceptual approach
, taken here is the same and also based on the SSNIP test. It assesses the extent to which the
customers of a product in question would switch to suppliers located in other territories in response
to a hypothetical small but permanent increase in price of that given product. When looking at
supply substitution and how this plays a role on the evaluating the geographic dimension of the
market, one needs to identify the possibility of other suppliers, located outside a certain geographic
area, to start supplying that area in the short term and without incurring significant additional costs
or risks.
Case law: Is the conduct prohibited by Article 101 TFEU?
1 Article 101(1) TFEU
• Is it an undertaking?
• Höfner and Elser
° Any single economic entity (natural persons, liberal professions and a State or a
state entity) and regardless the way in which it is financed
° Engaged in an economic activity (are goods or services offered on the market which is
not exercising public law authority, meaning an activity which necessarily has to be
provided by the State). A final consumer will never constitute an undertaking
• Is the conduct covered by Article 101(1) TFEU?
• An agreement is a concurrence of wills and can either be formal (contract) or informal.
Informal agreements imply that so long as there is a concurrence of wills, constituting the
faithful expression of parties’ intention, its form is unimportant (‘gentlemen’s agreement’)
° Consten and Grundig: agreements can either be horizontal (when the undertakings
concerned operate at the same level of the supply chain) or vertical. Vertical
agreements however are considered to be less harmful as a result of inter-brand and
intra-brand competition. Inter-brand competition is competition between producers of
different brands. Intra-brand competition is the competition between distributors of
the same brand
° Bayer: agreements may be hidden as an apparently unilateral behaviour. Or;
• Decision of an association of undertakings
° Piau: There must be an association of undertakings and the content of its decision
must be considered as streamlining the economic activity of the undertakings covered
by the association. It does not matter of the decision is legally binding or not, but it
must be considered binding by the undertakings themselves. Non-binding
recommendations are therefore also covered. Or;
• In the absence of an agreement and decision of an association of undertakings but presence
of exchange of individualised commercially sensitive information non rebutted by the
undertakings involved, a concerted practice may be conducted. This means an act of
coordination has taken place (concertation) which
resulted in a certain market behaviour (practice) and there is a causal link between the
coordination and the behaviour
° Sugar case: The Court of Justice defined a concerted practice as any direct or indirect
contact between economic operators, the object or effect of which its either to influence
the conduct on the market of actual or potential competitors or to disclose to such
competitors the future conduct of the market that they have decided or contemplate to
adopt
• Is the conduct collusive?
• Consten and Grundig: restrictions by object and effect are alternatives. In the case of
restrictions by effect, determined must be whether or not the conduct restrict actual or
potential competition as compared to the situation which would have existed in the
absence of the conduct. Restrictions by object reveal a sufficient degree of harm to the
competition in the purpose itself or by its very nature, without any need of a detailed analysis
on the effects on the market. These are the so-called hardcore restrictions and examples are
given in Article 101(1)(a)-(e) TFEU
• De Minimis Notice: the conduct does not appreciably restrict competition if the aggregate
market share held by the parties to the agreement does not exceed 10% in the case of
horizontal agreements or 15% in the case of vertical agreements. This threshold does not
apply to agreements that have as their object the prevention, restriction of distortion of
competition
• Does the undertakings’ collusive conduct affect trade between Member States in an
appreciable manner?
° Is there trade? This involves all cross-border activities
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