EU competition law

European Union competition law arose out of the desire to ensure that the efforts of government could not be distorted by corporations abusing their market power. Hence under the treaties are provisions to ensure that free competition prevails, rather than cartels and monopolies sharing out markets and fixing prices. Competition law in the European Union has some similarities with the law in the United States antitrust, though there are some key differences; not least, while US law is designed to protect competitors from the power of monopolies, EU law is designed to protect consumers from anti-competitive behavior.

Four main policy areas include:

(1)Cartels, or control of collusion and other anti-competitive practices that affect the EU. This is covered under Articles 101 of the Treaty on the Functioning of the European Union (TFEU).
Under EU law cartels are banned by Article 101 TFEU. Art. 101 TFEU makes clear who the targets of competition law are in two stages with the term agreement "undertaking". This is used to describe almost anyone "engaged in an economic activity"but excludes both employees, who are by their "very nature the opposite of the independent exercise of an economic or commercial activity"and public services based on "solidarity" for a "social purpose". Undertakings must then have formed an agreement, developed a "concerted practice", or, within an association, taken a decision. Like US antitrust, this just means all the same thing; any kind of dealing or contact, or a "meeting of the minds" between parties. Covered therefore is a whole range of behaviour from a strong handshaken, written or verbal agreement to a supplier sending invoices with directions not to export to its retailer who gives "tacit acquiescence" to the conduct. In the language of Article 101(1), prohibited are,

"All agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition within the common market."

This includes both horizontal (e.g. between retailers) and vertical (e.g. between retailers and suppliers) agreements, effectively outlawing the operation of cartels within the EU. Article 101 has been construed very widely to include both informal agreements (gentlemen's agreements) and concerted practices where firms tend to raise or lower prices at the same time without having physically agreed to do so. However, a coincidental increase in prices will not in itself prove a concerted practice, there must also be evidence that the parties involved were aware that their behaviour may prejudice the normal operation of the competition within the common market. This latter subjective requirement of knowledge is not, in principle, necessary in respect of agreements. As far as agreements are concerned the mere anticompetitive effect is sufficient to make it illegal even if the parties were unaware of it or did not intend such effect to take place.

Exemptions to Article 101 behaviour fall into three categories. Firstly, Article 101(3) creates an exemption for practices beneficial to consumers, e.g., by facilitating technological advances, but without restricting all competition in the area. In practice the Commission gave very few official exemptions and a new system for dealing with them is currently under review. Secondly, the Commission agreed to exempt 'Agreements of minor importance' (except those fixing sale prices) from Article 101. This exemption applies to small companies, together holding no more than 10% of the relevant market. In this situation as with Article 102 (see below), market definition is a crucial, but often highly difficult, matter to resolve. Thirdly, the Commission has also introduced a collection of block exemptions for different contract types. These include a list of contract permitted terms and a list of banned terms in these exemptions.
(2)Market Dominance, or preventing the abuse of firms' dominant market positions. EU law can apply for "dominant" market players with as little as 38% market share, compared to the US where a market share of 60%+ is usually required to trigger intervention. This is governed by Article 102 TFEU. This article also gives rise to the Commission's authority under the next area,
(3)Mergers, control of proposed mergers, acquisitions and joint ventures
(4)State aid, control of direct and indirect aid given by Member States of the European Union to companies.