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Lecture Notes 1
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Notes from the first interactive session in the European Competition law master's subject.
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Lecture 1: Introduction to EUCompetition Law and its field of
application
Written exam – open book
Zie eventueel ook youtube filmpje: https://www.youtube.com/watch?v=v8EhhsTPpUc
Essentials
What is competition?
Perspective: behavior of economic operators
Rivalry (between undertakings but also unsettled limits between rivalry!)
o In a dictionary, competition is rivalry: to promote rivalry and to force all of us to compete
but also to limit rivalry. Generally, one does not like rivalry even though it can produce
good results. Competition law is there to force us to compete, but also to limit
competition. Too much rivalry, too much competition, can lead to social exclusion that
competition law wants to avoid.
o Rivalry can produce results
o Competition law is there to promote rivalry and to promote all of us to compete
o But competition law is as much there to limit rivalry, it will also put limits to rivalry.
Unfettered rivalry between undertakings can for instance lead to social exclusion, which I
something we do not want.
Autonomy
o Competition is also about autonomy: Competition law ensures market operators feel
autonomous, free to take their decision.
o If an operator on the market loses autonomy and feels no longer free to set prices, feels
no longer free to decide where to trade this is usually an alarm signal something is wrong
with free competition and competition law may have to intervene.
Perspective: market structure
Majority views would say: it’s against monopolies. We like competition and we dislike monopolies
Free competition monopoly power
Why competition?
There are economic reasons, but not only economic! (For liking competition and disliking monopolies)
Aversion of monopolies for economic reasons. Aversion of monopolies for economic reasons. Why are
monopolies economically inefficient? Economists tell us that monopolies are not the most efficient, for 2
reasons
Allocate scarce resources efficiently. But economists tell is that monopolies are not efficient for 2
reasons:
o Deadweight loss, net loss for society (= being net loss for society in a situation of monopoly
consumers lose more than monopolists gain)
Deadweight loss, net loss for society: if a monopoly produced efficiently, gainsmore
than what society/comsumers needs/loses, it would be ok to have a monopoly as
society as whole would be better off with the monopoly. However, facts show it is
, not the case in practice: the loss of consumers is larger than the gain of the
monopolies. If the monopoly gained more than what we loose as consumers, it
would be ok, but in practice economists say it is not the case.
o X-inefficiency(they tend become lazy over time, they invest in the wrong project ie. to keep
others out instead of innovating)
X-inefficiency: monopolies tend to become lazy over time, that is they tend to invest
in the wrong projects, in those that will keep competitors out instead of the really
innovative ones.
Aversion of monopolies for policy reasons
No sympathy for monopolistic gains (distribution of income) - We want freedom of choice in the
market!
No sympathy for concentration of power: we do not like political dictatorship, why would we like
economic dictatorship ?
EU: market integration (Internal market without boundaries!) - Competition law is seen as a part of the
internal market. Politicians have for over 50 years tried to establish an internal market, although we
are not there yet, we come closer, why would we allow economic operators to undo the work of the
politicians, why would we allow them to carve the market up along the national border which
politicians have tried to unify. This is why market division is a hard-core restriction, there will be no
exemption for that type of restriction.
Why competition law?
Theoretical (ideal) versus real world. There are transparency issues, asymmetry of information issues,
transaction cost (cannot switch immediately form one product to another): we need laws to deal with
this, to need to remove, or prevent, the barriers to entry on the market.
Prevent/remove barriers to entry. We want to make it easier for newcomers to enter the market
Place accents. We are going to use legislation to for instance do a little extra/give them an extra
benefit for small and medium enterprise. This is often done in EU law. Why ? There is not a real
economic explanation, rather a belief that they are important in our economic model.
Enhance consumer welfare!
o What is consumer welfare? Do they only want the lowest price? Or do they want to have a
choice, is it also about consumer choice? Are we sure consumers just want to pay less? Is
consumer welfare not too materialistic? Is consumer welfare the only goal?
o Other goals? Choice, innovation, new: fairness…
o Some very important cases are discussing and addressing the fact on why we do this?
Facebook/WhatsApp _ EX decision 18.5.2017 – 110 million fine?
Bayer/Mondanto in 2018
ECJ judgement 6.10.2017 in Case C-413/14P – intel
Cf 3.10.201G EC Decision in case C-G13/1G P – Intel
o But be aware of the cost of law.
You don’t need too many laws for this, law always comes at a cost, the cost of
drafting and of supervision
Therefore, we don’t want too many laws, but we want to work on the basis of broad
principles, which in competition law we do. There are only a few treaty articles, the
rest is implementation.
First big controversy in competition: why do we do all this? Why do we fine heavily Google? According to the
Commission, it is because competition enhances « consumer welfare ». This answer triggers more questions :
Is that not a very materialistic point of view? Is this all?
, What is consumer welfare? Is it about the lowest price, or is it also about protecting consumers'
choices? Are we so certain about what consumer welfare is?
Could consumer welfare cover other goals? Ex: choice, innovation, or even fairness. The Commission
may accept innovation, it may even more rarely accept choice, but it never accepts non-economic
interests.
This is not just an academic discussion, some of the most important cases today are about the
question why are we doing all this
Ex. Facebook – WhatsApp merger decision. FB took over WA. Merger and EC Decision 18 May 2017 imposing
100m fine: people wanted Commission to prevent that merger, because it was feared that Facebook and
Whatsapp would then merge their data, and that would ruin privacy. The Commission firstly answered that
privacy-related concerns are not in the scope of competition rules, but in the scope of data protection:
(164) “For the purposes of this decision, the [EC] has analysed potential data concentration only to the
extent that it is likely to strengthen Facebook's position in the online advertising market or in any sub-
segments thereof. Any privacy-related concerns flowing from the increased concentration of data
within the control of Facebook as a result of the Transaction do not fall within the scope of the EU
competition law rules but within the scope of the EU data protection rules.”
The Commission answered it knowing that it was one of the sole moment where Facebook and
Whatsapp would be on their knees, ready to accept almost everything: that is, when they need
approval for a merger. And national data protection authorities simply do not have the powers the
Commission has. The commission looked into the merger and allowed it. Commission said: we are not
going to deal with any non-economic issues in the assessment of this case. (for ex. Not privacy) The
commission is the only institution that has the power to stop this merger. But the commission said
competition law is about consumer welfare and consumer welfare is about low price. Privacy is not for
us, but for national authorities. Knowing that the national authorities are not able to impose the
sanctions that the commission could impose. A lot of critique
Nevertheless, the Commission later on fined Facebook more than 10m €. Why? Because Facebook had
told the Commission it would not merge the data but eventually, it did merge them. So the
Commission considered Facebook misguided them. This fine is still only viewed as a consolation, when
the Commission realised its first decision was not really correct.
Commission was a little embarrassed fined FB afterwards (some people say this is a belated sorry
of the commission). EU said they had been misguided, they were informed they wouldn’t combine the
data but now they did.
Ex 2: Intel case: Starting in 2002 – Intel abused its dominant position by granting exclusivity rebates. (Intel told
G large pc makers: if you use only my chips we will give you some loyalty rebates). The Commission imposed a
fine on Intel because Intel paid PC manufactures to build the PC in such a way that they would only be
compatible with Intel chips, and not with those of its competitor AMD. This is an « exclusivity rebate»: Intel
gives those companies rebate if they only bought fromIntel.
• Commission reacted: ECJ judgement 6 octobre 2017 in C-413/14 P: Commission stated that what Intel
did was per se wrong as it limits consumer choice Commission said it was going to fine, without
even checking whether the price of the chips went up or down (effects of the behavior by the market).
Intel opposed that what it did led to lower prices for chips and therefore lower prices for consumers:
Commission should first look at the effect on the market, which was allegedly good. So if consumer
welfare is only about lower price, Intel was right. If not, if consumer welfare is broader than that and
includes for example consumers choice, Intel is wrong because an exclusive rebate indeed limits
freedom of choice for consumers, if you are a dominant player.
As the consumer choice was limited by Intel’s practice this is considered to be an offense as
Commission doesn’t check effects.
, The case went to the General Court, which confirmed that the Commission did not need to look at the
effect on the market (in practice, it did, but it did not have to).
Then the case was appealed and went to the CJEU. The CJEU overruled the General Court judgement.
ECJ has found that the general court had erred as it should have checked the effects. Consumer
choice is not considered to be sufficient.
Ex. 3: Beyer/Monsanto. Debate farmers not earning enough money – supermarkets take all the profit.
Commission promotes to sit around the table. Supermarkets to give farmers more profit. This can be seen as a
cartel. Merger between the biggest seed providers who were already were very powelful. It is about
agriculture, more precisely seeds and pesticides and digital agriculture. Today, a farmer is prohibited to use his
own seeds: he has to buy seeds subscription to seeds from one of the six giants in this industry. The six have
been merging and now only 3 are left on the market. Seeing that, people asked the Commission to prevent
those mergers because the actors were already too powerful. Commission's answer:
“During its investigation, the Commission has been petitioned through emails (50000), postcards,
letters (5000) and tweets expressing concerns about the proposed acquisition. Other concerns raised
by the petitioners relate to European and national rules to protect food safety, consumers, the
environment and the climate. While these concerns are of great importance, they cannot form the
basis of a merger assessment.”
“The Commission's mandate under the European merger control rules is to assess the merger solely
from a competition perspective.”
Agriculture is not competition law's business. One can wonder if this is really correct.
Why rules against State aid?
Specific for EU
‘Common self-discipline’ mutual disarmament
Very strict prohibition against state aid and exceptions.
It is needed because we tend to be less against public intervention than people in US The MS have the power to
give state aid and they make use of it. The richest members give most state aid.
Ex. BE: hard to do business (high salary costs, social security is expensive) Undertakings will want some benefits
otherwise they leave BE will give them money. Next day they go to France and tell what BE gave ==> France
is now less attractive France will also give money.
State aid rules: you can’t give state aid.
Competition is not a goal but an instrument!
In general, we tend to say that we have a special EU competition model that is different from the American
one. In the EU model, competition is not a goal in itself: it is an instrument to achieve other, nobler goals.
Internal market is a goal, competition is an instrument. This is why the EU does not want absolute
competition: it wants balanced, workable competition. This is why there are exceptions based on those other,
nobler goals, to competition law rules – competition law is reconciled with other interests. Ex: environment,
regional development, R&D,... The Commission is ready to put competition rules aside if it is sure that it is
about nobler goal, and it does so through exemptions. There are important social corrections, protection of
services of general interest, social exclusion.
In our model: Free competition was never a goal of the Union, it was always an instrument to achieve the
goals. (art 3 TFEU e.v. you will not find competition as a goal, but the internal market for instant.
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