European Competition Law

EEBL
3rd semester 2012

CASES
Overlapping regimes:

Deutsche Telekom

Paul Corbeau

Honeywell

Definition oft he market:

United Brands (Chquita Bananas)

Continental

Commissions notice on the definition of the relevant market

Abuse of dominant position

Microsoft

Commercial solventes

Oscar Bronners

British Airways

Azko

Commissions guidance on implementation abusive exclusionary conduct

Restrictive practices

Meca Medina

Viho

Constein &Gruding

Mergers

Tetra-Laval vs Commission (2005)

Gencor vs Commission (1996)

Airtours vs Commission (2002)

COUNCIL REGULATION (EC) No 139/2004

Liberalization

Council directive

Council directive 95/18/ec

Directive 2001/14/ec of the European Parliament and of the Council

Directive 2002/21/ec of the European Parliament and of the Council

Enforcement

Chrean

Manfredi

Regulation 2003

White Paper

States aids

Austria case

Commission Communication 2008

Commission communication 2009

When the European Community was created, the main activity of the ECJ was dedicated to
the foundation of the Single Market. Competition was one of the three instruments to
realize the Single Market (1. Four Freedoms, 2. Competition Law, 3. State Aids).
Competition and Regulation are two different forms of intervention used to regulate the
economic exchange. However, they must be distinguished. The first one requires a
neutral intervention by the State while the second one consists in a political intervention
in the economic sector since it substitutes the old intervention by the State.
Competition law establishes rules regarding three main fields: abuse of dominant
position, restrictive practices and mergers.
In affirming the Single Market, in 1990 some specific sectors were excluded by the
application of competition law, such as postal, electronic communication, gas, electricity,
rail and air transport. Originally, they were controlled by monopolists, afterwards they
were liberalised. Therefore, these sectors are not anymore reserved to a closed number of
operators. Liberalisation of a market is a juridical concept that means open opportunities
to enter a sector through the elimination of legal barriers. In law, monopoly is called
exclusive right. This right in specific sectors is regulated by art. 102 of the TFEU (ex-art
90).

The next three cases we are going to analyze (Deutsche Telekom, Corbeau case,
Honeywell) regard problems with overlapping regimes, rules & derogations etc
competition and its exceptions, EU and global competition. The key point is :
boundaries.

DEUTSCHE TELEKOM

FACTS
Deutshe Telekom (D.T.) was the incumbent operator in the German telecommunications
sector. It was originally a public entity owned by the State. Before the liberalisation of the
sector it enjoyed a legal monopoly, meaning the exclusive right decided by the
legislation. The applicant offered access to its local network to other operators by fixing
some tariffs in order to access infrastructures. The price for the access must be subject to
the approval of the German Regulatory Authority (it has a broader objective in the market
surveillance while the Commission may not take into account some important
considerations about the sector).
Between 18 March and 20 July 1999, the Commission received complaints from 15
companies which were competitors of the applicant, challenging the applicants pricing.
According to the Commission, the applicant has infringed Article 82 EC by operating
abusive pricing in the form of a margin squeeze by charging its competitors prices for
wholesale access that are higher than its prices for retail access to the local network
(recitals 1, 57, 102 and 103 to the contested decision).
A margin squeeze exists if the charges to be paid to [the applicant] for wholesale access
are so expensive that competitors are forced to charge their end-users prices higher than
the prices [the applicant] charges its own end-users for similar services. If wholesale
charges are higher than retail charges, [the applicants] competitors, even if they are at
least as efficient as [the applicant], can never make a profit, because on top of the
wholesale charges they pay to [the applicant] they also have other costs such as
marketing, billing, debt collection, etc.
Deutsche Telekom asked the CFI for the annulment of a decision issued by the
Commission of the European Communities. It regarded the undertaking responsible for
an abuse of dominant position. Being the Commission the public administration
responsible for the implementation of competition policy, its decisions are administrative
ones and consist in issuing sanctions.
There are some differences between intervening through regulation and competition law.
The first considers a broader range of interests then the second. Another problem to rise
is the different time of intervention: the regulator (German Authority) intervenes in
advance, while the Commission ex-post. Even the type of intervention makes the
difference: the Commission puts sanctions, the regulator establishes rules.
After the abuse of dominant position was declared, D.T. claimed the Regulator had
authorized it, thus the principle of legitimate expectation had been infringed (it imagined
its behaviour was lawful). Moreover, it requested for a reduction of the fine in line with
the principle of proportionality. Another problem is that of legal certainty, because of the
overlapping of regulation. The latter constitutes a very actual and controversial problem,

because there are two different legal orders (national and European one) both with a
rationale.
Liberalization refers to the structure of the market, while privatization concerns the
property. The Community asked for the first one, even thought in both systems only free
competition matters.

DISCUSSION
The general problem in the case of Deutsche Telekom (DT) deals with overlapping
regimes: the same object can be considered within two separate legal frameworks. Fixing
some tariffs for access to infrastructures can be considered as two different behaviors
under legal perspective. Under the regulators perspective, theres an ex ante
authorization, whereas under the commissions perspective it can be compatible or not
with EU law. Economic choices underline such decisions.
How to establish tariffs and charges are the result of economic choices. What problems
may arise from this? They can be part of both sector-specific regulator and competition
authoritys discipline. Theres some kind of rationale behind this, since the regulator has
been given different tasks by competition and antitrust authorities. Choices which may be
ok with either one of them, might be breaking the other ones principles.
Pleas in law raised by DT were mainly three
1. There was an infringement of article 82 EC
2. The contested decision is defective,
3. Misuse of power: breach of proportionality, legal certainty and legitimate
expectations
The economic part of the decision is not under question, howeverwhat we put under
question is if the commission followed the requirement for administrative proceedings in
taking the actions against DT.
An abuse of power(dominant position) is considered by the antitrust authority, but what
is put under challenge is the administrative decision itself.
Pleas in law, from par. 68 par 268
Definition of Misuse of power: an administrative act may have effects on entities towards
which its action isnt directed. When someone removes a civil servant from its position for
disciplinary reasons, the misuse of power is given by using the transferral act, which
results in positioning public resources in a place where they arent needed ( so we have a
misuse of power when a specific act is adopted for an end which is not the end for which
that kind of act is chosen to adopt)
The Commission was trying to correct the German authoritys use of administrative
power. It is important to bear in mind:

Par .270: In the third place, as regards the applicants complaint that the
Commission misused its powers, it must be observed that a measure is only
vitiated by misuse of powers if it is evident, on the basis of objective, relevant
and consistent evidence, that it was taken with the exclusive or main purpose
of achieving an end other than that stated.

One possible solution could be an infringement procedure against the national authority
instead of against DT. Legitimate expectations towards the fact that DTs behavior was
lawful since it is based on a lawful act, is the companys argument. We are however
not examining the question under an economic perspective. Once we come to the
controversial phase, we face an administrative problem. Under the economic perspective,
the argument could potentially be infinite.
There always are in the first examined cases (in class) right of defense (par 274),
stating reason, misuse of power (par 284), legitimate expectations (my behavior was
wrong, but I could assume that I was behaving well) etc

Par .274 The applicant submits that the Commission infringed Article 19(1) of
Regulation No 17 in relation to the rights of defence by failing in its statement of
objections of 2 May 2002 and in its supplementary letter of 21 February 2003 to
carry out a factual or legal analysis as to whether the alleged infringement had
been committed intentionally or negligently. In order to be reasonably able to
defend itself, the applicant should have been informed during the administrative
procedure of the facts on the basis of which the Commission was accusing it of
such fault or negligence.

It must be noted as a preliminary point that the obligation to state reasons laid
down under Article 253 EC is an essential procedural requirement, unlike the
question whether the reasons given are correct, which goes to the substantive
legality of the contested measure. From that point of view, the statement of
reasons required by Article 253 EC must be appropriate to the act at issue and
must disclose in a clear and unequivocal fashion the reasoning followed by the
institution which adopted that measure in such a way as to enable the persons
concerned to ascertain the reasons for it and to enable the competent court to
exercise its power of review (C-17/99 France v Commission [2001] ECR I-2481,
paragraph 35).

The argument provided by the Commission states that, even if authorized by the NRA, DT
should have known that they were going too far by applying to high prices for wholesale
and retail providing, thus inhibiting competition.
The decision was never put under challenge, never modified. It continued to be lawful,
but the decision hadnt the legal basis (you should have known that you were going too
far).
We do have overlapping regulations. There are other needs for regulation, which doesnt
lead to coincidence between regulation and competition law. Thus, what to do? More
competition? Allowing regulators to rise questions?

PAUL CORBEAU CASE

FACTS
Paul Corbeau is a businessman from Liege, in Belgium. He set up a company for mail
delivery and other services. He was brought in front of the criminal court of Liege, hence
a criminal proceeding against him. He chose to perform an economic activity in the postal
sector. The exclusive rights in the postal sector was granted to Rgie de Poste, an entity
of public law, considered as an undertaking by the ECJ.
A Belgian law of 1957 grants delivering of any kind of mail product towards Rgie de
Poste. Paul Corbeau was collecting and distributing mail, hence something close, yet with
an added value to the traditional postal service: he was actually granting a better and
expecially a faster service.
DISCUSSION
This activity of Paul Courbeau was harmful, by overlapping of tasks, towards, Rgie de
Poste. Rgie de Poste isnt subject to competition and it sometimes works in nonremunerative areas/conditions. (Cream-skimming or cherry picking is the expression
used for entering the most profitable segments of a given sector). The revenue of the
public undertaking in some areas is justified by its public service at political/social prices
in other areas. These quality and conditions, tariffs and territory, can create towards an
area the appetite for exploiting most profitable areas. So if you provide an essential
public service you have to imply the same tariff for all the areas where you perform, at
the same conditions.
The question referred to the ECJ follow a preliminary ruling. The main questions:

Can a national monopoly be justified?

Which is the limit to the application of limitations towards competition?

Rules of competition: art. 106 TFEU (ex art 90), a specific art.
Par1 In the case of public undertakings and undertakings to
which Member States grant special or exclusive rights,
Member States shall neither enact nor maintain in
force any measure contrary to the rules contained in
the Treaties, in particular to those rules provided for in
Article 18 and Articles 101 to 109.

This means that we (EU) dont care whether the undertaking is private or public.
Special or exclusive rights=legal monopoly, in economic terms. The last part may
seem a contradiction, since exclusive rights per se are contrary to competition.
However, one can have two forms of competition, namely within and for the
market. Ex: railway infrastructure: As a state, I need to grant management of
railways to one single undertaking and if I decide to do so towards someone whos
not a direct entity of public law, I need to give it to the best competitor. In some

cases, the state needs to assign exclusive rights. For instance, a tender may be
issued.

Par2: Undertakings entrusted with the operation of services of

general economic interest or having the character of a
revenue-producing monopoly shall be subject to the
rules contained in the Treaties, in particular to the rules
on competition, in so far as the applications of such rules
does not obstruct the performance, in law or in fact, of
the particular task assigned to them. The development of
trade must not be affected to such an extent as would be
contrary to the interests of the Union.

A concession may be considered contrary to competition only if theres no

competition in the preliminary phase. It is possible to give exclusive rights, but it
is no possible to infringe competition. There are cases in which we have to grant
exclusive rights, but promotion of competition prevails always.

Par3: The Commission shall ensure the application of the

provisions of this Article and shall, where necessary,
address appropriate directives or decision to Member
States.
From the case:
Par 12 Thus Article 90(1) provides that in the case of public undertakings to which
Member States grant special or exclusive rights, they are neither to enact nor to maintain
in force any measure contrary to the rules contained in the Treaty with regard to
competition.
Par 14: That latter provision thus permits the Member States to confer on undertakings to
which they entrust the operation of services of general economic interest, exclusive rights
which may hinder the application of the rules of the Treaty on competition in so far as
restrictions on competition, or even the exclusion of all competition, by other economic
operators are necessary to ensure the performance of the particular tasks assigned to the
undertakings possessed of the exclusive rights.
Par 15 As regards the services at issue in the main proceedings, it cannot be disputed
that the Rgie des Postes is entrusted with a service of general economic interest
consisting in the obligation to collect, carry and distribute mail on behalf of all users
throughout the territory of the Member State concerned, at uniform tariffs and on similar
quality conditions, irrespective of the specific situations or the degree of economic
profitability of each individual operation.(this is a public service)
Par 16 The question which falls to be considered is therefore the extent to which a
restriction on competition or even the exclusion of all competition from other economic
operators is necessary in order to allow the holder of the exclusive right to perform its
task of general interest and in particular to have the benefit of economically acceptable
conditions.

Analyzing this case is competition respected in Belgium? It was the first time that the
first par1 of art 106 had been read in conjunction with par2. A legal monopoly could only
be justified if given by the necessity to ensure certain tasks to certain undertaking.
The necessity test is what the ECJ calls economic equilibrium. This concept means
that in general you shouldnt go to the part of the service which ensures extra-profits
to a given competitor. Moreover, the ECJ claimed that a service with an additional value
for consumers shouldnt be considered as ensuring an extra-profit. Corbeau was offering
a different service that Rgie de Poste, delivering mail by a quick service within a certain
number of hours. The discipline which we are referring to, existing at the time in
Belgium, was in fact contrary to competition. This is the notion of universal service
( exclusive rights are only for the base services and not for everythnig9)
The EU legislator started to liberalize all sectors of public utilities after this turning-point
case. Every time we have exclusive rights, they can only be referred to the essential part
necessary for enjoying a universal service. In the following years of the 90s, many similar
cases were presented in front of the ECJ.
The political message to be learned is given by the ECJ. Without it, we couldnt have given
the floor to liberalization. They are justified only to the limit called economic equilibrium.
Through the necessity test, we manage to open a breach in state monopolies and
exclusive rights given by art 106.

CASE GENERAL ELECTRIC VS HONEYWELL

FACTS

The case is about the merger between Honeywell and GE, brought in front of the Court
of First Instance. Honeywell and GE notified the EU-Commission about the operation. The
administrative procedures was made to decide whether to authorize the merger or not,
but the Commission opposed the merger, but government of U.S not.
The case is important since we have a long analysis by EU Commission, prohibiting the
merger, whereas the US antitrust authority authorized it. The issue is that the relevant
market is larger in the US and hence the merger wouldnt have granted Honeywell a
dominant position whereas it would have done so in Europe. It was the first decision in
which the ECJ affected a foreign market to the EU. Starting from the economic concept of
the antitrust discipline of the relevant market, we can consider it either in a static or
dynamic way.
DISCUSSION
What is the problem behind the case and the possible solution? No international antitrust
authority. Without a global antitrust authority we will always find similar problems of
competition, monopoly etc. .
Verizon vs Trinko by the Supreme Court of Justice regards a similar case to Deutsche
Telekom vs. Commission. A problem of interpretation of competition law shouldnt arise
within the EU, since National Authorities and the Commission are applying and
implementing competition law jointly, whereas very few cases at the time are reserved
exclusively to the Commission.
Our national law in competition (Italian), law n287/1990, establishes the Italian Autorit
garante della concorrenza e del mercato. If something against competition law happens
in Italy, it is subject to this authority. Italian discipline, however, is interpreted in the
light of EU law. We do have notices adopted by the commission on how to interpret the
relevant market. There are some instruments for coordination within our legal framework,
and moreover theres a network of competition authorities. The administrative model
is similar to Interpol.
At the global level however theres no single legal order, thus resulting in many
problems. Economics is a global phenomenon, law isnt. a more integrated cooperation
is hence needed. The ICN is the International Competition Network. It is an informal
creature which gathers most of the national competition authoritys work. It is an
informal body. It works through consensus (everybody must agree on the decisions), it
isnt based on any specific juridical framework, it isnt founded by a treaty. This body
doesnt have a premise, treaty or its own civil servants. What is relevant for us is that its
decisions arent legally binding.
It provides a series of documents, suggestions. It is sort of a lobby, since people in
charge of implementing national policy are seating in it. This might in the future give
birth to convergence, at international level, of competition policy. The G20 has a similar
kind of arrangement. It has to work together with other organs such as OECD and
UNCTAD.

In the EU most antitrust functions are decentralized to national level, with surveillance by
the Commission. Within the EU we do have something similar to the ICN: the European
Competition Network.
Commission Notice on cooperation within the Network of Competition Authorities
(with EEA Relevance)
1. Council Regulation (EC) No 1/2003 of 16 December 2002
on the implementation of the rules on competition laid
down in Articles 81 and 82 of the Treaty (1) (hereafter the
Council Regulation) creates a system of parallel
competences in which the Commission and the Member
States' competition authorities (hereafter the NCAs) (
2) can apply Article 81 and Article 82 of the EC Treaty (hereafter
the Treaty). Together the NCAs and the Commission form
a network of public authorities: they act in the public
interest and cooperate closely in order to protect
competition. The network is a forum for discussion and
cooperation in the application and enforcement of EC
competition policy. It provides a framework for the cooperation
of European competition authorities in cases where Articles 81 and 82
of the Treaty are applied and is the
basis for the creation and maintenance of a common
competition culture in Europe. The network is called
European Competition Network (ECN).
It hence is a forum of discussion similar to the ICN. This is lobbying. Different national
bodies are in charge of competition law. This has become important/relevant within the
very last years, since competition law is being implemented by more or less formal/
independent national authorities. From a mixed set of authorities, problems of
coordination can most certainly arise.
Some examples (just for reading) of problems which may arise:
10. It follows that a single NCA is usually well placed to deal
with agreements or practices that substantially affect
competition mainly within its territory.
Example 1: Undertakings situated in Member State A are
involved in a price fixing cartel on products that are mainly
sold in Member State A.
The NCA in A is well placed to deal with the case.
11. Furthermore single action of an NCA might also be appropriate
where, although more than one NCA can be
regarded as well placed, the action of a single NCA is
sufficient to bring the entire infringement to an end.
Example 2: Two undertakings have set up a joint venture in
Member State A. The joint venture provides services in
Member States A and B and gives rise to a competition
problem. A cease-and-desist order is considered to be
sufficient to deal with the case effectively because it can
bring an end to the entire infringement. Evidence is located
mainly at the offices of the joint venture in Member State A.

The NCAs in A and B are both well placed to deal with the
case but single action by the NCA in A would be sufficient
and more efficient than single action by NCA in B or
parallel action by both NCAs.
12. Parallel action by two or three NCAs may be appropriate
where an agreement or practice has substantial effects on
competition mainly in their respective territories and the
action of only one NCA would not be sufficient to bring
the entire infringement to an end and/or to sanction it
adequately.
Example 3: Two undertakings agree on a market sharing
agreement, restricting the activity of the company located in
Member State A to Member State A and the activity of the
company located in Member State B to Member State B.
The NCAs in A and B are well placed to deal with the case
in parallel, each one for its respective territory.
Conclusions: Regulation needs to be regarded as one of the limits to competition law.
Usually the intervening authority is prevailing. Another limit to competition law, existing
since the nineties, is the need for exclusive rights for both social (quality, public service)
and economic (natural monopolies, even after introduction of competition) reasons.
We learned that we can restrict the notion of exclusive rights to a minimum, just like in
Corbeau. It should be limited to such resources which are scares, such as in the railway
case. We then focused on the limits of competition discipline in different legal orders. The
ICN provides some info about international relations among competition law, whereas the
ECN is something similar on European (EEA) level.

Definition of the relevant market

The next cases and documents we are going to analyze (United Brand, Continental,
Commissions notice) deal with the definition of the relevant market.
One case is the leader case: Banana-Chiquita. The other one is Continental case that is
important for historical reasons. Continental case is important also because there is a
particularity: at that time there wasnt the merger regulation to refer to, so Continental
case gives a look on how the Commission introduced the first elements of EU competition
policy, especially on abuse of dominant position.
The first part of our course, competition law (the second is regulation), deals with one
ofinstruments of market-integration. It is regarded as a necessary tool in building the
single market. Competition law somehow prevents companies from setting their own
rules and behavior, which in many cases could be considered unfair under a competitive
perspective. When we talk about completion law we are referring to different possible
types of unfairness: either single undertakings or a trend within a single member state to
act in a protectionist manner, thus favoring the activity of one business rather than
another.
Competition is mainly conceived an instrument for creating the single market, it should
be considered as a neutral instrument. In Italy, we find it at the beginning of our antitrust
history. We do not have a very long antitrust tradition.
Also, in intervening through competition instruments, many other aims can be achieved,
for instance making a specific sector stronger. Also in the trend which we examined in EU
institutions, we can detect sort of an interventionist trend in a or specific to a certain aim
or sector. Who says that competition should be completely neutral, prefers the market
oriented approach. The alternative approach, is the structural one, that refers to certain
industries or sectors, economic areas. In most cases, if we have to look for some kind of
interventions other than the pure neutral instruments of competition, we find more useful
information in the procedural for the definition of relevant market.
Everything starts in understanding which market we are talking about. Defining the
relevant market is the beginning of any antitrust investigation, even structurally this
is the first step: which market are we talking about?
Strong divergences can be found in the fact that sometimes a market perimeter is defined
through economic tools or more subjective tools like consumer preferences etc. However,
the choice of a specific instrument for defining the relevant market, is not neutral
towards the result. Usually, the more the instrument is the economic one, the more the
definition of the relevant market appears to be neutral (some do not agree). From a
certain year onward, for answering to criticism which were raised against its decision, the
commission decided to issue a notice.
Theres only one solution (for the definition of relevant market) only if we apply the
purely economic perspective, but the more other aspects are included, the more a
specific market might be favored.

Over the years, whatever method the Commission used to apply, they always got to a
narrow market-definition (commission always adopted decision that sow markets very
narrowed). In this way, since the market is narrowly defined, each firm possesses a larger
share of it and it is easier to assess the dominant position. So a narrow definition means
a better and easier control for the commission.
On the contrary, undertakings will be prone to prove the opposite: a larger relevant
market. So here its the problemdifferent interpretation.
The competition authority should be impartial in the adoption of the right instruments.
This ambiguity has been widespread across Europe. This led to another consequence:
once in front of the ECJ, we find it becoming the final referee (arbiter) for what is the
actual relevant market. This judgment is not about procedural aspects, but perhaps
rather about technical opinions. It may hence happen where the divergence in
interpretation in economic analysis-tools have been strong when defining the relevant
market.
The ambiguity is that commission uses a distorted vision in order to narrow definition of
the market, and the real problem is that sometimes we have different definitions in
similar cases. When this happens it means that a structural approach is chosen in order
to favor a specific sector, even if it should be better to adopt a market oriented approach.
The antitrust should be neutral (market oriented approach). Commission is not a
protections actor, but there can be divergences in interpretation. These differences can
be explained with the hidden aim to protect a specific sector.
The commission adopted the notice to clarify this ambiguity, and to defend itself from
the criticism. When the Commission issue a notice, it is done for granting a reason to the
case law, the methodology used. We can find all the steps the Commission has followed
in order to define the relevant market.

UNITED BRANDS (Chiquita) VS. COMMISSION

FACTS
The "United Brands Company" (hereinafter referred to as "UBC") of New York, was formed
in 1970. UBC is at the present time the largest group on the world banana market and
accounted for 35% of world exports in 1974. Its European subsidiary, United Brands
Continental B.V. (hereinafter eferred to as "UB"), whose registered office is in Rotterdam,
is responsible for co-ordinating banana sales in all the Member States of the EEC.
On 19 March 1975 the Commission decided, pursuant to Article 3 (1) of Regulation No
17/62 of 6 February 1962, to initiate a procedure for infringement of Article 86 of the
EEC Treaty against UBC following complaints made to it by other competitors.
On 11 April 1975 the Commission notified UBC that in its opinion it was engaging in an
abuse of a dominant Position.
DISCUSSION
This case deals with an application for annulment of a Commissions decision, which
stated that banana trade, in the way in which it was practiced by United Brands, violated
what is today art. 102 TFEU (ex art 86). Three behaviors were contested:
1. Different conditions being applied to equivalent transactions. ( charged its
distributor/ripeners in the various Member States prices which differed
considerably, without any objective justification, for bananas of the same quality,
even though the conditions of the market were to all intent and purposes the
same;
- applied to its distributor/ripeners differing prices, the difference
sometimes amounting to 138%);

2. Imposing that certain retailers didnt have to sell their products at certain times.
( required its distributor/ripeners not to sell bananas while still green);

3. Refusing to sell products to certain companies. (refused to supply the Danish

firm Olesen with bananas of the Chiquita brand on the ground that this
undertaking had taken part in an advertising campaign for bananas of a competing
brand). Remember this part of refusal to supply with discrimination because it will
come back in other cases.
Every book citing this case, refers to it as the leading case when defining the relevant
market.
In order to explain the facts of this case the Commission begins by describing the
structure of the banana market viewed as a whole and then describes the position and
conduct of UB and its subsidiary on this market.

10 - In order to determine whether UBC has a dominant position on the banana market
it is necessary to define this market both from the standpoint of the product and from
the geographic point of view.
11 - The opportunities for competition under Article 86 of the Treaty must be considered
having regard to the particular features of the product in question and with reference to a
clearly defined geographic area in which it is marketed and where the conditions of
competition are sufficiently homogeneous for the effect of the economic power of the
undertaking concerned to be able to be evaluated.
Before assessing dominance and abuse of dominance, we have to define the relevant
market, which is highly controversial. The main factors which help us in defining the
relevant market are: geographical factors and product prospects (that is to say demand &
supply side substitability). In this case we deal with consumer preferences and
geographical references.
The Commission states that bananas are a special product which doesnt have direct
substitutability, whereas the argument provided by United Brands is that it simply
belongs to the larger fruit market. How can someone assess whether banana-eaters
might be interested in other types of fruit? (Even the period of the year is important
because in summer there is more variety of fruits).
Price is one factor that is used to answer to the previous question. Also SSNIP tests
might be useful: they have been introduced in order to give more objective content to the
relevant market definition. In general, we look at prices and try to see whether there has
been a price increase compared to other fruit.
Another profile, a timing profile, is to see whether this only happens in certain periods of
the year. Market is different from period to period. Definition of relevant market takes
into account even future prospective. Even the mergers are analyzed taking in
consideration what can happen in the future.
18 - The applicant concludes from these findings that bananas and other fresh fruit
form only one market and that UBC's operations should have been examined in this
context for the purpose of any application of Article 86 of the Treaty.
19 - The Commission maintains that there is a demand for bananas which is distinct
from the demand for other fresh fruit especially as the banana is a very important part of
the diet of certain sections of the community.
Preferences are difficult to be read in dataset. According to the supply-side
substitutability, according to the Commission the product was available all-year long,
whereas according to United Brands, being in competition with other products at certain
times, it was better to keep it from marketing.
Certain countries of Europe have been considered competitive markets, whereas in
others, such as Italy, there was a state monopoly. Under a geographical perspective,
around the community territory, there isnt that much of a difference. The commission
included six countries out of nine in the geographical market, excluding Italy, France and

UK (6 out of 9 of EEC). Here the definition is given by regulation, namely legal conditions
which constrained economy: a certain form of protectionism.
36 - The Commission has taken the Federal Republic of Germany, Denmark, Ireland, the
Netherlands and the BLEU as the geographic market and it is in respect of this market
that it is necessary to consider whether UBC has the power to hinder effective
competition.
38 - The other Member States -of the Community (France, Italy, the United Kingdom)
must however be excluded from this geographic definition of the market notwithstanding
the significant presence of UBC in these States, because of the special circumstances
relating to import arrangements and trading conditions and the fact that bananas of
various types and origin are sold there.
There were countries where there was a specific form of protectionism. U.K. was excluded
because there was an agreement with old colonies it enjoys "Commonwealth preferences"
system,. It wasnt the moment for , it wasnt the task of, the Commission to fight
protectionism: it was considering the regulatory framework as given for granted. Since
there is no competition we dont talk about that part of the market. For this reason we
talk about six countries out of nine. In other situations, the regulator will command the
erosion of certain state monopolies.
57 - It follows from all these considerations that the geographic market as determined
by the Commission which constitutes a substantial part of the common market must be
regarded as the relevant market for the purpose of determining whether the applicant
may be in a dominant position. Bananas are a product of agriculture, and the European
policy of agriculture is essential.

Most of competition-arousing problems stem from the agricultural field.

Todays economy is clearly not based on agriculture, but still most
problems in competition stem from this field, both in WTO and the EU.
Milk quotas were another big issue: should someone buy spare products
in order to attain more favorable prices?

The applicant was challenging the Commissions definition of the relevant market:
12 - As far as the product market is concerned it is first of all necessary to ascertain
whether, as the applicant maintains, bananas are an integral part of the fresh fruit
market, because they are reasonably interchangeable by consumers with other kinds of
fresh fruit such as apples, oranges, grapes, peaches, strawberries, etc. or whether the
relevant market consists solely of the banana market which includes both branded
bananas and unlabelled bananas and is a market sufficiently homogeneous and distinct
from the market of other fresh fruit.
13 - The applicant submits in support of its argument that bananas compete with other
fresh fruit in the same shops, on the same shelves, at prices which can be compared,
satisfying the same needs: consumption as a dessert or between meal (according to the
applicant there is no difference for consumers between banans and other fruits.
Approach of the Court:

The ECJ starts with economic evidence: using statistics and

studies by the Food and Agriculture Organization (FAO). The SSNIP
test wasnt fully developed at the time of the case These are
predictable factors.

The court starts using economics evidence, but then it interprets

them, so it uses non-predictable factors.

Finally, the Court uses consumer preferences in order to define

the relevant market. This is a much less specific and unscientific
approach.

31 - The banana has certain characteristics, appearance, taste, softness, seedlessness,

easy handling, a constant level of production which enable it to satisfy the constant needs
of an important section of the population consisting of the very young, the old and the
sick.

34 - It follows from all these considerations that a very large number of consumers
having a constant need for bananas are not noticeably or even appreciably enticed away
from the consumption of this product by the arrival of other fresh fruit on the market and
that even the personal peak periods only affect it for a limited period of time and to a
very limited extent from the point of view of substitutability.

35 - Consequently the banana market is a market which is sufficiently distinct from the
other fresh fruit markets.
The main criticism on this case is that economic evidence was put aside in favor of very
subjective evaluation. The risk is inconsistency of market-definition.
For instance, the merger between Nestl and Perrier stressed comparisons between
bottled water and other beverages such as tea, obviously depending on the geographical
market which we are referring to. In all these cases, the definition relied on unpredictable
consumer preferences, putting firms in conditions of uncertainty.

CONTINENTAL CAN VS COMMISSION

FACTS

Continental Can Company Inc. (Continental) of New York (USA), is a company

manufacturing metal packages, packaging materials of paper and plastic and machines
for manufacturing.
On 16 February 1970, it was agreed that Continental would set up in Delaware (USA) a
company (subsequently called Europemballage Corporation) to which it would transfer its
interests in SLW (Schmalbach-Lubeca-Werke AG );
During the same year, Continental contemplated the formation, with The Metal Box
Company Ltd (MB) of London, of a European holding company for packaging, in which the
licensees of Continental in the Netherlands and in France, Thomassen & Drijver-Verblifa
N.V (TDV) would be invited to participate.
On 8 April 1970, Europemballage carried out the purchase of the shares and debentures
of TDV offered up to that date, thus bringing the initial share of Continental in TDV to 91.
07 %.
On 9 April 1970, the Commission decided to open of its own motion a procedure against
Continental and its subsidiary Europemballage concerning the acquisition by the latter of
the majority of the shares in TDV.
It is found that Continental Can Company, which holds through the medium of its
subsidiary, Schmalbach-Lubeca-Werke AG of Brunswick, a dominant position over a
substantial part of the Common Market on the market for light packaging for preserved
food, has abused this dominant position by the purchase made in April 1970 by its
subsidiary Europemballage Corporation of approximately 80 % of the shares of the Dutch
undertaking Thomassen & Drijver-Verblifa N.V.. This purchase has had the effect of
practically eliminating competition in the above mentioned packaging products over
substantial part of the Common Market.

DISCUSSION
Europemballage was not Continental Can, but was a subsidiary. What are the pros and
cons of considering the company independently or as the holding? Usually the acquired
company is considered jointly with the mother company in order to subject it to
competition/antitrust law.

An undertaking with legal personality performs its activities legally independently,

however, on a company level, direction is probably imposed by the top. Even if a
company is abroad it can be subject to European law. If it werent like that many
companies would separate all the time to avoid problems with antitrust.

The origin of real antitrust draws back to a contract between a trustee

and other parties; performed activity is referable to the trust itself,
without any formal arrangement. The wider meaning of competition and
protection of the market was added later on. This way, a lot of different
legal implications were de facto avoided.

Is legal personality sufficient to say that we are talking about different subjects? From a
legal perspective, it usually would be. However, in this case we need to consider the
whole company. Even if you have legal personality but yoa are a subsidiary yau can be
involved in the facts of your mother company.
14 - The applicants argue that according to the general principles of international law,
Continental, as an enterprise with its registered office outside the Common Market, is
neither within the administrative competence of the Commission nor under the
jurisdiction of the Court of Justice. The Com- mission, it is argued, therefore has no
competence to promulgate the contested decision with regard to Continental and to
direct to it the instruction ontained in Article 2 of that decision. Moreover, the illegal
behaviour against which the Commission was proceeding, should not be directly
attributed to Continental, but to Europemballage.
Another (negative) aspect is the one through which we have the ECJ ruling, in contrast
with the Commissions decision. We are now working on competition law, however, at EU
level, the main problems arise from administrative procedures, establishing fines,
penalties and so on.

The ECJ ruled that the Commission didnt succeed at correctly defining the relevant
market, in defining each canning market for different foodstuffs as a different market
(fish cans, meat cans etc.). The canning industry should be considered as a single
relevant market. Which are the factors which led to defining separate canning markets?
This is also relevant. There has been no actual explanation by the Commission on this
matter. These must hence be considered separately. More explications and clarifications
are needed.

34 - Besides, there are in the decision itself indications which make one doubt whether
the three markets are to be considered separately from other markets for light metal
containers, indications which rather lead one to conclude that they are parts of a larger
market. [..] that the production of metal cans for meat and fish cannot be considered
separately from the production of metal cans for other purposes and that, when
considering the production of metal closures, crown corks must not be left out.

33 - In this context recitals Nos 5 to 7 of the second part of the decision deal in turn with
a 'market for light containers for canned meat products', a market for light containers for
canned seafood', and a 'market for metal closures for the food packing industry, other
than crown corks', all allegedly dominated by SLW and in which the disputed merger
threatens to eliminate competition. The decision does not, however, give any details of
how these three markets differ from each other, and must therefore be considered
separately. Similarly, nothing is said about how these three markets differ from the
general market for light metal containers, namely the market for metal containers for
fruit and vegetables, condensed milk, olive oil, fruit juices and chemico-technical
products. In order to be regarded as constituting a distinct market, the products in
question must be individualized, not only by the mere fact that they are used for packing
certain products, but by particular characteristics of production which make them
specificially suitable for this purpose. Consequently, a dominant position on the market
for light metal containers for meat and fish cannot be decisive, as long as it has not been
proved that competitors from other sectors of the market for light metal containers are
not in a position to enter this market, by a simple adaptation, with sufficient strength to
create a serious counterweight.
The commisiion has to explain why you considerd the three markets different from the
others. Demand and supply side substitutability and geographical dimensions need to be
assessed in order to define the relevant market. How far can other competitors compete
by entering the market, is also relevant. The incumbent or other factors might provide
barriers to entry.
QUICK SUM UP:
The definition of the relevant a market is important to understand if there is an abuse of
dominant position or not, but defining relevant market is quite difficult. We can use three
main tools to define a market.
-

Supply side substitutability: it os referd to the competitors, how far can really
others compete potentially with an undertaking, which are the real possibilities for
thirds to compete in that markets (Barriers to entry, organizational and
infranstruction needs and so on)

Demand Side substitutability: prospects of consumers

Geographical factor: it makes reference to transport costs, but also to national

technical and juridical standard, legal framework. Also national preferences are
taken into account.

When criteria are vaguely defined, usually the ECJ is the final referee to the case.
Commission receind accuses for the definition of market in many cases. ECJ uses these
criteria: Economic evidence and consumer perceptions

COMMISSIONS NOTICE ON THE DEFINITION OF THE RELEVANT

MARKET

The notice is an interpretation test in order to facilitate the comprehension of some

norms. Is not legally binding, in fact, even if the Commission acts differently from the
notice it doesnt have to motivate its behavior.
This Notice it is sort of a guideline for the Commissions definition of the relevant
market. Moreover, after all criticism, the Commission simply claimed increased
transparency of its policy. But Commission didnt change it attitude

This notice and decision are strongly economically-oriented. One problem: being
non-binding, the Notice isnt subject to judicial review (principle of legality).
There was no official consultation in preparing the Notice (legislation with less
safeguards), but participation is important. This is a legislation is without safeguards. The
fact that this isnt binding, also puts the ECJ in a more difficult position.

The following paragraphs to 13 define the SSNIP test and supply-side substitutability:

Geographic dimension:

Gathering evidence in business premises:

PD:

Additional considerations (!):

On the Abuse of Dominant Position

Art 102 TFEU regulates abuse of dominant position, in the internal market or in a
substantial part of it. It may regard one or more undertakings. The article refers to a
dominant position, which is evaluated on the basis of which market we are talking about,
namely mainly an economic notion, but also regulated by ECJ case-law. We have already
discussed the Commission Notice.
A dominant position in the market should refer to a strong market power, hence not a
synonym of monopoly. The concept of dominance is more frequent than a monopoly,
which only arises in natural monopoly or state-granted special rights. Dominance is a
much wider concept, meaning that an undertaking has the power to undermine the
competitive process. Hence, the undertaking is able to harm both consumers and
competitors.
When we talk about dominance we usually make reference to market share or other
factors. Market share is not only determined by the quota of the market, but also by
other factors like entry barriers (legal, economic or technical). Hence, also a smaller
market share could constitute a dominance within a specific market.
A barrier for entry can also be intellectual rights like in the Microsoft case and others,
which makes it difficult for other undertakings to penetrate the market.
Supply-side substitutability is also another instrument, it is used to define the relevant
market: other competitors might enter the market.
Moreover, dominance is not per se prohibited, at least not in our legal order. If it is
gained by legal purposes, instruments and efficiency, it is not against the law. We might
have a legal order in which dominance is prohibited in itself, for instance in the US one
undertaking acquiring a dominant position might be obliged to divide itself into smaller
companies (ex. AT&T for telephones).
So it is prohibited the abuse of dominant position and not the dominant position itself .
But dominant undertakings must perform in a responsible way. A regime of special

responsibility means that also behaviors which can be accepted by companies which do
not have a dominant position, might be unlawful for undertakings who do have a
preeminent market share.
Another key concept in our preliminary analysis are two types of abuse:
1.

Exploitative behavior, more related

towards consumers. Affects more
consumers.

2.

Exclusionary behavior, affecting most

of all other competitors.

Both have an effect on the market in general, hence it isnt a meaningful distinction in
terms of effects, but only in descriptive terms.
Art 102 TFEU talks about different ways of abusing a dominant position:Article 102
(ex Article 82 TEC)
Any abuse by one or more undertakings of a dominant position within the internal
market or in a substantial part of it shall be prohibited as incompatible with the
internal market in so far as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(a) directly or indirectly imposing unfair purchase or selling prices or other unfair
trading conditions;
(b) limiting production, markets or technical development to the prejudice of
consumers;
(c) applying dissimilar conditions to equivalent transactions with other trading
parties, thereby placing them at a competitive disadvantage;
(d) making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.

It is not an exclusive list. It provides examples, but we could integrate it with any other
abusive behavior, for instance in Continental Can mergers had not yet been regulated.
We will also analyze two cases that represent abusive behaviors developed through
pricing mechanisms (British Airways and Azko)

COMMISSION VS MICROSOFT
FACTS
Microsoft Corp., a company established in Redmond, Washington (United States), designs,
develops and markets a wide variety of software products for different kinds of
computing devices. Those software products include, in particular, operating systems for
client personal computers (client PCs'), operating systems for work group servers and
streaming media players. Microsoft also provides technical assistance for its various
products.
On 15 September 1998, Mr Green, a Vice-President of Sun Microsystems, Inc. ('Sun'), a
company established in Palo Alto, California (United States) which supplies, in particular,
servers and server operating systems, wrote to Mr Maritz, a Vice-President of Microsoft,
as follows:
'We are writing to you to request that Microsoft provide [Sun] with the complete
information required to allow Sun to provide native support for COM objects on Solaris.
We also request that Microsoft provide [Sun] with the complete information required to
allow [Sun] to provide native support for the complete set of Active Directory technologies
on Solaris.
By letter of 6 October 1998, Mr Maritz replied to the letter of 15 September 1998. In his
letter, he said:
[..]Regarding the Active Directory, we have no plans to "port" [it] to Solaris. However, to
satisfy our mutual customers there are many methods with varying levels of functionality
in order to interoperate with the Active Directory. For example, you can use the standard
LDAP to access the Windows NT Server Active Directory from Solaris.
On 10 December 1998, Sun lodged a complaint with the Commission
In the contested decision, the Commission finds that Microsoft infringed Article 82 EC
and Article 54 of the Agreement on the European Economic Area (EEA) by twice abusing a
dominant position.
The Commission first identifies three separate worldwide product markets and considers
that Microsoft had a dominant position on two of them. It then finds that Microsoft had
engaged in two kinds of abusive conduct. As a result it imposes a fine and a number of
remedies on Microsoft.
First of all, if we went to the Commission now, we wouldnt have the same results, since
once Microsoft was in a dominant position, whereas today Apple is a larger competitor
than Microsoft. Also the size of the European market is relevant.

One could also wonder whether the two

different alternatives actually belong to

the same market in terms of personal

satisfaction and price
Microsoft was in a dominant position. The (very long) case can be summed up into two
main questions:
1.

Microsoft refused to supply

integrate interoperability.

2.

Tying products.

and

Our investigation will focus on these two elements. The refusal to supply was motivated
by Microsoft based on their copyright. The effect was preventing competitors from
entering the market.
The copyright issue is big, especially when dealing with high-tech and scientific products.
What is behind this is the necessity to protect the copyright. A copyright is a discipline
which provides an added value to the innovating company. The discipline of copyrights
covers all new inventions, with the aim of protecting products and investments,
stimulating R&D investments assuring a sufficient revenue through all the investors that
put money in the activity. There is the need to be a good balance within competition
functioning and copyright protection.
Giuliano Amato, former president of the Italian antitrust authority, thought itd be fair to
recognize intellectual property to Microsoft, hence protecting their result, but at the same
time stimulating them to find new solutions: probably today without Microsoft we
wouldnt have Apple as an active competitor. Competition is not harmful for property
rights, sometimes it helps competitors to find new solution to innovate and win the
market.
This is a controversial issue, which can be seen as a positive factor in the development of
competition and R&D stimulation. One could also say that the Microsoft decline started
after this case. So, completion is good or bad for undertakings? It depends.

DISCUSSION
Three arguments brought by Microsoft:
1. Wrong assessment of interoperability
2. Wrong interpretation of copyright law
3. Broken principle of proportionality
An example: we are in the broad category of refusal to supply, which usually contains a
big category of behaviors, namely those related to the essential facilities doctrine. A
first abusive behavior is when a company has the control (exclusive) of an essential
facility, which, despite of its market share, obliges to supply it to other competitors. Only
a small number of facilities could be requested by one or more firms.

Deutsche Telekoms behavior was slightly different but could be compared to this
case.

Theres a different treatment of competitors owning essential facilities to others. This is

the reason why different phone operators charge different charges (higher) when calling
from one to another user belonging to different companies.
In Microsoft we are talking about a producer which without a doubt possesses an
essential facility as a result of a specific activity, namely R&D investments. It hence makes
sense that the access to this resource is limited. In which kind of conditions do we find
the right balance between active competition and copyright?
Case law:
Commercial Solvents, IMS Health and Magill.
From the case:
331- It follows from the case-law cited above that the refusal by an undertaking
holding a dominant position to license a third party to use a product covered by an
intellectual property right cannot in itself constitute an abuse of a dominant position
within the meaning of Article 82 EC. It is only in exceptional circumstances that the
exercise of the exclusive right by the owner of the intellectual property right may give
rise to such an abuse.
This is the core of this decision.
Play attention on the fact that what the CFI judges can try to challenge is whether the
procedure has been followed in an orthodox way under an administrative point of view.
This is a big administrative procedure. The judge has just to see if the rules were
respected, toy do not review the decision itself, you just check if that decision could be
taken.
The Commission could be judged on the method used in taken the decision.
What did Microsoft said against this solution? It said that its technology was not
indispensable and that there were other competitors.According to Microsoft the
Commission failed in the assessment. It failed the definition of the product of the market.
Microsoft failed in demonstrating the errors of the commission.
The CFI refused to adopt a new definition of the market, claiming it involves complex
economic assessment. It needs to be assessed based on accurate, reliable and coherent
evidence. The CFI will not proceed to a new consideration of economic analysis. It will
only analyze whether the Commission respected those criteria.
332 - It also follows from that case-law that the following circumstances, in particular,
must be considered to be exceptional:
in the first place, the refusal relates to a product or service indispensable to the
exercise of a particular activity on a neighbouring market;

 in the second place, the refusal is of such a kind as to exclude any effective
competition on that neighbouring market; ( when we talk about property rights, a refusal
is considered as capable to exclude completely competition in the market)
in the third place, the refusal prevents the appearance of a new product for which
there is potential consumer demand

We say that the judge has a limited power to syndicate what has been previously
assessed, in our legal framework (Italy): has the method in reaching the conclusion
been followed correctly?

CFI also stated that Microsofts competitors were few and weak. What we have so far
discussed mainly refers to the firms refusal to supply. From one day to another, a firm
may refuse to sell their products to active or potential competitors for some reason.
Refusal to supply is refusal to deal. It can be abusive (remember Chiquita case refusal to
deal to the Danish company). Refusal to deal can be considered as a barrier to entry not
only for actual, but even for potential competirors.
Example: If we consider the electronic and telecommunication market, made up by an
infrastructure and the service, the refusal to deal with certain competitors is even worse
when theres an operator working both in upstream and downstream markets. This is the
case in Rete Ferroviaria Italiana, being a different company from Trenitalia.
If you have an essential facility you have a dominant position.
The second plea in law refers to the tying agreement. This refers to subjecting the
agreement to one product to accepting to use also another product. Microsoft claimed
that it regarded Windows Media player, being included into the whole software package
and for consumers it was normal to have such software included in the package.
Consumers could object that they are worried about hidden costs in the price. Microsoft
stated that consumers didnt pay for the Media Player being included in the package.
Hence we need to focus on whether the price is justified. The CFI assessed whether the
tying and the tied products are part of two separate markets. The company might be
dominant in the tying market and use the tied product to get dominant in that market
also. (I use dominance in one market to get dominance in the other).

Ex. You are an Apple customer, buying an iPad and I provide you the choice of
tying it with an iPhone, theres no argument. If the two products are always sold
together, there is a tying agreement which might be abusive.If I oblige you to buy
an Ipad to have an IPhone is illegal.

If there are meaningful consequences with the effect of limiting competition in the tying,
theres an abusive practice being carried out.
Problem of tying agreements is for both consumers and competitors.you cannot have an
efficient solution, so price or qualities may get worst.

The CFIs conclusions were that there had been an infringement of art 102 TFEU both
under the perspective of an abusive practice concerning the tying and the refusal to
supply.
Microsoft case arose from the two next cases (Commercial solvent; Oscar Bronner)

COMMERCIAL SOLVENTS VS COMMISSION

FACTS
Commercial Solvents Corporation (CSC) is a company incorporated under the law of the
State of Maryland, having its principal office in the City and State of New York, United
States of America. The company manufactures and sells among other things products
based on nitroparaffines.
In 1962 CSC acquired a 51 % of the voting stock in Istituto Cbemioterapico ltaliano SpA
(Istituto), a company incorporated under Italian law having its principal office in Milan.
At present CSC has a 50 per cent representation in the 'Consiglio di amministrazione'
Board of Directors (5 out of 10) and in the 'Comitato Esecutivo' Executive Committee
(3 out of 6).
Until 1970 Istituto acted as a reseller of aminobutanol produced by CSC in the United
States of America. A customer of Istituto for aminobutanol was Laboratorio Chemico
Farmaceutico Giorgio Zoja SpA (Zoja), to whom Istituto began selling the product in 1966.
At the end of 1970 Istituto informed CSC that Zoja had placed a new order for
aminobutanol and asked whether this intermediary product could again be supplied for
resale to Zoja. CSC replied that none was available.
After further attempts to obtain supplies of aminobutanol on the world market had failed
as the search for the product inevitably led to one possible source of supply, namely CSC,
Zoja, by letter dated 8 April 1972, applied to the Commission for the institution of
proceedings against CSC and Istituto,
(Sum up of the story: It was the first case concerning refusal to supply. It regards an
American chemical company controlling an Italian chemical company. This latter refused
to supply certain chemical products to a firm of which it once was the main supplier.
Istituto Chemioterapico refused to supply ethanbutol to Zoja, which was an essential item
for Zoja. In fact, Zoja tried without success to find the same product elsewhere.)
DISCUSSION
This is the first case on refusal to supply. There is also the argument of intellectual
property right, even if the question is not raise.
If they do not supply ethanbutol they kick out from the market a competitor.
22 - Contrary to the arguments of the applicants it is in fact possible to distinguish the
market in raw material necessary for the manufacture of a product from the market on
which the product is sold. An abuse of a dominant position on the market in raw
materials may thus have effects restricting competition in the market on which the
derivatives of the raw material are sold and these effects must be taken into account in
considering the effects of an infringement, even if the market for the derivative does not
constitute a self-contained market (it does not arrive directly to consumers). The

arguments of the applicants in this respect and in consequence their request that an
expert's report on this subject be ordered are irrelevant and must be rejected.
Here we are talking about link markets.
This case is relevant because refusal to supply cases always refer to Commercial Solvents,
Magill and IMS.

OSCAR BRONNER VS MEDIAPRINT

FACTS
An organization can be an essential example in providing a service: this is almost always
true. For instance, in the postal service the network externalities of delivery service and
so on makes the difference.
We have a newspaper company and one of the competitors who also possesses a delivery
service. Oscar Bronner wants to use Mediaprints delivery service, which didnt agree.
Bronner argues that the delivery service was essential in order to carry on its activity.
Mediaprint replied that the home post delivery scheme required great administrative and
financial investments. Having dominat postion doesnt mean taking care of competitors.
DISCUSSION
(Remember that refusal to supply, expecially dicriminatoion in refusal to supply is also in
Banana case)
Oscar Bronner claimed discrimination: another company was accepted in the delivery net.
However, Mediaprint claimed that the relationship between the two companies was
different. Discrimination is another problem behind refusal to supply.
Concluding, the Court ruled that there was a dominant position by Mediaprint but no
abuse in refusing to supply to Bronner:
45 - It should be emphasised in that respect that, in order to demonstrate that the
creation of such a system is not a realistic potential alternative and that access to the
existing system is therefore indispensable, it is not enough to argue that it is not
economically viable by reason of the small circulation of the daily newspaper or
newspapers to be distributed.
46 - For such access to be capable of being regarded as indispensable, it would be
necessary at the very least to establish, as the Advocate General has pointed out at point
68 of his Opinion, that it is not economically viable to create a second home delivery
scheme for the distribution of daily newspapers with a circulation comparable to that of
the daily newspapers distributed by the existing scheme.
47 - In the light of the foregoing considerations, the answer to the first question must
be that the refusal by a press undertaking which holds a very large share of the daily
newspaper market in a Member State and operates the only nationwide newspaper homedelivery scheme in that Member State to allow the publisher of a rival newspaper, which
by reason of its small circulation is unable either alone or in cooperation with other

publishers to set up and operate its own home-delivery scheme in economically

reasonable conditions, to have access to that scheme for appropriate remuneration does
not constitute abuse of a dominant position within the meaning of Article 86 of the
Treaty.

BRITISH AIRWAYS VS COMMISSION

FACTS
We see BA on one side and Virgin on the other.
We are talking about the agreement made by BA with travel agent for the distribution
stage.
3 - BA, which is the largest United Kingdom airline, concluded agreements with
travel agents established in the United Kingdom and accredited by the
International Air Transport Association (IATA), which included not only a basic
commission system for sales by those agents of tickets on BA flights ('BA tickets')
but also three distinct systems of financial incentives: 'marketing agreements',
'global agreements', and, subsequently, a 'performance reward scheme', applicable
from 1 January 1998.
4 - The marketing agreements enabled certain travel agents, namely those with at least
GBP 500 000 in annual sales of BA tickets, to receive payments in addition to their basic
commission, in particular a performance reward calculated on a sliding scale []BA is the
largest British airline. It concluded agreements granting strong financial incentives and
facilitations to travel agents selling a certain amount of BA tickets. Virgin airways directed
a complaint to the Commission to this regard. BA renewed its compensation scheme and
Virgin sent a new complaint to the Commssion. The Commission found that BA was
abusing its dominant position and issued the contested decision. BA presented several
pleas in law. In the appeal judgment only the alleged abuse of dominant position is at
stake.
The CFI stated that in the case the abuse of dominant position consisted in applying
dissimilar conditions to equivalent transactions, seriously limiting the competition among
travel agents who sold products of different airlines. In addition, the CFI found that such
fidelity-building incentives had an exclusionary effect on competition. BA claimed its
competitors could have established a similar bonus scheme, but the CFI stated they
didnt have the financial means to do so. The CFI concluded that BAs bonus schemes
were not economically justifiable and had the only purpose of exponentially increasing
(which they did) BAs customer basis.
Hence BA now seeks that:

The contested decision be annulled.

The fine be annulled or reduced.

The Commission seeks that:

The application be dismissed

Virgin intervenes.

This is an appeal judgment. In 2003, BA applied to the CFI for the annulment of a
Commissions decision. The application was rejected. Now, BA applies to the ECJ for
reversing the decision and consequent 6.8 million fine for abuse of dominant position
in the air transport market. Virgin is a competitor of British Airways, acting in support of
the Commission.
DISCUSSION
The behavior under scrutiny are agreements with travel agents, favoring the sale of BAs
tickets. These are agreements for distribution. We are not properly talking about
agreements, but about an abuse of dominant position: a system of reward scheme and
distribution which is considered abusive. What is found abusive in the special behavior of
BA, as many times happens have the issue of being based on rebates.
On one side theres the discriminatory effect of the measures, on the other side the
exclusionary behavior. These agreements are discriminatory towards travel agents but
also towards other competitors.
Here we are talking about a reward scheme for travel agents, thus other airlines might
find more difficulties in competing with the dominant firm since they cannot develop such
agreements. Airlines have been long considered a public utility. Usually in the air
transport market there only was one national company. Active competition was
introduced only later on in the air transport sector.
Flying from Rome to Paris, only Alitalia and Air France had available flights, since
they were the flagship companies of the respective countries. Other airways could
stop in Paris only on longer flights, for instance from NY to Bangkok.
This system collapsed after Curbeau vs. Regie de poste, granting rights for essential
services also to other competitors (exclusive rights were limited).
The problem connected to entering a liberalized market might be several. In this specific
way, slots (places in the airport) are relevant: they connect the landing/departing area to
the interior of the airport. The usage of the airport at a certain time of the day is
connected to the slot issue. For instance, low-cost airlines only find available slots at
terrible times.
The electronic mechanism for ticket booking used a unified system, in order to check
seat availability. When considering all the problems a system like this might create, it is
also referred to the technical side. Some travel agents ( in the case) might not be able to
sell non-BA tickets just as easily. This is a barrier to entry. Nowadays, examining the
market we would see that most tickets are sold through the internet.
Could we imagine a reward scheme for consumers? Developing fidelity with consumers is
possible, but not necessarily abusive (Each company could do something like that). The
kind of remuneration given to BAs travel agents was at stake.
Relay attention on the profile that many times those kind of agreements are considered
unlawfully because they are keeping out the competitors from the market. The two points
to consider are the discriminatory effect and on the other side the exclusionary effect.

We have to look the cost: BA they brought many considerations and what we can say is
that the exclusive and discriminatory effect are related to the price for the service. If it is
lower than what necessary to have profit the strategy pricing is considerate abusive.
So, when theres no profit probably the behavior or the agreement are abusive.
In fact the prices were the issue in the BA case. Competition is a good way in regulating
economy when dealing with prices. There must be an economic justification in the bonus
scheme. The exclusionary and discriminatory component in this case is detected through
prices. Here the relationship was between BA and its travel agents. BA brought many
considerations to the case. The exclusionary and discriminatory effect is proved by the
fact that prices result lower than what is necessary for BA in order to have profit. The big
pocket theory tells us that a larger incumbent in the firm can dump prices and supply
until smaller competitors are forced to exit the market.
Another factor in the predatory conduct, which operate in the mechanism of price, is the
time and moreover the long or short term in which the pricing is related to.
The period of time is relevant: for how long is the competitor allowed to survive by the
incumbents behavior in economic terms?
BA tried to attract travel agents, thus stimulating demand of their own tickets. The
reward/bonus scheme was considered abusive (market and global agreements were not
considered abusive). The practice of rationalizing (second agreement) distribution was
not considered abusive. Some travel agents were selected because they were favoring
BAs ticket policy.
The compensation scheme would apply in economic terms to consumers as well: are low
prices justified by economic efficiency or predation? This is the important point.
In any case one deals with competition we need to consider the relevant market, the
addressee and their market power.
The same behaviors toward consumers is considered legal if you have this behavior with
agencies, theres a problem.
The European Founding Fathers believed in a market with fair prices. When an incumbent
firm establishes unreasonably low prices with the sole purpose of eliminating
competitors, law needs to limit economics. Quality and efficiency may lead to a dominant
position, whereas other practices such as predation and mergers which artificially allow
to reach such position are prohibited.
84 - Discounts or bonuses granted to its co-contractors by an undertaking in a
dominant position are not necessarily an abuse and therefore prohibited by Article
82 EC. According to consistent case-law, only discounts or bonuses which are not
based on any economic counterpart to justify them must be regarded as an abuse

AKZO VS COMMISSION
FACTS
Its an action for annulment. The applicant is the Danish private undertaking Akzo
Chemie BV, the defendant is the EU Commission. The object of the trial is a Commissions
decision against the private undertaking on ground of art. 106 TFEU. The Danish
company had allegedly tried to force one of its active competitors out of the market: ECS
Ltd.
1 By application lodged at the Court Registry on 5 March 1986, AKZO Chemie BV
brought an action under the second paragraph of Article 173 of the EEC Treaty for
the annulment of Commission Decision 85/609/EEC of 14 December 1985 relating
to a proceeding under Article 86 of the EEC Treaty (IV/30698 ECS/AKZO
Chemie, Official Journal 1985 L 374, p. 1).
2 By that decision the Commission found that AKZO had infringed Article 86 of the
Treaty by pursuing against a competitor, Engineering and Chemical Supplies
(Epsom and Gloucester) Ltd ('ECS'), a course of conduct intended to damage ECS's
business and/or to secure its withdrawal from the EEC organic peroxides market
(Article 1).
9 The Commission found in particular (Article 1 of the decision) that AKZO: (i) had
made direct threats to ECS at meetings in late 1979 with the aim of securing ECS's
withdrawal from the market for organic peroxides for the 'plastics' application;
The Commission found that Akzo:
directly threatened ECS to exit the market on one occasion.
Sold products to ECSs customers at unreasonably low prices, maintaining usual
prices for their own usual customers.
Applied bait prices for certain products and kept others at suspiciously low prices.
Followed an exclusionary commercial policy in systematically underbidding ECSs
prices.
And hence imposed a 10.000.000 ECU fine on Akzo.
Akzo contested the Commissions decision claiming that:

The administrative procedure has been vitiated.

It did neither occupy a dominant position in the market nor consequently

violate it.

The European Court of Justice found that:

1. FIRST PLEA: VITIATED ADMINISTRATIVE PROCEDURE

The first vice of the administrative procedure asserted by Akzo, namely the
impossibility of accessing its file, must be rejected. The undertaking had been
sufficiently informed.

The Incomplete Investigation allegedly carried out by the Commission does not
per se constitute a vice, and hence must be rejected.

Even though Akzo found that it didnt have the opportunity to make its point of
view known, with a consequent breach of the right to be heard, such claim is
unfounded and must be rejected.

2. SECOND PLEA: INFRINGEMENT OF (now) ART 102 TFEU

The definition of the relevant market carried out by the Commission as the
organic peroxides market is sensible: the plea that Akzo didnt belong to it must
be rejected.

The assessment of Akzos dominant position in the aforementioned market

carried out by the Commission is supported by evidence. The plea must be
rejected.

The elimination of competition by an undertaking through other means than

quality are considered abusive when carried out by the dominant firm in the
market. In this case, the abuse consists in predatory pricing below average
variable costs. In addition, Akzos managers threatened ECS to exit the market
but it did not use selective (lower) pricing with ECSs usual customers. Summing
up, the plea that Akzos practices had not been abusive must be rejected.

Some of the measures imposed by the Commission appear excessive with the aim
of preventing the companys abusive behavior. This part of the plea must be
accepted. One paragraph of the decision has been annulled and the fine reduced
to 7.500.000 ECU.

DISCUSSION
Akzo is a leading case with the problem of administrative procedure, and in particular
with the access to the file. all the case about the access to the file in the EU is a problem
of competition. but why? which kind of competition is related to the access to files? which
kind of problem get controversial this issue? and which are the interest besides? for
instance pepsi want to know the coca-cola formula..but here we are talking about files
that need policies of regarding and privacy. considering that they are controversial
because usually file are deviated in the administrative procedurebut the public
administration sometimes gives file to get a decision even if this file contain important
and private data. a company could ask for an access to a specific file and maybe
sometimes they have the access even if they couldnt have it. here is really controversial
because the info could damage and give confidential info about economic data that could
influence the future behavior of a given competitor

The Akzo case is a landmark for both predatory prices cases and administrative
procedures: access to file. The particular problem connected to the access to file issue in
competition matters, regards the danger of competitors accessing private information of
a given firm. Files might be covered by industrial secret/private information. Files might
be provided by other competitors to the Commission in order to get to a decision, but
usually also contain info about essential policies for the competitor providing the files.
Several paragraphs of the ruling confirm that not always files might be accessible to all
competitors, for good reason.
A Access to the file
15 - AKZO claims, firstly, that despite repeated requests it did not obtain access
to all the investigation reports drawn up by the Commission's inspectors, when
those documents could have contained evidence that might have enabled it to
defend itself and to confirm that the position it had adopted was justified. That
refusal of access to the file conflicts with the line of conduct that the Commission,
in its reports on competition policy, has declared that it intends to follow.
19 [..]The Commission's defence shows that, in adopting its decision, it took
this document into account for the purpose of determining Diaflex's production
costs.
21 - In that respect it must be held that since the reply of Steetley Chemicals was
not disclosed to AKZO, although the Commission drew conclusions from it, the
information contained in that document cannot be used in the present
proceedings..
The second point under discussion is connected to the fact there was an infringement of
the treaty, about the resistance of dominant position.
In this case theres an economic test in order to assess whether prices are compatible
with the market.
The substantial point of the decision deals with an infringement of the Treaty. Two
issues: the relevant market and the assessment of a dominant position.
The object of the trial is a Commissions decision against the private undertaking on
ground of art. 102 TFEU. The Danish company had allegedly tried to force one of its
active competitors out of the market: ECS Ltd.
64 - According to the Commission, Article 86 does not make costs the decisive
criterion for determining whether price reductions by a dominant undertaking are
abusive (point 77). Such a criterion does not take any account of the general
objectives of the EEC competition rules as defined in Article 3(f) of the Treaty and
in particular the need to prevent the impairment of an effective structure of
competition in the common market. A mechanical criterion would not give
adequate weight to the strategic aspect of price-cutting behaviour. There can be
an anti-competitive object in price-cutting whether or not the aggressor sets its
prices above or below its own costs, whatever the manner in which those costs are
understood (point 79).

65 - The exclusionary consequences of a price-cutting campaign by a dominant

producer might be so self-evident that no evidence of intention to eliminate a
competitor is necessary. On the other hand, where the low pricing could be
susceptible of several explanations, evidence of an intention to eliminate a
competitor or restrict competition might also be required to prove an infringement
(point 80).
Par 64 of the decision is relevant: Art 102 does not define costs and consequently
abusive prices. Such criterion doesnt take account of the Commissions purposes and it
cannot be a mechanical criterion. In fact, one needs to bear in mind the strategic aspect
of pricing. In fact in any decision about pricing, in general cutting is considered as good
thing because is favoring consumers, but in the general market we have to consider also
other competitors interest. So in the medium term or in a short term a decision about
costs is favor to consumers even if is harms competition, but economic concept about the
European market not consider this in a positive way in long period. So not any decision
about price or costs is considered unlawful but we have to check exclusionary or
discriminatory intention.
Par 65 states that the exclusionary consequences of price-cutting by a dominant firm
might be so evident that there needs to be no evidence of the will to eliminate a
competitor in order to condemn such conduct. Low prices can be dangerous for the
future.
Other competitors interests need to be considered since competition in itself is a value.
For the economic concept on which the EU market was based, this isnt considered
positive in the long-run, since it could even harm consumers.
It is relevant to assess whether there has been an exploitative or exclusionary behavior.
67 - In that respect, it states that the question of the lawfulness of a particular
level of prices cannot be separated from the specific market situation in which the
prices were fixed. There is no abuse if the dominant undertaking endeavours to
obtain an optimum selling-price and a positive coverage margin. A price is
optimum if the undertaking may reasonably expect that the offer of another price
or the absence of a price would produce a less favourable operating profit in the
short term. Furthermore, a coverage margin is positive if the value of the order
exceeds the sum of the variable costs.
Akzos cost discussion is considered a landmark decision in predatory pricing.
Competitors cannot be eliminated through predation but through efficiency.
Lawfulness: we have above a economic concept. We need to consider the specific market
situation. Necessity to consider the period and the quantity to decide the cost. Moreover
here we find an important aspect about the legitimization of price through all the variable
of the cost: variable cost fix cost..average variable costsand so on.
70 - It follows that Article 86 prohibits a dominant undertaking from eliminating a
competitor and thereby strengthening its position by using methods other than
those which come within the scope of competition on the basis of quality. From

that point of view, however, not all competition by means of price can be regarded
as legitimate.
71 - Prices below average variable costs (that is to say, those which vary
depending on the quantities produced) by means of which a dominant undertaking
seeks to eliminate a competitor must be regarded as abusive. []
72 - Moreover, prices below average total costs, that is to say, fixed costs plus
variable costs, but above average variable costs, must be regarded as abusive if
they are determined as part of a plan for eliminating a competitor. [..]
This is the point.
A consideration of the market structure is also of extreme interest: are there any
alternative suppliers for a given specific product?

COMMISSIONS GUIDANCE ON IMPLEMENTATION ABUSIVE

EXCLUSIONARY CONDUCT
1. Article 82 of the Treaty establishing the European Community (Article 82)
prohibits abuses of a dominant position. In accordance with the case-law, it is not
in itself illegal for an undertaking to be in a dominant position and such a
dominant undertaking is entitled to compete on the merits. However, the
undertaking concerned has a special responsibility not to allow its conduct to
impair genuine undistorted competition on the common market. Article 82 is the
legal basis for a crucial component of competition policy and its effective
enforcement helps markets to work better for the benefit of businesses and
consumers. This is particularly important in the context of the wider objective of
achieving an integrated internal market.
Some abusive practices deal with prices, others dont. We have dealt with different types
of abuses in the previous cases:
-

In United Brand we have an example of excessive prices, and we find also a

discrimination in price. We can have also a geographic discrimination.

Even rebate scheme (British Airways) is a discrimination based on prices.

Also predatory pricing (Azko case) can represent a discrimination based on

prices.

Margin squeezing, as already analyzed in Deutsche Telekom, is one particular

kind of abuse.

Microsoft refusal to license/supply. (United Brands) Bronner (to new incomers)

Refuse to license (Micrisoft must be limited to specific circumstance).

Remember also the essential facilities problems. It is important to share facilities

with other competitors. Remember that there can be some justification to refusal
to deal, for instance property rights can be a justifications

There is also problems of discrimination Porto di Genova Case: discrimination on

grounds of nationality. Football world cup

Tying agreements: in order to be considered unlawful, it needs to have to

respond to the conditions laid down in Microsoft.

Getting back to the Commissions notice, we can assess its legal nature: documents in
which the Commission is trying to explain certain of its own behaviors in favor of
transparency:

2. This document sets out the enforcement priorities that will guide the
Commission's action in applying Article 82 to exclusionary conduct by dominant

undertakings. Alongside the Commission's specific enforcement decisions, it is

intended to provide greater clarity and predictability as regards the general
framework of analysis which the Commission employs in determining whether it
should pursue cases concerning various forms of exclusionary conduct and to help
undertakings better assess whether certain behaviour is likely to result in
intervention by the Commission under Article 82.
This document is relevant for finding a sum-up of all the jurisprudence.
C. Price-based exclusionary conduct
23. The considerations in paragraphs 23 to 27 apply to pricebased exclusionary
conduct. Vigorous price competition is generally beneficial to consumers. With a
view to preventing anti-competitive foreclosure, the Commission will normally only
intervene where the conduct concerned has already been or is capable of
hampering competition from competitors which are considered to be as efficient as
the dominant undertaking (1).
24. However, the Commission recognises that in certain circumstances a less
efficient competitor may also exert a constraint which should be taken into
account when considering whether particular price-based conduct leads to anticompetitive foreclosure. The Commission will take a dynamic view of that
constraint, given that in the absence of an abusive practice such a competitor may
benefit from demand-related advantages, such as network and learning effects,
which will tend to enhance its efficiency.
The Commission is substantially making reference to its adopted or ECJ-recognized
jurisprudence. It is clear that also the Commission could come to different conclusions
than the one contained in the notice (it is not binding). We have analyzed a number of
cases on dominant position.
It is a kind of memorandum useful for the commission in order to talk about transparency
and its a good way to have all the case studies reviewed. Its really a sum up.

Restrictive Practices

Series of kind of agreements that affect competition

Article 101
1. The following shall be prohibited as incompatible with the internal market: 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
internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have
no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this Article shall be automatically
void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices, which contributes to
improving the production or distribution of goods or to promoting technical or economic
progress, while allowing consumers a fair share of the resulting benefit, and which does
not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the
attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a
substantial part of the products in question.
This article deals with:
o Agreements between undertakings, namely not agreements in the legal sense.
We usually include in this category also cases or agreements which would not
constitute a valid legal agreement such as gentlemens agreements or
memorandums of understanding. The concept of agreement needs to be
interpreted in a broad sense.

o Decisions by associations of undertakings gather both legal undertakings and

associations of lawyers and other professionals. We do not talk only about formal
legal acts but also statutes, guidelines and directives. Also an association (for
instance of lawyers) which establishes rules between its members can have the
same result of an agreement, in the sense as above.

o Concerted practices are the case where some undertakings adopt also unilaterally
some specific behaviors in a parallel way. All these kinds of agreements are
considered void (they have no real effect). When it is possible to distinguish the
unlawful part of the agreement from the rest of it, this has to be considered void.
When it is impossible to distinguish, the whole agreement is considered void. In
case of voidance, a sanction might be imposed.
Behaviors included in 101 TFEU are, more or less, the same as art. 102 TFEU: only the
origin of such behaviors is different. In case of art. 102 TFEU we have one or two
undertakings which decide to abuse a dominant position. Here instead the abuse stems
not from the position of the undertaking but from a certain parallel or not official
undertaking, or artificially derives from the decision to make an agreement among
undertakings or associations of undertakings.
There are exemptions to art. 101 related to some agreements among undertakings:

Any situation in which the agreement is efficient

The de minimis notice refers to the share of the market. In the case of no or too
little influence on the market, the agreement might be allowed even if otherwise
illegal

Hence there are exemptions for specific sectors by object (transport, defense,
agriculture), effects (efficiency of the agreements) and volume (low values of activities).
Additional notes
Remember that among agreements we have also cartels. We consider horizontal and
vertical agreements. The effect of unlawful agreements is that they can be void, and
commission can stop the action, impose a fine or a sanction.
An agreement of undertaking and its statute can be subject to the judge ofEU
Concerted practices are really difficult to investigate (Minoan, Hoechst). Therefore, in
order to establish whether a concerted practice can be adopted, we need to look at any
kind of evidence, telephone calls, dinners, meeting. Not even a real will is necessary in
order to prove that the conclusion of this kind of agreement/arrangement may have an
influence on competitors behavior (in some cases such as meetings and informal events,
a simple exchange of information can be considered an origin of concerted practices).

MECA-MEDINA VS COMMISSION (2006)

FACTS
The applicants are two professional athletes who compete in long-distance swimming,
the aquatic equivalent of the marathon.
8 In an anti-doping test carried out on 31 January 1999 during the World Cup in that
discipline at Salvador de Bahia (Brazil), where they had finished first and second
respectively, the applicants tested positive for Nandrolone. The level found for Mr D.
Meca-Medina was 9.7 ng/ml and that for Mr I. Majcen 3.9 ng/ml.
9 On 8 August 1999, FINA's Doping Panel suspended the applicants for a period of four
years.
11 In January 2000, certain scientific experiments showed that Nandrolone's metabolites
can be produced endogenously by the human body at a level which may exceed the
accepted limit when certain foods, such as boar meat, have been consumed.
12 In view of that development, FINA and the applicants consented, by an arbitration
agreement of 20 April 2000, to refer the case anew to the CAS for reconsideration.
13 By arbitration award of 23 May 2001, the CAS reduced the penalty to two years
suspension.
The applicants didnt appeal before the CAS but sent a letter to the EU Commission
claiming that the limit imposed by FINA for nandrolone was low enough to sanction
innocent or negligent athletes and was incompatible with their economic freedom (now
art 56 TFEU) and violated EU competition law (now art. 101 and 102 TFEU). The
Commission rejected the complaint which was subsequently issued in front of the CFI.

DISCUSSION
This case is at the limit of being included in the discipline of competition. We have two
different categories of actors involved: the IOC and FINA. They are an Olympic movement
association and a sporting federation: the first is a specific authority, the second is a
general one at global level. On the other side, there are two athletes (swimmers).
We have two associations and two physical persons. The problem with this fact regards
that athletes are physical persons, not undertakings; whereas IOC and FINA are
associations which decide on many aspects of an athletes activity and performance. The
task of the actors is the organization of a well-functioning, clean and loyal competition,
which involves a variety of operations. Ant doping is a controversial aspect of sport 1.
The fact that this kind of activity needs to be subject to competition law isnt clear. In this
case, associations of undertakings or professionals establish their own activity. Theres
1

Today, WADA is an international ant doping organization on global level.

an interest in this kind of activity: if you belong to a certain legal category, you need rules
to correctly perform your job, but what kind of rules need to be legally adopted?
Sports belongs to a special legal order considered separate from other economic
activities. Rules are decided by sporting federation and cases are discussed by specific
courts. In this sense, Meca-Medina case is very important.
Remember one side there are two sporting federations, on the other the two athletes.
Athletes are persons. Professional athletes can be considered as workers, since they
receive remuneration for their professional activity. The case Bosman was relevant when
distinguishing between national and foreign players in referring to their legal status. The
fact that Olympic games have very particular rules, excluding fully professional athletes
from the competition on some level (soccer players under a certain age, non-professional
boxers), makes the case more controversial.
There are two legal problems. First, the nature of these sport federations (OIC and Fina)
and the kind of acts they can adopt. Second, who are the actors interested in these kinds
of rules? In order to do this, we need to establish the aim of such rules.
According to Meca-Medina and Majcen, the rules limited their economic freedom and
breached EU competition law. According to the Commission, sporting rules do not fall
within the scope of competition law. Three connections need to be examined:
1. Associations: would say lawfulness of competition, lawfulness of loyalty
2. The athletes: would claim limits of competition, respect of economic freedom
3. The Commission: would say lawfulness of competition in the other sense (these
activities are considered as economic as well and thus fall into such
considerations, use the normal interpretations, like all the decisions on
undertakings).

CFI judgment
o The main problem in order to decide on this case regards the first stage, where
appellants claim that the Commission did not consider IOC as an undertaking. The
CFI states that the Commission rightly considered it broadly as an association of
undertakings (we need to consider the big movement of money which is involved
in sport competitions) and it did not found the infringement.
37 The appellants contend that the Commission was wrong not to treat the IOC as an
undertaking for the purposes of application of Article 81 EC
38 It is, however, common ground that, in order to rule on the complaint submitted to it
by the appellants in the light of Articles 81 EC and 82 EC, the Commission sought, as is
explicitly made clear in point 37 of the decision at issue, to proceed on the basis that the
IOC was to be treated as an undertaking and, within the Olympic Movement, as an
association of international and national associations of undertakings.

o Retaining that ant doping rules do not restrict competition is a mistake. In order to
apply art. 101, we do not need to talk necessarily about agreements but it is
sufficient to have rules regarding athletes health, integrity of competition, etc.
40 The appellants contend that in rejecting their complaint the Commission wrongly
decided that the anti doping rules at issue were not a restriction of competition within the
meaning of Article 81 EC.[..] According
to the appellants, first, those rules are, contrary to the Commission's findings, in no way
solely inherent in the objectives of safeguarding the integrity of competitive sport and
athletes health, but seek to protect the IOC's own economic interests.
o Commission made an error of assessment (par. 50). However, the appellants failed
to contest the applied rule, because they did not prove scientifically why the limits
for nandrolone were too low.
50 However, the appellants fail to establish that the Commission made a manifest error
of assessment in finding that rule to be justified.
In theory, the activity of athletes can fall under the scope of competition law. Associations
of undertakings, in this case associations of athletes can be included with its own status
under those acts which must be taken under scrutiny, even in a sector which is so distinct
from the economic sector, but has some overlaps. It is distinct because it has its own
authorities and role, and even because athletes are not really professionals, but they
receive remunerations for their activity, they are not ordinary employees of undertakings,
but we cannot say that they do not play an economic activity.
The Court said from today we can review the rules of federations. The fact itself that the
court went to decide that the quantity was to law means that the Court took the power to
do so, the Court recognized the possibility to judge over the regulation of federation.
The possibility of reviewing the nandrolone limit by the ECJ means that sports does fall
within the scope of competition law (art 101 and 102 TFEU) and also considerations
of economic freedom (art. 56 TFEU). The ECJ has thus the power to examine federations
rules. Therefore, Associations of undertakings (like in another case, Wouters) can be
subject to competition law, and the activity of sportsmen can as well.
We have in this sector an overlap of regulation. But it is not said that EU intervene every
time.

VIHO VS COMMISSION (1996)

FACTS
Viho is incorporated under the law of Netherlands, while Parker Ltd under British law
which has lots of subsidiary in many member states. Viho wanted to buy writing materials
from a retailer of Parker located in Germany instead of Netherlands because of its lower
prices and wasnt able to do so because of a refusal by Parker.
'1 . The applicant, Viho Europe BV (hereinafter "Viho"), a company incorporated under
Netherlands law, markets office equipment on a wholesale basis and imports and exports
that equipment.
4. Parker Pen Ltd (hereinafter "Parker"), a company incorporated under English law,
produces a wide range of writing utensils, which it sells throughout Europe through
subsidiary companies or independent distributors. The sale and marketing of Parker
products through its subsidiaries, and the staff policy of its subsidiaries, are controlled by
an area team of three directors, namely an Area Director, a Finance Director and a
Marketing Director. The Area Director is a member of the board of the parent company.
5 []Viho lodged a complaint on [], in which it complained that Parker was prohibiting
the export of its products by its distributors, dividing the common market into national
markets of the Member States, and maintaining artificially high prices for Parker products
on those national markets.
11 In its observations sent to the Commission on 6 April 1992 Viho disputed that the
Parker group's policy of referring inquiries could constitute a purely internal measure,
since it deprived third parties of the freedom to obtain supplies from where they wished
within the common market and it obliged them to obtain supplies exclusively from the
subsidiary in the place where they were established []

DISCUSSION
Behaviors are similar to an abuse of dominant position. Why doesnt it fall within the
scope of art. 102 TFEU, namely abuse of dominant position?
Situations are pretty much the same, what changes is the origin and the intent of the
behavior. It is for some aspects similar to British Airways, for others to other cases
regarding exclusionary behaviors. In this case, the behavior doesnt come from a
dominant position, but rather from an agreement (as in the sense of art. 101). Even
in the case of British Airways we talk about agreements.
The abuse of dominant position is prohibited, you have to stop the behavior, whereas in
the other case (illegal agreements) we have voidance of the agreement. Here, the case is

not brought towards the abuse of dominant position. According to Conticelli, at that the
case could fall better within the scope of art. 102.
The behavior is established by Parker, but carried out by one of its retailers. We need to
think about whether distributors are independent or not. In this case, retailers
(Parkers subsidiaries) are dependent economic units (from Parker UK) and therefore
there is no illegal agreement. Remember that the problem of vertical agreements is to
determine whether the single company can be regarded as independent or as a big,
single economic unit. All the subsidiaries were set just in one market
13 In its decision the Commission found that the integrated distribution system set up by
Parker to sell its products in Germany, France, Belgium, Spain and the Netherlands
through subsidiary companies established there fulfilled the conditions laid down by the
Court of Justice for the non-applicability of Article 85(1) of the Treaty on the grounds
that "the subsidiaries and the parent company form one economic unit within which
the subsidiaries do not enjoy real autonomy in determining their course of action in
the market" and moreover that "the assignment of a specific distribution area to each of
the Parker subsidiaries does not exceed the limits of what can normally be regarded as
necessary for the purpose of a proper distribution of tasks within a group". The
Commission also found that Parker was entitled to deny Viho similar prices and terms to
those granted to its independent distributors without thereby infringing the ban on
restrictive practices.'
Parker and its subsidiaries thus form a single economic unit within which the
subsidiaries do not enjoy real autonomy in determining their course of action in the
market, but carry out the instructions issued to them by the parent company
controlling them

CONSTEN AND GRUNDIG VS COMMISSION (1964)

FACTS
By a contract concluded on 1 April 1957, the German company Grundig and the French
Consten agreed, for an indefinite period, that Consten be appointed sole
representative of Grundig for the metropolitan territory of France, Saar and Corsica.
Consten undertook, in particular, the following obligations:
1- To buy the articles to the extent of a minimum percentage of the total exports
from the Federal Republic of Germany to the contract territory;
2- To place regular advance orders;
3- To provide appropriate publicity;
4- To set up a repairs workshop with a sufficient stock of spare parts and to carry out
the guarantee and after-sales service.
5- Not to sell similar articles capable of competing with the goods which were
the subject of the contract and not to make deliveries for or to other
countries from the contract territory.
Grundig undertook to grant to Consten the retail sale rights and not to make deliveries to
other persons in the area covered by the contract. In addition Consten registered in
France, in its own name, the trademark GRUNDIG INTERNATIONAL.
Since April 1961, the company UNEF has bought Grundig appliances from German traders
who delivered them in spite of the export prohibition imposed by Grundig. UNEF resold
these goods to French retailers at more favourable prices than those asked by Consten.
Subsequently, Consten brought two actions against UNEF, one for unfair competition and
one for infringement of the GINT trade-mark.
In the first of these proceedings, Consten was successful at first instance. However,
following an appeal brought by UNEF, the Cour d'Appel, Paris decided to stay the
proceedings until the decision of the Commission had been given on the application
which UNEF had made to it, on 5 March 1962, for a declaration that the Grundig and
Consten companies had infringed the provisions of Article 85 of the EEC Treaty through
the provisions of the sole distributorship contract of 1 April 1957 and the ancillary
agreement concerning the registration and use of the GINT trade-mark in France.
DISCUSSION
Under the legal perspective it is important to assess whether two companies constitute a
unique company. The assessment of such a difference needs a good expertise of
commercial law. Grundig is a relevant case for setting a clear statement on vertical
agreements. After this case, horizontal and vertical agreements are included both

within art. 101 TFEU. We usually imagine horizontal agreements to exclude competitors,
whereas Grundig is important to know that it can happen also vertically.

The Commission declared the voidance of the entire vertical agreement (remember it was
a distributor contract).

4) The complaints concerning the applicability of Art.85 to solo

distributorship contracts
The applicant submits that the prohibition in Art.85 applies only to horizontal
agreements ( the one among the two undertakings was a vertical agreement regulated by
art.86). The Court replies that articles 85-86 do not give any ground for holding that
distinct areas of application have to be assigned to each of the two Articles according to
the nature of the agreement.
Furthermore, the possible application of Art.85 to a sole distributorship contract cannot
be excluded because the grantor and the concessionaire are not competitors inter se and
not on a footing of equality. Art.85 applies also to agreements which prevent or restrict
the competition which might take place between one of them and third parties. The Court
states that:

And that:

The plea is thus unfounded.

Does art. 101 TFEU apply to vertical agreements? The ECJ referred to it in the fourth plea,
affirming that 101 TFEU (ex art 85 EC) does not distinguish between agreements if they
hinder competition, even if Consten and Grundig are not competitors. The Court adopted
a very innovative decision/ruling in this case to the scope of competition law. This is the
clear nature of functional interpretation when dealing with competition, which is one of
the three instruments for creating the Single Market.
Neither the wording of Article 85 nor that of Article 86 gives any ground for holding that
distinct areas of application are to be assigned to each of the two Articles according to

the level in the economy at which the contracting parties operate. Article 85 refers in a
general way to all agreements which distort competition within the Common Market and
does not lay down any distinction between those agreements based on whether they are
made between competitors operating at the same level in the economic process or
between non-competing persons operating at different levels. In principle, no distinction
can be made where the Treaty does not make any distinction.
Furthermore, the possible application of Article 85 to a sole distributorship contract
cannot be excluded merely because the grantor and the concessionnaire are not
competitors inter se and not on a footing of equality. Competition may be distorted
within the meaning of Article 85 (1) not only by agreements which limit it as between the
parties, but also by agreements which prevent or restrict the competition which might
take place between one of them and third parties.

Mergers
Both horizontal and vertical mergers are regulated by the Merger Regulation 4064/89
and successive modification. This regulation consists of an authorization procedure
with strict time deadlines. Each project of concentration (this term includes both mergers
and takeovers and refers to all situations where the operation allows a firm to take de
facto control of the operations of another firm) should be reported to the Merger Task
Force (MTF), a special unit of the Competition Directorate of the European Commission,
within seven days of the agreement or the announcement of the public bid. The MTF has
then one month to carry out a first round of investigation. At the end of it, it might
decide either to allow the merger or that such a merger raises doubts as to its
compatibility with the Common Market. In the latter case, the MTF has four additional
months at its disposal to decide on the concentration proposal, during which it will
engage in deeper investigation of the possible effects of the merger. In the end, there are
mainly three possible outcomes to this process. The merger might be allowed,
prohibited, or allowed subject to certain conditions, or remedies (commitments).
Strict time deadlines is a notable feature of the Merger Regulation. Indeed, firms and the
markets need to know as quick as possible if a merger can be carried out or not. The
uncertainty related to long regulatory processes is always very costly especially for
mergers, where firms need to deeply restructure and reorganize their production,
distribution, research and marketing activities.
Finally, the Merger Regulation provides a good example of the subsidiary principle
whereby decisions should be taken at a decentralized level (by the national authorities)
unless there are good reasons to take them at a centralized one (by the supranational
administration bodies). The EU has jurisdiction on a merger if certain threshold are met.
Moreover, only mergers which create or reinforce a dominant position will be prohibited.

Tetra-Laval vs Commission (2005)

FACTS
The case (one of the leading ones in conglomerate mergers) originated from the
Commissions prohibition in 2001 of the merger between Tetra Laval (a private
undertaking incorporated under the French law), which according to the Commission had
a dominant position in carton drinks packaging, and Sidel, a market leader in the
production of machines used for making PET (polyethylene terephthalate) plastic bottles.
The Commission concluded that the merger would have resulted in anticompetitive
conglomerate effects. In particular, although Tetra Laval and Sidel did not previously
have a competitive relationship, either as direct competitors or through a vertical
relationship, the Commission believed that the combination of the parties business in
potentially converging areas would encourage TL to leverage its existing market to
persuade its customers to choose Sidels Pet bottling machines in future.
The Commission concluded that this would turn Sidels market leadership into a
dominant position and that the elimination of Sidel as a potential competitor would
strengthen TLs dominant position on the carton-packaging market. The Commission
prohibited the merger and, because TL had already acquired the Sidel shares (which it
was permitted to do under French takeover law), the Commission ordered the separation
of the two companies.
Ruling on the appeal brought by TL, the CFI annulled the Commissions prohibition in
October 2002. After a new investigation, the Commission cleared the merger, subject to
a commitment by TL to license its new technology for making PET plastic bottles to third
parties. In parallel, the Commission appealed the CFIs ruling to the ECJ.
The Commission is appealing against the judgment by the CFI, claiming that there has
been an infringement, which relies on a wrong interpretation of art. 2 of the Merger
Regulation (appraisal of concentrations). We are discussing the power of appraisal of
the Commission and the appraisal of judicial review.
In particular, the Commission argued that the CFIs analysis had gone beyond the proper
scope of judicial review as set in the EC treaty and previous case-law and that the CFI had
set an excessively high standard of proof for the prohibition for the mergers. According
to the Commission, the CFIs assessment relies on a wrong interpretation of article 2 of
the Merger Regulation, appraisal of concentrations.
The Commission also challenged the CFIs analysis of leveraging. In particular, the
Commission criticized that the CFI took the view that it is not the structure resulting
from the merger itself which creates or strengthens a dominant position but rather
the future conduct of the merged entity.

DISCUSSION

Does the merger create or strengthen a dominant position?

Is it likely to inhibit competition?

These are the two conditions to analyze the lawfulness of a merger.

There are two fundamental questions in this case:
1. Is it possible to review a Commissions decision?
The ECJ recognized that the provision of the Merger Regulation 4064/89 confer on the
Commission a certain discretion, especially with respect to assessment of an economic
nature. However, the ECJ also confirms the importance of judicial review (par. 39). In
particular, the ECJ said that it is for the CFI to establish not only whether the evidence
relied on by the Commission is factually accurate, reliable and consistent, but also
whether that evidence contains all the information needed to assess a complex situation
and whether it is capable of substantiating the Commissions conclusions.
Par 39 - Whilst the Court recognises that the Commission has a margin of discretion
with regard to economic matters, that does not mean that the Community Courts must
refrain from reviewing the Commission's interpretation of information of an economic
nature. Not only must the Community Courts, inter alia, establish whether the evidence
relied on is factually accurate, reliable and consistent but also whether that evidence
contains all the information which must be taken into account in order to assess a
complex situation and whether it is capable of substantiating the conclusions drawn from
it. Such a review is all the more necessary in the case of a prospective analysis required
when examining a planned merger with conglomerate effect.
2. In the particular case of conglomerate mergers, what is important in the
assessment?
In a conglomerate effect case, the quality of evidence on which the Commission relies is
particularly important. A prospective analysis in merger control must be carried out with
great care, since such analysis entails a prediction of the future, which makes it necessary
to envisage various chains of cause and effect with a view to ascertaining which of them
are most likely (par. 44). We need to assess the structural profile of the market and other
aspects, but what is important is that this is a predictive judgment. Prediction is what is
of fundamental importance in the Commissions decision. The CFI also talks about
foresee ability.
Par 44 - The analysis of a 'conglomerate-type' concentration is a prospective analysis in
which, first, the consideration of a lengthy period of time in the future and, secondly, the
leveraging necessary to give rise to a significant impediment to effective competition
mean that the chains of cause and effect are dimly discernible, uncertain and difficult to
establish. That being so, the quality of the evidence produced by the Commission in
order to establish that it is necessary to adopt a decision declaring the concentration
incompatible with the common market is particularly important, since that evidence must
support the Commission's conclusion that, if such a decision were not adopted, the
economic development envisaged by it would be plausible.

45 It follows from those various factors that the Court of First Instance did not err in law
when it set out the tests to be applied in the exercise of its power of judicial review or
when it specified the quality of the evidence which the Commission is required to
produce in order to demonstrate that the requirements of Article 2(3) of the Regulation
are satisfied.

Article 2Merger Regulation - Appraisal of concentrations

1. Concentrations within the scope of this Regulation shall be appraised in accordance
with the objectives of this Regulation and the following provisions with a view to
establishing whether or not they are compatible with the common market. In making this
appraisal, the Commission shall take into account:
(a) the need to maintain and develop effective competition within the common market in
view of, among other things, the structure of all the markets concerned and the actual or
potential competition from undertakings located either within or outwith the Community;
(b) the market position of the undertakings concerned and their economic and financial
power, the alternatives available to suppliers and users, their access to supplies or
markets, any legal or other barriers to entry, supply and demand trends for the relevant
goods and services, the interests of the intermediate and ultimate consumers, and the
development of technical and economic progress provided that it is to consumers'
advantage and does not form an obstacle to competition.
2. A concentration which would not significantly impede effective competition in the
common market or in a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position, shall be declared compatible with the common
market.
3. A concentration which would significantly impede effective competition, in the
common market or in a substantial part of it, in particular as a result of the creation
or strengthening of a dominant position, shall be declared incompatible with the
common market.
[]
When examining a merger the Commission may require parties to submit commitments,
in order to make the merger lawful. Commitments are agreements between private
parties and public institutions. In this case, undertakings will pursue a certain conduct
to avoid negative effects of an otherwise anti-competitive mergers. Its like a private-law
element in public law proceedings. The responsible actors for competition are somehow
put on the same level as undertakings, even though they actually are on a higher level,
having the prerogative of the judgment. Sometimes, private parties could propose
commitments but this may result controversial because of possible conflict of interests.
There are structural and behavioral commitments. The structural ones are easier to
control when monitoring the market for potentially damaging concentrations of
enterprises. The most important point is how to provide a correct investigation.

In this proceeding, the ECJ confirmed the importance of judicial review, stating that
the Commissions margin of discretion does not mean that the Community Courts must
refrain from reviewing the Commissions interpretation of information of an economic
nature. In particular, the ECJ said that it is for the CFI to establish not only whether the
evidence relied on by the Commission is factually accurate, reliable and consistent, but
also whether that evidence contains all the information needed to assess a complex
situation and whether it is capable of substantiating the Commissions conclusions.
In the end of the case, the ECJ concluded that the CFI had exercised its powers of judicial
review appropriately and ordered the Commission to pay the costs.

Gencor vs Commission (1996)

FACTS
Gencor Ltd is the parent company of a group operating mainly in the mineral resources
and metals industries.
Implats is a company incorporated under South African law bringing together Gencor's
activities in the platinum group metal (PGM) sector (held 46.5% by Gencor and 53.5% by
the public) and controlled by Gencor.
Lonrho is a company incorporated under English Law. It is the parent company of a
diversified group with interests in mining and metals, hotels, agriculture and general
trade.
Eastplats and Westplats generally known under the name of Lenrho Platinum Division
(LPD), are companies incorporated under South African Law which bring together
Lonrho's activities in the PGM sector (held 73% by Lonrho and 27% by Gencor through its
subsidiary Impats).

Gencor and Lonrho proposed to acquire joint control of Implats, and through that
understaking also of LPD, in a two-stage operation.
1st stage: Gencor and Lonrho were to acquire joint control of Implats
2nd stage: Implats was to be granted sole control of LPD.

The two companies sent to the Commission a copy of the press release announcing the
agreement. The South African Competition Board held that 'the transaction did not give
rise to any concerns under South African competition law'.
The two companies signed an agreement regarding the concentration.
The Commission ordered the suspension of the concentration as it found that the
concentration raised serious doubts as to its compatibility with the common market and
therefore initiated the proceeding provided for by the Regulation.
The commission declared that the concentration was incompatible with the common
market and the functioning of the EEA Agreement, because it would have led to the
creation of a dominant duopoly position between Amplats and Impalts in the world of
platinum and rhodium market as a result of which effective competition would have been
significantly impeded in the common market.
Collective dominance and the problems connected with it are relevant in this case.Its like
an umbrella company controlling other ones operating in the same sector (metal/mining).

We find sort of a dialogue with authorities established in South Africa. In 1995 Gencor
and Lonrho sent a copy of their agreement to the Commission and South African
competition authorities said that the operation was authorized, whereas the Commission
said that it raised serious doubts. The duty to inform regards significant mergers. Here,
theres a passage in which the African authority states that the object of the future
international trade (platinum) is of fundamental importance for the South African
economy as a whole. The minister of foreign affairs stated that two competitors (Lonrho
and Gencor) were preferable to a monopoly (Gencor), for South African interests.
DISCUSSION
After the Commissions decision of non authorization of the merger, the applicant
(Gencor) submitted three pleas to the CFI. We are interested particularly in the first plea.
This latter is divided in two parts.
The first one regards the relevant market and the principle of territoriality. Here the
relevant market is the world market. Demand for platinum in South Africa is low. The
sectoral and geographical demand for platinum at world level shows that the Community
account only 70% to 22% of the world demand and therefore would be little affected by
the concentration. However, the issue certainly regards the EC (because it has jurisdiction
over activities of Lonrho, a company incorporated under a member state law) and hence
the Community needs to monitor for potential dominant positions being established,
since derivatives of platinum are certainly much used in Europe, with potential negative
effects (par. 98).
98 Finally, it is not possible to accept the applicant's argument that the creation of the
dominant position referred to by the Commission in the contested decision is not of
greater concern to the Community than to any other competent body and is even of less
concern to it than to others. The fact that, in a world market, other parts of the world are
affected by the concentration cannot prevent the Community from exercising its control
over a concentration which substantially affects competition within the common market
by creating a dominant position.
We could have reached the same conclusion even if Lonrho hadnt been a British
company.
The second part of the first plea submitted by Gencor regards the infringement of art. 2
of the Merger Regulation (1989). In particular, according to the applicant it does not
contain the collective dominant position definition. Thus, concentrations creating or
strengthening a collective dominant position are not covered by the Regulation. However,
the CFI stated that since the interpretation of the Regulation does not permit the precise
scope to be assessed, the collective dominant position does not fall outside the scope of
the Regulation (after Gencor, we know that collective dominant position fall into the
scope of art. 2).
125 It cannot be deduced from the wording of Article 2 of the Regulation that only
concentrations which create or strengthen an individual dominant position, that is to say
a dominant position held by the parties to the concentration, come within the scope of
the Regulation. Article 2, in referring to 'a concentration which creates or strengthens a
dominant position', does not in itself exclude the possibility of applying the Regulation to

cases where concentrations lead to the creation or strengthening of a collective dominant

position, that is to say a dominant position held by the parties to the concentration
together with one or more undertakings not party thereto
131 It is necessary, therefore, to interpret the Regulation, in particular Article 2 thereof,
on the basis of its general scheme.
There were three commitments:
Par. 301
(a) the development of an extra (...) ounces of capacity at the (...) mine shaft;
(b) the maintenance of output at existing levels ((...) ounces (...));
(c) the creation of a new supplier in the market.
The problem is that they mainly were behavioral. They werent accepted, since it was
difficult to monitor the level of output and there also were other issues.
Par. 318: Consequently, under the Regulation the Commission has power to accept only
such commitments as are capable of rendering the notified transaction compatible with
the common market. In other words, the commitments offered by the undertakings
concerned must enable the Commission to conclude that the concentration at issue
would not create or strengthen a dominant position within the meaning of Article 2(2)
and (3) of the Regulation.
Par 319: The categorization of a proposed commitment as behavioral or structural is
therefore immaterial. It is true that commitments which are structural in nature, such as a
commitment to reduce the market share of the entity arising from a concentration by the
sale of a subsidiary, are, as a rule, preferable from the point of view of the Regulation's
objective, inasmuch as they prevent once and for all, or at least for some time, the
emergence or strengthening of the dominant position previously identified by the
Commission and do not, moreover, require medium or long-term monitoring measures.
Nevertheless, the possibility cannot automatically be ruled out that commitments which
prima facie are behavioral, for instance not to use a trademark for a certain period, or to
make part of the production capacity of the entity arising from the concentration
available to third-party competitors, or, more generally, to grant access to essential
facilities on non-discriminatory terms, may themselves also be capable of preventing the
emergence or strengthening of a dominant position.
Par 320: It is thus necessary to examine on a case-by-case basis the commitments
offered by the undertakings concerned.
The Court maintained that such commitments were of ancillary nature (par. 325).
325 As for the third commitment, namely the creation of a new supplier, it need merely
be observed that the applicant does not dispute the Commission's analysis that it would
have had a negligible impact on the amount of the future platinum supply to the ultimate
consumer. The applicant merely states, thereby acknowledging the ancillary nature of
that commitment, that if it were right in its other criticisms of the Commission's approach
to the commitments, that aspect of the contested decision could not be upheld.

Airtours vs Commission (2002)

FACTS
We are discussing collective dominance, with an interesting definition of the market.
Airtours wished to acquire all shares of First Choice Plc., one of its competitors. The
merger was communicated to the Commission, which declared it incompatible with the
Common Market on the basis of the merger regulation (4064/89), since it would create
a collective dominant position in the United Kingdom market for short-haul foreign
package holidays, as a result of which competition would be significantly impeded in the
common market.
DISCUSSION
In Gencor we had a vague idea of collective dominance, with one operator on the side of
production, the other in another stage. Here the Court states that there are three
conditions for assessing about collective dominance.
1. First, each member of the dominant oligopoly must have the ability to know
how the other members are behaving in order to monitor whether or not they
are adopting the common policy. As the Commission specifically acknowledges, it
is not enough for each member of the dominant oligopoly to be aware that
interdependent market conduct is profitable for all of them but each member must
also have a means of knowing whether the other operators are adopting the
same strategy and whether they are maintaining it. There must, therefore, be
sufficient market transparency for all members of the dominant oligopoly to be
aware, sufficiently precisely and quickly, of the way in which the other members'
market conduct is evolving.
2. There must be an incentive not to depart from common policy on the market. As
the Commission observes, it is only if all the members of the dominant oligopoly
maintain the parallel conduct that all can benefit. The notion of retaliation in
respect of conduct deviating from the common policy is thus inherent in this
condition. In this instance, the parties concur that, for a situation of collective
dominance to be viable, there must be adequate deterrents to ensure that there is
a long-term incentive in not departing from the common policy, which means that
each member of the dominant oligopoly must be aware that highly competitive
action on its part designed to increase its market share would provoke identical
action by the others, so that it would derive no benefit from its initiative.
3. To prove the existence of a collective dominant position to the requisite legal
standard, the Commission must also establish that the foreseeable reaction of
current and future competitors, as well as of consumers, would not jeopardize
the results expected from the common policy.
The concept of collective dominance does not only apply to mergers but to any part of
competition law. Tacit collusion is the result which is achieved, in order to pursue the
common policy established by the firms. This broad concept is very difficult to prove in

practical terms. After assessing it, remedies sometimes overlapping ones can be
ordered.
Getting back to the case, there are four pleas raised by Airtours. We report the most
relevant ones. The second plea and third pleas allege an infringement of Article 2 of
Regulation No 4064/89, breach of the principle of legal certainty in so far as the
Commission applied a new and incorrect definition of collective dominance in its
assessment of the present case, and infringement of Article 296 TFEU inasmuch as the
decision is vitiated by a defective statement of reasons. After a lengthy and detailed
analysis of the alleged dominant position to be created after the merger, the CFI
concluded that the Commission made a mistake in assuming that the merger was going
to force competitors out of the market and prevent competition: the reaction of smaller
competitors had been underestimated. The cost structure of package holidays, the
availability of alternative routes/services and the increasing percentage of internet
bookings make it easier (than predicted by the Commission) for smaller competitors to
successfully compete. Moreover, the market situation was such that neither customers
nor potential competitors would have been damaged by a dominant position because of
the absence of barriers to entry, and consumer preferences.
Nonetheless, in mergers an analysis of competition prior to the notification is necessary.
Although the Commission devoted one section of the Decision to an examination of 'Past
Competition', those passages make no mention of any reduced level of competition in the
market prior to the notification.
The Commissions made errors of assessment when forecasting the end of competition
after the merger, hence the merger was authorized, annulling the Commissions decision.

COUNCIL REGULATION (EC) No 139/2004

Article 1
Scope
1. Without prejudice to Article 4(5) and Article 22, this Regulation shall apply to all
concentrations with a Community dimension as defined in this Article.
2. A concentration has a Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more
than EUR 5 000 million; and
(b) the aggregate Community-wide turnover of each of at least two of the undertakings
concerned is more than EUR 250 million, unless each of the undertakings concerned
achieves more than two-thirds of its aggregate Community-wide turnover within one and
the same Member State.
3. A concentration that does not meet the thresholds laid down in paragraph 2 has a
Community dimension where:
(a) the combined aggregate worldwide turnover of all the undertakings concerned is more
than EUR 2 500 million;
(b) in each of at least three Member States, the combined aggregate turnover of all the
undertakings concerned is
more than EUR 100 million;
(c) in each of at least three Member States included for the purpose of point (b), the
aggregate turnover of each of at least two of the undertakings concerned is more than
EUR 25 million; and
(d) the aggregate Community-wide turnover of each of at least two of the undertakings
concerned is more than EUR 100 million, unless each of the undertakings concerned
achieves more than two-thirds of its aggregate Community-wide turnover within one and
the same Member State.
4. On the basis of statistical data that may be regularly provided by the Member States,
the Commission shall report to
the Council on the operation of the thresholds and criteria set out in paragraphs 2 and 3
by 1 July 2009 and may present proposals pursuant to paragraph 5.
5. Following the report referred to in paragraph 4 and on a proposal from the
Commission, the Council, acting by a qualified majority, may revise the thresholds and
criteria mentioned in paragraph 3.
Article 2
Appraisal of concentrations
1. Concentrations within the scope of this Regulation shall be appraised in accordance
with the objectives of this Regulation and the following provisions with a view to

establishing whether or not they are compatible with the common market. In making this
appraisal, the Commission shall take into account:
(a) the need to maintain and develop effective competition within the common market in
view of, among other things, the structure of all the markets concerned and the actual or
potential competition from undertakings located either within or outwith the Community;
(b) the market position of the undertakings concerned and their economic and financial
power, the alternatives available to suppliers and users, their access to supplies or
markets, any legal or other barriers to entry, supply and demand trends for the relevant
goods and services, the interests of the intermediate and ultimate consumers, and the
development of technical and economic progress provided that it is to consumers'
advantage and does not form an obstacle to competition.
2. A concentration which would not significantly impede effective competition in the
common market or in a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position, shall be declared compatible with the common
market.
3. A concentration which would significantly impede effective competition, in the
common market or in a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position, shall be declared incompatible with the common
market.
4. To the extent that the creation of a joint venture constituting a concentration pursuant
to Article 3 has as its object or effect the coordination of the competitive behaviour of
undertakings that remain independent, such coordination shall be appraised in
accordance with the criteria of Article 81(1) and (3) of the Treaty, with a view to
establishing whether or not the operation is compatible with the common market.
5. In making this appraisal, the Commission shall take into account in particular:
whether two or more parent companies retain, to a significant extent, activities in the
same market as the joint venture or in a market which is downstream or upstream from
that of the joint venture or in a neighbouring market
closely related to this market,
whether the coordination which is the direct consequence of the creation of the joint
venture affords the undertakings concerned the possibility of eliminating competition in
respect of a substantial part of the products or services in question.
Article 3
Definition of concentration
1. A concentration shall be deemed to arise where a change of control on a lasting basis
results from:
(a) the merger of two or more previously independent undertakings or parts of
undertakings, or b) the acquisition, by one or more persons already controlling at least
one undertaking, or by one or more undertakings, whether by purchase of securities or
assets, by contract or by any other means, of direct or indirect control of the whole or
parts of one or more other undertakings.

2. Control shall be constituted by rights, contracts or any other means which, either
separately or in combination and having regard to the considerations of fact or law
involved, confer the possibility of exercising decisive influence on an undertaking, in
particular by:
(a) ownership or the right to use all or part of the assets of an undertaking;
(b) rights or contracts which confer decisive influence on the composition, voting or
decisions of the organs of an undertaking.
3. Control is acquired by persons or undertakings which:
(a) are holders of the rights or entitled to rights under the contracts concerned; or
(b) while not being holders of such rights or entitled to rights under such contracts, have
the power to exercise the rights deriving therefrom.
4. The creation of a joint venture performing on a lasting basis all the functions of an
autonomous economic entity shall constitute a concentration within the meaning of
paragraph 1(b). 5. A concentration shall not be deemed to arise where:
(a) credit institutions or other financial institutions or insurance companies, the normal
activities of which include transactions and dealing in securities for their own account or
for the account of others, hold on a temporary basis securities which they have acquired
in an undertaking with a view to reselling them, provided that they do not exercise
voting rights in respect of those securities with a view to determining the competitive
behaviour of that undertaking
or provided that they exercise such voting rights only with a view to preparing the
disposal of all or part of that undertaking or of its assets or the disposal of those
securities and that any such disposal takes place within one year of the date of
acquisition; that period may be extended by the Commission on request where such
institutions or companies can show that the disposal was not reasonably possible within
the period set;
(b) control is acquired by an office-holder according to the law of a Member State relating
to liquidation, winding up,
insolvency, cessation of payments, compositions or analogous proceedings;
(c) the operations referred to in paragraph 1(b) are carried out by the financial holding
companies referred to in Article 5(3) of Fourth Council Directive 78/660/EEC of 25 July
1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of
companies provided however that the voting rights in respect of the holding are
exercised, in particular in relation to the appointment of members of the management
and supervisory bodies of the
undertakings in which they have holdings, only to maintain the full value of those
investments and not to determine
directly or indirectly the competitive conduct of those undertakings. Article 4 Prior
notification of concentrations and pre-notification referral at the request of the notifying
parties
1. Concentrations with a Community dimension defined in this Regulation shall be
notified to the Commission prior to
their implementation and following the conclusion of the agreement, the announcement
of the public bid, or the acquisition of a controlling interest. Notification may also be

made where the undertakings concerned demonstrate to the Commission a good faith
intention to conclude an agreement or, in the case of a public bid, where they have
publicly announced an intention to make such a bid, provided that the intended
agreement or bid would result in a concentration with a Community dimension.
For the purposes of this Regulation, the term notified concentration shall also cover
intended concentrations notified
pursuant to the second subparagraph. For the purposes of paragraphs 4 and 5 of this
Article, the term concentration includes intended concentrations within the meaning of
the second subparagraph.
2. A concentration which consists of a merger within the meaning of Article 3(1)(a) or in
the acquisition of joint control within the meaning of Article 3(1)(b) shall be notified
jointly by the parties to the merger or by those acquiring joint control as the case may be.
In all other cases, the notification shall be effected by the person or undertaking
acquiring control of the whole or parts of one or more undertakings.
3. Where the Commission finds that a notified concentration falls within the scope of this
Regulation, it shall publish the fact of the notification, at the same time indicating the
names of the undertakings concerned, their country of origin, the nature of the
concentration and the economic sectors involved. The Commission shall take account of
the legitimate interest of undertakings in the protection of their business secrets.
4. Prior to the notification of a concentration with affect competition in a market within a
Member State which presents all the characteristics of a distinct market and should
therefore be examined, in whole or in part, by that Member State. The Commission shall
transmit this submission to all Member States without delay. The Member State referred
to in the reasoned submission shall, within 15 working days of receiving the submission,
express its agreement or disagreement as regards the request to refer the case. Where
that Member State takes no such decision within this period, it shall be deemed to have
agreed. Unless that Member State disagrees, the Commission, where it considers that
such a distinct market exists, and that competition in that market may be significantly
affected by the concentration, may decide to refer the whole or part of the case to the
competent authorities of that Member State with a view to the application of that State's
national competition law.
The decision whether or not to refer the case in accordance with the third subparagraph
shall be taken within 25 working days starting from the receipt of the reasoned
submission by the Commission. The Commission shall inform the other Member States
and the persons or undertakings concerned of its decision. If the Commission does not
take a decision within this period, it shall be deemed to have adopted a decision to refer
the case in accordance with the submission made by the persons or undertakings
concerned.
If the Commission decides, or is deemed to have decided, pursuant to the third and
fourth subparagraphs, to refer the whole of the case, no notification shall be made
pursuant to paragraph 1 and national competition law shall apply. Article 9(6) to (9) shall
apply mutatis mutandis.

5. With regard to a concentration as defined in Article 3 which does not have a

Community dimension within the meaning of Article 1 and which is capable of being
reviewed under the national competition laws of at least three Member States, the
persons or undertakings referred to in paragraph 2 may, before any notification to the
competent authorities, inform the Commission by means of a reasoned submission
that the concentration should be examined by the Commission.
The Commission shall transmit this submission to all Member States without delay.
Any Member State competent to examine the concentration under its national
competition law may, within 15 working days of receiving the reasoned submission,
express its disagreement as regards the request to refer the case. Where at least one
such Member State has expressed its disagreement in accordance with the third
subparagraph within the period of 15 working days, the case shall not be referred. The
Commission shall, without delay, inform all Member States and the persons or
undertakings concerned of any such expression of disagreement. Where no Member State
has expressed its disagreement in accordance with the third subparagraph within the
period of 15 working days, the concentration shall be deemed to have a Community
dimension and shall be notified to the Commission in accordance with paragraphs 1 and
2. In such situations, no Member State shall apply its national competition law to the
concentration.
6. The Commission shall report to the Council on the operation of paragraphs 4 and 5 by
1 July 2009. Following this report and on a proposal from the Commission, the Council,
acting by a qualified majority, may revise paragraphs 4 and 5.
If the Commission doesnt receive a notification, there might be a start of the procedure
against the undertakings, provided the merger is relevant.
COMMISSION REGULATION (EC) No 802/2004 contains the details for examining the
details in order to decide whether a concentration might or might not be authorized.
Provided the parties didnt comply with commitments or other instructions, there might
be fines.

Liberalization
Today we discuss two different sectors, and the respective liberalization process. The
directives which are presented are not the newest but it doesnt matter for understanding
the evolutionary process of liberalization. Liberalizing means to open a market and to cut
down entry barriers, such as legal barriers to entry (mainly). Before the 90s in these
sectors there were also many technical and economical barriers. Since liberalizing means
opening sectors, competition law is essential in the discussion.
Sometimes the result of competition law application might be quite confusing. We need
to show the relationship between regulation and competition. In some sectors, such as
financial markets, the absence or bad use of existing regulatory instruments led to a
collapse originating the financial crisis.
The railway sector is the best example of a natural monopoly and the problems
connected with it. For the first time, we have at least two competitors in this market. The
liberalization process in telecommunications went really fast, whereas it is not as
complete in the railway sector.
We deal with art 106 TFEU, which asks for the abolition of monopolies in public utility
sectors. Undertakings in charge of a certain task assigned by the state have sometimes
proved to be completely inadequate. The case law which opens liberalization is Corbeau.
In those years the common market was integrated and most of the EC legal principles had
been affirmed. The ECJ and the legislator decided to jointly complete the single market
through the involvement of public utilities. Starting by Corbeau and continuing with a
series of interventions by the legislator the liberalization process was started.
We mostly deal with directives in liberalization, because of the fundamental differences
among countries which need to be taken into account. Sometimes liberalization might
also be achieved through regulations. Frequently secondary legislation was modified and
updated to indicate the stage-by-stage liberalization. Open network directives of the
nineties refer to the fact that many operators didnt have their own infrastructure,
whereas today they do. Hence, other sets of directives/regulations have been approved in
the electricity, gas, air-transport, postal, railway and electronic telecommunications
sectors. When the EU legislator decided to open them to competition, two problems
arose:

Economic: even after liberalization of access, opening the market to competition

and reducing legal barriers to entry, there still are problems. Two elements of a
traditional public utility system: exclusive rights and public management. How to
deal with management in shifting from public to private? This, however is more of
a legal problem. The real problem was about infrastructure: being a natural
monopoly, even after liberalization economic activity will always tend to favor the
old monopolist, owning the infrastructure. Access to infrastructure for
competitors needs to be granted. The legal solution was to imagine different
legal regimes for infrastructures and provision of services. In order to realize
this legal design effectively, two things need to be guaranteed. Access to
infrastructure and the payment of a tariff for the access. The different phases of

liberalization of the industry need to be separated, applying different legal

regimes. Exclusive rights are kept on the network, whereas provision of the service
is opened. New problems are interconnection between infrastructures, deciding
the tariffs, the criteria and the turnover of managers. What kind of requirements
need to be asked to companies in order to provide the service? All of this means
that the legislator needed to artificially introduce competition. In some other
situations it could also be useful not only to separate the regiem of the service but
also the management, either in the weaker form by taking different counts for
network and service or requiring structural separations, such as property
separations. The aim of this last case is evident, meaning that a situation of
conflicts of interests wanted to be avoided. One can put whatever rule on
assigning the infrastructure, but one might run in situations of conflict of
interests. Separation in the way through which costs are separated is fundamental.
Cross-subsidization creates problems both to competitors and to consumers.

Social: on one side theres the risk of cherry picking. On the other side, a
uniform service at uniform tariffs needs to be provided continuously. What
consequences will there be on tariffs? Protection of weaker consumers needed to
be secured. A minimum package of services needed to be guaranteed. By defining
the notion of universal service, the problem was solved. When it needed to be
provided in loss, three solutions were found:

1. Financing the loss.

2. Establishing a common fund, ensuring a revenue to the providers
supplying the universal service.
3. Allow the provider of the universal service to exercise exclusive rights to a
certain extent to grant him some revenue.
To liberalize a market means to put down legal barriers to entry. We had re-regulation,
not deregulation. This happened because while the legislator was trying to simplify the
legal framework, they also recognized that new rules were needed to control competition
and make it efficient on an economic and social level. Now states rule more than before
through the constitution of regulatory authorities. Regulatory authorities for different
sectors such as Agcom and others.
Functions performed by regulatory authorities:

Providing control of the criteria for network access (Deutsche Telekom).

Fixing general criteria (adjudicatory powers).

Sanctioning and dispute settlement.

Regulatory authorities pursue different objectives:

Some are pro-competitive acts of regulation, to favor or obtaining the

development of certain markets through infrastructures. Development of their
respective sectors.

On the other side, they aim at guaranteeing social rights.

For any to liberalize sector, a regulator was introduced. Directives stated that
management of services needed to be independent of regulators. Before, some sectors
were directly controlled by a ministry. Regulators became independent authorities in our
legal order when privatization discipline was approved. In 1992 and following years, by
starting privatization, regulators were introduced in Italy, also to limit the problem of
conflicts of interests. Private property was left to the people, while regulators were
introduced. We need to differ among privatization and liberalization. The first is changing
form and property of an undertaking, the second means to open a market. Electricity and
gas liberalization dates back to 1995 (in Italy).
At some time it was also put into question whether public undertakings would have been
able to compete with private ones because of their mismanagement.

COUNCIL DIRECTIVE
of 29 July 1991
on the development of the Community's railways
Article 2
1. This Directive shall apply to the management of railway infrastructure and to rail
transport activities of the railway undertakings established or to be established in a
Member State.
C1
2. Railway undertakings whose activity is limited to the provision of solely urban,
suburban or regional services shall be excluded from the scope of this Directive.
M1
3. Undertakings the train operations of which are limited to providing solely shuttle
services for road vehicles through the Channel Tunnel are excluded from the scope of
this Directive except Articles 6(1), 10 and 10a.
Article 3
For the purpose of this Directive:
M1
railway undertaking shall mean any public or private undertaking licensed
according to applicable Community legislation, the principal business of which is to
provide services for the transport of goods and/or passengers by rail with a
requirement that the undertaking must ensure traction; this also includes undertakings
which provide traction only;
A license is the recognition of a right by a public administration. A license also states
the requirements for carrying out a certain activity are met. A concession is also the
recognition of ones possibility of exploiting a public good (ex: beaches). Also Erasmus
scholarships are close to this concept: the funds are public and are granted to privates
who meet certain requirements in applying for them (merit etc).
Art 3 (continued) infrastructure manager shall mean any body or undertaking
responsible in particular for establishing and maintaining railway infrastructure. This may
also include the management of infrastructure control and safety systems. The functions
of the infrastructure manager on a network or part of a network may be allocated to
different bodies or undertakings
Management independence
Article 4
1. Member States shall take the measures necessary to ensure that as regards
management, administration and internal control over administrative, economic and
accounting matters railway undertakings have independent status in accordance with
which they will hold, in particular, assets, budgets and accounts which are separate
from those of the State.
2. While respecting the framework and specific charging and allocation rules established
by the Member States, the infrastructure manager shall have responsibilities for its own
management, administration and internal control.

Separation between infrastructure management and transport

operations

Article 6
1. Member States shall take the measures necessary to ensure that separate profit and
loss accounts and balance sheets are kept and published, on the one hand, for business
relating to the provision of transport services by railway undertakings and, on the other,
for business relating to the management of railway infrastructure. Public funds paid to
one of these two areas of activity may not be transferred to the other.
2. Member States may also provide that this separation shall require the organisation of
distinct divisions within a single undertaking or that the infrastructure shall be managed
by a separate entity. In the Italian legal order we decided to constitute two different
companies for management of networks and the other one for providing services. A third
undertaking manages certain railway stations. We could have only chosen an account
separation but we decided to form different companies. This situation is more dangerous
since management conflicts might arise. Nuovo Trasporto Viaggiatori is normally a
licensed operator.
Article 8
The manager of the infrastructure shall charge a fee for the use of the railway
infrastructure for which he is responsible, payable by railway undertakings and
international groupings using that infrastructure. After consulting the manager, Member
States shall lay down the rules for determining this fee.
Access to railway infrastructure
M1
Article 10
1. International groupings shall be granted access and transit rights ()
7. Without prejudice to Community and national regulations concerning competition
policy and the institutions with responsibility in that area, the regulatory body established
pursuant to Article 30 of
Directive 2000/14/EC, or any other body enjoying the same degree of independence shall
monitor the competition in the rail services markets, including the rail freight transport
market.
Conflicts might arise in this sector. This is a concrete hypothesis. They are not so broad
and easy to come out as it might happen for electronic communication sector. Here we
can imagine less hypothesis coming out but we understand the link: as the market is
developing, the major role is probably played by competition authorities. Then, once it is
developed, the pro-competitive regulator becomes more relevant.
We now see the directive which rules on requirements set within licences:

COUNCIL DIRECTIVE 95/18/EC

of 19 June 1995
on the licensing of railway undertakings
Licences
Article 4
1. A railway undertaking shall be entitled to apply for a licence in the Member State in
which it is established.
5. A licence shall be valid throughout the territory of the Community
If I set discriminatory licenses, probably I wont obtain opening of the market.

Article 5
1. A railway undertaking must be able to demonstrate to the licensing authorities of the
Member State concerned before the start of its activities that it will at any time be able to
meet the requirements relating to good repute, financial fitness, professional
competence and cover for its civil liability listed in Articles 6 to 9.
We need insurance of good performances and quality for our travelling community. One
has the right of choosing the railway servicing as main economic activity. What one has to
do is just meet the requirements. Concessions on the other hand usually regard
scarce resources, thus one chooses one economic operator by issuing a tender; they are
per se opposed to competition. One can also have competition for the market. Here we
have on the other hand competition in the market. If the requirements for the licenses
are so limited that they give access only to a very limited number of operators, we
nonetheless talk about concessions.

DIRECTIVE 2001/14/EC OF THE EUROPEAN PARLIAMENT AND OF THE

COUNCIL
of 26 February 2001
on the allocation of railway infrastructure capacity and the levying of charges for
the use of
railway infrastructure
What criteria are needed for allocating the infrastructure?
INTRODUCTORY PROVISIONS
Article 1
Scope
1. This Directive concerns the principles and procedures to be applied with regard to the
setting and charging of railway infrastructure charges and the allocation of railway
infrastructure capacity.
Article 2
Definitions

l)train path means the infrastructure capacity needed to run a train between two places
over a given time-period;
Allocations provided on sort of a grandfather rule. Alitalia kept all flights between Rome
and Milan. If the flight wasnt full, Alitalia cancelled the flight and put the passengers on
the next one. This gives us an idea about the power enjoyed by the company in having
many slots available.

DIRECTIVE 2002/21/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

of 7 March 2002
on a common regulatory framework for electronic communications networks and
services
(Framework Directive)
Article 2
Definitions
(d) public communications network means an electronic communications network used
wholly or mainly for the provision of publicly available electronic communications
services;
Legal effect on liberalization: the more you liberalize, the more rules will be needed.
The progress in the electronic communication sector led to doubling the licensing. The
licenses are difficult to obtain and are hence close to concessions. We use this specific
concept: undertaking with significant market power (=dominant position). We are not
really in competition, since obligations in dominance are established ex ante:
GENERAL PROVISIONS
Article 14
Undertakings with significant market power
1. Where the Specific Directives require national regulatory authorities to determine
whether operators have significant market power in accordance with the procedure
referred to in Article 16, paragraphs 2 and 3 of this Article shall apply.

Enforcement
Today we discuss both public and private enforcement. We will be discussing with
preliminary rulings, the enforcement of EU competition law by national courts. Public
enforcement, enforcement by the Commission, are those in which it is up to the
Commission to examine a specific situation and to find a certain violation of community
legislation.
We are discussing private enforcement in the first part of the lecture: a private party
brings another private party in front of a judge for breach of EU competition law. It is
clear from this that most of the cases weve been studying are cases in which the
administration took the action.
We find ourselves in front of a national judge, with a problem arising from an
infringement of competition law upon the Commission has not investigated for some
reason, perhaps because it wasnt of public interest. Also national courts are called to
give implementation on competition law.
Art 101 TFEU
1. The following shall be prohibited as incompatible with the internal market: 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 internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with the
subject of such contracts.

2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:
- any agreement or category of agreements between undertakings,
- any decision or category of decisions by associations of undertakings,
- any concerted practice or category of concerted practices,

which contributes to improving the production or distribution of goods or to promoting technical

or economic progress, while allowing consumers a fair share of the resulting benefit, and which
does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the
attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a substantial
part of the products in question.

CREHAN AND COURAGE CASE

FACTS
This is a preliminary ruling in the proceedings between Courage Ltd and the publican Mr.
Crehan, concerning the interpretation of art 101 TFEU (regarding illegal arrangements),
concerning unpaid supplies of beer.
In 1990, Courage, a brewery holding a 19% share of the United Kingdom market in sales
of beer, and Grand Metropolitan pic (hereinafter 'Grand Met'), a company with a range of
catering and hotel interests, agreed to merge their leased public houses (hereinafter
'pubs'). To this end, their respective pubs were transferred to Inntrepreneur Estates Ltd
(hereinafter 'IEL'), a company owned in equal shares by Courage and Grand Met. An
agreement concluded between IEL and Courage provided that all IEL tenants had to buy
their beer exclusively from Courage. Courage was to supply the quantities of beer
ordered at the prices specified in the price lists applicable to the pubs leased by IEL.
In 1991, Mr Crehan concluded two 20-year leases with IEL imposing an obligation to
purchase from Courage. The rent, subject to a five-year upwardonly rent review, was to
be the higher of the rent for the immediately preceding period or the best open market
rent obtainable for the residue of the term on the other terms of the lease. The tenant
had to purchase a fixed minimum quantity of specified beers and IEL agreed to procure
the supply of specified beer to the tenant by Courage at the prices shown in the latter's
price list.
In 1993, Courage, the plaintiff in the main proceedings, brought an action for the
recovery from Mr Crehan of the sum of GBP 15 266 for unpaid deliveries of beer. Mr
Crehan contested the action on its merits, contending that the beer tie was contrary to
Article 85 of the Treaty. He also counter-claimed for damages.
Mr Crehan contended that Courage sold its beers to independent tenants of pubs at
substantially lower prices than those in the price list imposed on IEL tenants subject to a
beer tie. He contended that this price difference reduced the profitability of tied tenants,
driving them out of business.
The considerations which led the Court of Appeal to refer questions to the Court of
Justice for a preliminary ruling were as follows.
According to the referring court, English law does not allow a party to an illegal
agreement to claim damages from the other party. So, even if Mr Crehan's defence, that
the lease into which he entered infringes Article 85 of the Treaty, were upheld, English
law would bar his claim for damages.

DISCUSSION

We are talking about an unlawful agreement. Probably we couldnt have come to the EU
Commission because of low economic importance and lack of influence on the Common
market. We probably could have raised the question in front of a national judge.
This is an unlawful agreement under the perspective of competition law, which wasnt
considered by a public authority and it was not given public implementation/
enforcement. This case, for many implications and events of which we are not fully aware,
there wasnt a complete public proceeding.
Private enforcement is parallel to public enforcement. Even if we do have private
enforcement, there might be damage actions later on. So far, we have only seen public
proceedings to this matter. Anyhow, it is another way to grant enforcement to
competition law.
Crehan was a party to the agreement. The English law principle claiming that a party
taking part in an illegal agreement cannot claim damages on basis of the same
agreement. Mr Crehan was so to speak the victim of the illegal agreement. We need to
give real enforcement to competition law, then we can consider that the two parties were
not really on the same bargaining level.
Mr Crehan was both a party and a victim of the illegal agreement. If we didnt recognize
Mr Crehans damage, we wouldnt have enforcement of competition law. Through the
recognition of damages to Mr Crehan, we have a real enforcement of competition law. If
the agreement if void (art.101TFEU) one must have compensation for the suffered
damage.
'1. Is Article 81 EC (ex Article 85) to be interpreted as meaning that a party to a
prohibited tied house agreement may rely upon that article to seek relief from the courts
from the other contracting party?
2. If the answer to Question 1 is yes, is the party claiming relief entitled to recover
damages alleged to arise as a result of his adherence to the clause in the agreement
which is prohibited under Article 81 ?
3. Should a rule of national law which provides that courts should not allow a person to
plead and/or rely on his own illegal actions as a necessary step to recovery of damages
be allowed as consistent with Community law;
4. If the answer to Question 3 is that, in some circumstances, such a rule may be
inconsistent with Community law, what circumstances should the national court take into
consideration?'
The court claimed that the three questions need to be considered jointly. We have a
functional interpretation of the Treaty. The claims brought by the ECJ rely on fundamental
cases (Van Gend, Costa, Francovich) and reaffirm direct applicability: damage claims by a
party damaged by an illegal agreement according to competition law need to be
recognized and enforced. Police patrol=Commission, Fire alarm=the bottom used for
signaling a problem.
Par 19- It should be borne in mind, first of all, that the Treaty has created its own legal
order, which is integrated into the legal systems of the Member States and which their

courts are bound to apply. The subjects of that legal order are not only the Member
States but also their nationals. Just as it imposes burdens on individuals, Community law
is also intended to give rise to rights which become part of their legal assets. Those
rights arise not only where they are expressly granted by the Treaty but also by virtue of
obligations which the Treaty imposes in a clearly defined manner both on individuals and
on the Member States and the Community institutions
Par 23 - Thirdly, it should be borne in mind that the Court has held that Article 85(1) of
the Treaty and Article 86 of the EC Treaty (now Article 82 EC) produce direct effects in
relations between individuals and create rights for the individuals concerned which the
national courts must safeguard (judgments in Case 127/73
Par 24 - It follows from the foregoing considerations that any individual can rely on a
breach of Article 85(1) of the Treaty before a national court even where he is a party to a
contract that is liable to restrict or distort competition within the meaning of that
provision.
If we have a lot of possibilities to claim damages, there is more possibility for competition
law to be enforced. ECJ: a part from the first part of the case, it is up to the relevant court
to find the solution. Damages need to be reimbursed for affirming enforcement of
competition law.
Par - 26 The full effectiveness of Article 85 of the Treaty and, in particular, the practical
effect of the prohibition laid down in Article 85(1) would be put at risk if it were not open
to any individual to claim damages for loss caused to him by a contract or by conduct
liable to restrict or distort competition.
Par - 27 Indeed, the existence of such a right strengthens the working of the Community
competition rules and discourages agreements or practices, which are frequently covert,
which are liable to restrict or distort competition. From that point of view, actions for
damages before the national courts can make a significant contribution to the
maintenance of effective competition in the Community.

MANFREDI
FACTS
The references for a preliminary ruling concern the interpretation of Article 81 EC.
The questions were raised in an action for damages brought by Vincenzo Manfredi
against Lloyd Adriatico Assicurazioni SpA, by Antonio Cannito against Fondiaria Sai SpA
and, respectively, by Nicol Tricarico and Pasqualina Murgulo against Assitalia SpA
(Assitalia) in order to obtain an order against those insurance companies for repayment
of the increase in the cost of premiums for compulsory civil liability insurance relating to
accidents caused by motor vehicles, vessels and mopeds (civil liability auto insurance)
paid due to the increases implemented by those companies under an agreement declared
unlawful by the national competition authority (Autorit garante per la concorrenza e del
mercato; the AGCM).
By decisions of 8 September 1999, 10 November 1999 and 3 February 2000, the AGCM
initiated the procedure for infringement laid down in Article 2 of Law No 287/90 against
various insurance companies, including the three defendant companies in the main
proceedings. It was alleged that those companies had participated in an arrangement for
the purpose of the tied selling of separate products and the exchange of information
between competing undertakings. As regards the present cases, only the arrangement
for the exchange of information between competing undertakings is relevant.
In its final decision No 8546 (I377) of 28 July 2000 (Bolletino 30/2000 of 14 August
2000) the AGCM declared that the insurance companies involved had implemented an
unlawful agreement for the purpose of exchanging information on the insurance sector.
That agreement enabled those undertakings to coordinate and fix the prices of civil
liability auto insurance premiums so as to charge users large increases in premiums
which were not justified by market conditions and which they could not escape.
The AGCMs decision, which was challenged by the insurance companies, was essentially
upheld by the Tribunale amministrativo regionale per il Lazio (Regional Administrative
Court of Latium) and by the Consiglio di Stato (Council of State).
The applicants in the main proceedings brought their respective actions before the
Giudice di pace di Bitonto to obtain damages against each insurance company concerned
for the increase in the cost of premiums paid by reason of the agreement declared
unlawful by the AGCM.

DISCUSSION
We discuss about Italian legislation and the fact that theres a cartel among insurance
companies. We had another case about oil companies forming a cartel in Italy. AGCM had
fixed general criteria and tariffs, enjoying strong jurisdiction power. The powers of AGCM
also regards all sectors. They also have an adjudicatory power, extended to every sector.

Problems may arise with overlapping authorities. ISVAP is the regulatory power for
insurances, whereas AGCM is like the general patrol. The agreement was declared void
by AGCM because of an artificial increase of insurance premiums.
Article 2(2) of Law No 287 of 10 October 1990 prohibits arrangements between
undertakings which have as their object or effect appreciably to prevent, restrict or
distort competition in the national market or a substantial part of it. Under Article 2(1)
arrangements include agreements and/or concerted practices between undertakings,
and decisions, even those adopted on the basis of statute or regulation, of consortia,
associations of undertakings and other similar entities.
Art 1 of 287/90 states that the Italian law, which is very similar to the relevant articles of
EU competition law, needs to intervene when EU competition law is not applied and also
the opposite is true.
The Giudice di pace di Bitonto decided to stay the proceedings and to refer the following
questions to the Court for a preliminary ruling:
1. 1. Is Article 81 EC to be interpreted as meaning that it renders void an agreement
or concerted practice between insurance companies consisting of a mutual
exchange of information which makes it possible to increase civil liability auto
insurance policy premiums which are not justified by market conditions, having
regard, in particular, to the fact that undertakings from several Member States
took part in the agreement or concerted practice? (Can civil liability be allowed
for subjects being damaged by an illegal agreement for the purposes of art 101
TFEU?

2. Is Article 81 EC to be interpreted as meaning that it precludes the application of a

national provision similar to that in Article 33 of Law [No 287/90] under which a
claim for damages for infringement of Community and national provisions for
anticompetitive arrangements must also be made by third parties before a court
other than that which usually has jurisdiction for claims of similar value, thus
involving a considerable increase in costs and time?

3. . Is Article 81 EC to be interpreted as meaning that it entitles third parties who

have a relevant legal interest to rely on the invalidity of an agreement or practice
prohibited by that Community provision and claim damages for the harm suffered
where there is a causal relationship between the agreement or concerted practice
and the harm? (Does art 101 TFEU produce an obligation similar to law 287/90, to
present damage actions in front of a different court which has usually
jurisdiction, with a consequent increase in costs and time?)

4.

Is Article 81 EC to be interpreted as meaning that for the purposes of the

limitation period for bringing an action for damages based thereon, time begins to
run from the day on which the agreement or concerted practice was adopted or the

day on which the agreement or concerted practice came to an end? (When does
the time limit for the damage action start? At the beginning or after the end of
the illegal agreement?)

5. 5. Is Article 81 EC to be interpreted as meaning that where the national court sees

that the damages that can be awarded on the basis of national law are in any event
lower than the economic advantage gained by the infringing party to the
prohibited agreement or concerted practice, it should also award of its own motion
punitive damages to the injured third party, making the compensable amount
higher than the advantage gained by the infringing party in order to deter the
adoption of agreements or concerted practices prohibited under Article 81
EC? ( May a national court raise damages paid to damaged parties on behalf of
art 101 TFEU when the damaging parties enjoy a higher economic advantage from
the illegal agreement?)
It is for national courts to assess a breach of competition law, implementing EU
legislation. Art 1 and 2 of 287/90 are relevant and need to be applied. This is the key
of interpretation.
Par - 71 Secondly, as follows from paragraph 62 of this judgment, in the absence of
Community rules governing the matter, it is for the domestic legal system of each
Member State to designate the courts and tribunals having jurisdiction and to prescribe
the detailed procedural rules governing actions for safeguarding rights which individuals
derive directly from Community law, provided that such rules are not less favourable than
those governing similar domestic actions (principle of equivalence) and that they do not
render practically impossible or excessively difficult the exercise of rights conferred by
Community law (principle of effectiveness).

REGULATION 1/2003
The Commission is the first enforcer of EU competition Law, together with national
completion authorities. We have seen how private parties as well may enforce competition
law. The Directorate General for Competition within the Commission is the organ
responsible for competition. Two different ways through which the Commission enters
into examination of a case:
1. On its own initiative
2. By complaints issued by private parties
The Commission is obliged to examine only the more relevant cases, with serious
violations or novel infringements, or when a case has significant implications on market
integration. We get to the Commission in a certain way and then dividing it in two parts.
The Commission has the duty to gather information, by investigation and obtaining all
information necessary to getting to a decision.
In the second stage, the Commission interacts with private parties to get to a decision.
Art 18 and 20 of the Regulation: gather information and carrying out inspections. The
Commission may require undertakings to provide additional information. It is clear that
we keep the secrecy of information exchange between companies and their lawyers. The
most specific instrument granted to the Commission is its power of inspection (Minoan)
here it needs to be counterbalanced by another right: the constitutional inviolability of
home and their property, also enforced by Human Rights. Inspections are covered by a
series of procedural guarantees: national inspectors must accompany the Commissions
inspection, there must be a reason for the inspection, like a clue for an infringement;
there must be a specific reference for an inspection. Dawn Raids is the expression used
by the Commission. The protection from abuses is hence important (art 21 par 3)
A statement of objections presented by the Commission to a party shall notify the
infringements committed by the parties (art 27 par1). During the Inquisition one didnt
even have the right to know of what they had been condemned. The statement of
objections serves this purpose. Access to file is controversial as well. A hearing officer is
in charge of the oral hearing where we find the Commission and the parties. Participation
through access to documents and oral hearings is required, only then we have the
decision adopted by the Commission. The fine is established for what has been done.
They are getting higher and higher, acting as a deterrence for infringements.
Leniency policy reduces the fines/penalties imposed on undertakings in case they can
provide useful information about for instance and illegal cartel to the Commission,
even though they were part of that cartel. We could say that leniency policy is now
becoming stronger and stronger, sometimes it may be harmed by the differences in
leniency policy from country to country.
Commitments (art 9) are a way to give an end to a proceeding. It is used when parties
agree on binding behavior which the Commission considers adapt to cease an illegal
agreement. The controversial aspect is abuse of power of the Commission when

proposing the commitments, on the other side undertakings could avoid costs and
negative publicity from a Commission penalty being imposed. The procedure actually
declares undertakings guilty, and it doesnt prevent private parties from claiming
damages in front of a national judge (Crehan).

WHITE PAPER
It is based on a previously adopted Green Paper, which is usually adopted by the
Parliament, whereas the White Paper by the Commission. In addition, they are both nonbinding acts and highlight different aspects. The object is to grant full damage
compensation for all victims of EU Competition Law infringements. Collective actions and
other solutions for rendering compensation effective and equivalent throughout the EU
are found. (the White Paper needs to be analyzed in more detail).
Any citizen or business who suffers harm as a result of a breach of EC antitrust rules (Articles 81
and 82 of the EC Treaty) must be able to claim reparation from the party who caused the damage.
This right of victims to compensation is guaranteed by Community law, as the European Court of
Justice recalled in 2001 and 2006.1

The primary objective of this White Paper is to improve the legal conditions for victims to
exercise their right under the Treaty to reparation of all damage suffered as a result of a
breach of the EC antitrust rules.
Full compensation is, therefore, the first and foremost guiding principle Improving
compensatory justice would therefore inherently also produce beneficial effects in terms
of deterrence of future infringements and greater compliance with EC antitrust rules.
Safeguarding undistorted competition is an integral part of the internal market and
important for implementing the Lisbon strategy. A competition culture contributes to
better allocation of resources, greater economic efficiency, increased innovation and
lower prices.
Another important guiding principle of the Commissions policy is to preserve strong
public enforcement of Articles 81 and 82 by the Commission and the competition
authorities of the Member States.
In the context of legal standing to bring an action, the Commission welcomes the
confirmation by the Court of Justice that any individual who has suffered harm caused
by an antitrust infringement must be allowed to claim damages before national courts.6
This principle also applies to indirect purchasers, i.e. purchasers who had no direct
dealings with the infringer, but who nonetheless may have suffered considerable harm
because an illegal overcharge was passed on to them along the distribution chain
The Commission sees no reason why a final decision9 on Article 81 or 82 taken by an
NCA(National Competition Authorities) in the European Competition Network (ECN), and
a final judgment by a review court upholding the NCA decision or itself finding an
infringement, should not be accepted in every Member State as irrebuttable proof of the
infringement in subsequent civil antitrust damages cases.
The Commission therefore suggests10 the following rule:
national courts that have to rule in actions for damages on practices under Article 81 or
82 on which an NCA in the ECN has already given a final decision finding an infringement
of those articles, or on which a review court has given a final judgment upholding the

NCA decision or itself finding an infringement, cannot take decisions running counter to
any such decision or ruling.
It is important, for both public and private enforcement, to ensure that leniency
programmes are attractive. Adequate protection against disclosure in private actions for
damages must be ensured for corporate statements submitted by a leniency applicant in
order to avoid placing the applicant in a less favourable situation than the co-infringers.
Otherwise, the threat of disclosure of the confession submitted by a leniency applicant
could have a negative influence on the quality of his submissions, or even dissuade an
infringer from applying for leniency altogether.

State Aids

State aids are an issue under discussion in this period of financial crisis. Aids are
supports to undertakings and are not prohibited per se but they are limited and
controlled by the European Commission.
The limitation of state aids has the purpose of preserving competition between Member
States. In Italy we had a strong arising of state aids after 2007 ( with the appearance of
financial crisis). State aids tend to advantage some firms and to disadvantage the others.
The disciplines of state aids falls within the discipline of art 107 TFEU and some
exemptions are considered as well. They are limited and put under control of the EU
Commission for this control and its evolution, we find it during the first thirty years (the
80S) the Commission was initially very flexible in the approach. Later on, some flexibility
was lost and we came to a deeper and more detailed form of intervention. Starting from
year 2007, other criteria and a modernization of the policy started: many forms of
intervention and new criteria because of the economic crisis.
If you look at the intervention of the Commission, we have continuously new criteria
being established. According to art 107 we can find forms of intervention in the economy
under certain criteria. In a broader conception, the circumstance of intervention providing
resources to a certain undertaking is a way of influencing the economy. We are discussing
the limit of intervention in the economy. Art 107:
Article 107
1. Save as otherwise provided in the Treaties, any aid granted by a Member State or
through State resources in any form whatsoever which distorts or threatens to distort
competition by favouring certain undertakings or the production of certain goods shall, in
so far as it affects trade between Member States, be incompatible with the internal
market.
2. The following shall be compatible with the internal market:
(a) aid having a social character, granted to individual consumers, provided that such aid
is granted without discrimination related to the origin of the products concerned;
(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany
affected by the division of Germany, in so far as such aid is required in order to
compensate for the economic disadvantages caused by that division. Five years after the
entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the
Commission, may adopt a decision repealing this point.
3. The following may be considered to be compatible with the internal market:
(a) aid to promote the economic development of areas where the standard of living is
abnormally low or where there is serious underemployment, and of the regions referred
to in Article 349, in view of their structural, economic and social situation;
(b) aid to promote the execution of an important project of common European interest or
to remedy a serious disturbance in the economy of a Member State;
(c) aid to facilitate the development of certain economic activities or of certain economic
areas, where such aid does not adversely affect trading conditions to an extent contrary
to the common interest;
(d) aid to promote culture and heritage conservation where such aid does not affect
trading conditions and competition in the Union to an extent that is contrary to the
common interest;
(e) such other categories of aid as may be specified by decision of the Council on a
proposal from the Commission.

Par 1 Aids are prohibited only when they distort competition or affect competition
within member states favoring sectors or undertakings.

Par 2 Aids who shall be compatible:

Par.2 provides a list of actions which in any case are compatible with the internal
market, whereas those of par. 3 may be compatible, hence with more discretionary power
granted to the Commission. This power of the Commission, backed up by economic
analysis, is very relevant, whereas the ECJ can only review the procedural aspects of the
Commissions evaluations.

(a)Social character: if they have a social character, they are likely to realize a
balance between consumers.

(b)To make good damage caused by natural desasters: these aids aim exactly at
re-establishing previous market conditions

(c) Aids for certain areas of the Federal Republic of Germany: this problem now has
passed (probably).

Par 3 Aids who may be compatible:

(a)Aids for balancing certain economically disadvantaged areas, poor areas ex:
Southern Italy

(b)To Remedy a serious disturbance in the economy of a member state: on this

basis different conditions some state aids in certain sectors have been allowed
(Austria, Netherlands). It is natural that the Commission is being more interested
in the issue of the financial crisis, which led to an explosion of state aids to
remedy to this disturbance.

(C) of certain economic activities, sectors

(d)Heritage etc.

(e)Need for the proposal of Commission

Two lectures regarding 107.2b

AUSTRIA & NETHERLANDS

FACTS
The Republic of Austria published the Law on the stability of the financial markets and on
strengthening the interbank market for credit institutions and insurance companies in
Austria on 26 October 2008 in order to stabilise the financial market. The Law forms the
legal basis for a package of measures aimed at strengthening the interbank market
(Interbankmarktstrkungsgesetz (IBSG)) and a broader collection of measures for
remedying a serious disturbance in Austria's economy
The measures are aimed at strengthening the interbank market and remedying a serious
disturbance in Austria's economy, securing macroeconomic equilibrium and protecting
the Austrian economy and the financial market.
Credit institutions and insurance companies licensed in Austria (hereinafter "institutions")
are the beneficiaries of the measures.
The Austrian package of measures is in two parts:
A. instruments for providing liquidity, which are set out in the IBSG, and
B. measures for strengthening an institution's equity or measures intended to stabilise
the institution by other means, e.g. guarantees covered by the FinStaG.
The Austrian authorities acknowledge that the notified scheme is in the nature of aid.
They stress, however, that the Austrian Government is aiming to make the individual
measures as market-oriented as possible. The Austrian authorities point out that the
package of measures is urgently needed to avert damage to the Austrian financial market
due to the financial market crisis that has been steadily brewing since the summer of
2007.
DISCUSSION
The Austrian state has the initiative. Measures in support of banks and insurance need to
be assessed: are they an aid? Liquidity injections and guarantees were supplied to
Commercial Banks, also through a clearing bank. The financial crisis has caused the
turmoil of the banking sector, banks are becoming more risk averse in granting loans.
Contagion is also claimed: if Austrian banks go bust, this also affects commercial banks
in other Member States. The Austrian state is pretty clear about the nature of the aid. The
decision of the Commission falls under assessment.
Under Article 87(3)(b) of the EC Treaty, the Commission may declare aid compatible with
the common market if it helps to remedy a serious disturbance in the economy of a
Member State. The Commission would point out that the Court of First Instance has
expressly stated that Article 87(3)(b) is to be applied restrictively, with the result that the

aid may not benefit just one enterprise or one sector but must help to remedy a
disturbance in the whole of the economy of the Member State concerned11
The Commission has recognized that despite the general incompatibility of state aids
with the Treaty, in particular art 107 TFEU the guarantee of heavy liability towards the
credit sector is necessary for its survival and impossible to be achieved on a nongovernmental level.
The state-aid project in question will hence help preventing a serious disturbance caused
by the ever-more difficult access to liquidity in the banking sector.
Par 60 According to the Communication from the Commission on the application of
State aid rules to measures taken in relation to financial institutions in the context of the
current global financial crisis,12 it must be stressed in the context of the application of
Article 87(3)(b) of the EC Treaty that an aid measure or scheme may be declared
compatible with the common market only if it satisfies the general criteria for
compatibility under Article 87(3), as viewed in the light of the general objectives of the
Treaty and in particular of Articles 3(1)(g) and 4(2) of the EC Treaty, which entail
compliance with the following conditions:13
a. Appropriateness: The aid measure must be precisely targeted at its objective, i.e. in
this case to remedy a serious disturbance in the economy. This would not be the case if
the measure were not appropriate to remedy the disturbance. (Appropriateness to the
objective)
b. Necessity: The aid measure must, in its amount and form, be necessary to achieve the
objective. This means that it must be of the minimum amount necessary to attain the
objective and must take the form most appropriate to remedy the disturbance. In other
words, if a lesser amount of aid or a measure with less distortive affect (e.g. a temporary
and limited guarantee instead of a capital injection) were sufficient to remedy a serious
disturbance in the economy, the measures in question would not be necessary. This is
confirmed by settled case law of the European Court of Justice. (the objective cannot be
attained by an alternative measure)
c. Proportionality: The positive effects of the measure must be properly balanced against
the distortions of competition caused by it; this ensures that the distortions of
competition are limited to the minimum necessary to attain the measures objectives.
This follows from Articles 3(1)(g) and 4(1) of EC Treaty, which provide that the
Community must ensure the proper functioning of an internal market with free
competition. Therefore, Article 87(1) of the EC Treaty prohibits all selective measures by
the State or from state resources that are capable of distorting trade between Member
States. Any derogation under Article 87(3)(b) of the EC Treaty which authorises state aid
must ensure that such aid is limited to what is necessary to achieve its stated objective,
reducing to a minimum any distortions of competition that arise as a result. (there must
be a balance between the potential distortions in the market and the positive effects
attained through the measure. We could also look at it as a cost and benefits balance.
The distortion must not distort competition more than the benefits attained through the
measure)

(Par - 62) One feature of the Austria scheme for restoring confidence is the clearing
bank, which is designed to raise liquidity from the capital market and/or from other
institutions and to channel it to the institutions that need it. The clearing bank's business
policy is not geared to profit-making, and no provision is made for any other commercial
banking activities. It is also important to bear in mind that the clearing bank was founded
by a number of other banks; the State has no ownership rights over it. The Commission
has therefore concluded that the clearing bank is a mere vehicle of the banks and that its
foundation should be seen exclusively in the light of the above purpose, i.e. to revive the
interbank market.
Par - 66) As regards necessity, the guarantee scheme, whereby a safety net is established
to cover debt newly issued by institutions in Austria, appears to be limited to the
minimum necessary in terms of scope and duration.
(Par - 67) As regards scope, the Commission does not dispute the fact that the guarantee
scheme is needed to restore the confidence of lenders.18 A guarantee in respect of retail
deposits would not be sufficient as it would only avoid bank runs but not restore the
confidence of institutional lenders.[]
Par - 69) As regards proportionality, the distortion of competition is minimised by
various safeguards, in particular a market-oriented premium.
Theres a lot of discretion in the criteria used by the Commission, especially more
elasticity has been shown in the last years: we are not creating new criteria and
categories. This is however limited by a strict temporal application of the measure and a
constant review.
DECISION
The Commission concludes that the measure constitutes state aid within the meaning of
Article 87(1) of the EC Treaty.
Since the measure satisfies the above-mentioned conditions for aid under Article 87(3)(b)
of the EC Treaty, it is compatible with the common market, with the result that the
Commission has no objections to it.
The Commission would recall that, according to the assurance given by Austria, the
measure is restricted to six months and any extension must be notified to the
Commission.

COMMISSION COMMUNICATION 2008

Par - 4. Given the scale of the crisis, now also endangering fundamentally sound banks,
the high degree of integration and interdependence of European financial markets, and
the drastic repercussions of the potential failure of a systemically relevant financial
institution further exacerbating the crisis, the Commission recognises that Member States
may consider it necessary to adopt appropriate measures to safeguard the stability of the
financial system
Par - 5. While the exceptional circumstances prevailing at the moment have to be duly
taken into account when applying the State aid rules to measures addressing the crisis in
the financial markets the Commission has to ensure that such measures do not generate
unnecessary distortions of competitions between financial institutions operating in the
market or negative spillover effects on other Member States. It is the purpose of this
Communication to provide guidance on the criteria relevant for the compatibility with the
Treaty of general schemes as well as individual cases of application of such schemes and
ad hoc cases of systemic relevance
Guarantees and recapitalization are considered. There are criteria for seeing whether an
aid can be accepted: efficiency and so on. Par.15 describes evaluation of a state aid
measure: well-targeted, proportionate and minimizing spillover effects (they are slightly
different from those recalled above, but likely to have the same effects).
Par - 15. Moreover, in line with the general principles underlying the State aid rules of the
Treaty, which require that the aid granted does not exceed what is strictly necessary to
achieve its legitimate purpose and that distortions of competition are avoided or
minimized as far as possible, and taking due account of the current circumstances, all
general support measures have to be:
well-targeted in order to be able to achieve effectively the objective of remedying a
serious disturbance in the economy,
proportionate to the challenge faced, not going beyond what is required to attain this
effect, and
designed in such a way as to minimize negative spill-over effects on competitors,
other sectors and other Member States.
Par - 22. The extension of the coverage of any guarantee to further types of debt beyond
this relatively broad scope would require a closer scrutiny as to its justification.
Par - 24. The duration and scope of any guarantee scheme going beyond retail deposit
guarantee schemes must be limited to the minimum necessary. In line with the general
principles set out above, taking into account the currently unpredictable duration of the
fundamental shortcomings in the functioning of financial markets, the Commission
considers it a necessary element for the compatibility of any general scheme for the
Member State to carry out a review every six months, covering the justification for the
continued application of the scheme and the potential for adjustments to deal with

evolution in the situation of financial markets. The results of this review will have to be
submitted to the Commission. Provided that such regular review is ensured, the approval
of the scheme may cover a period longer than six months and up to two years in
principle. It may be further extended, upon Commission approval, as long as the crisis in
the financial markets so requires. Should the scheme permit guarantees to continue to
cover the relevant debt until a maturity date later than the expiry of the issuance period
under the scheme, additional safeguards would be necessary in order to prevent
excessive distortion of competition. Such safeguards may include a shorter issuance
period than that allowed in principle under the present communication, deterrent pricing
conditions and appropriate quantitative limits on the debt covered.
43. In the context of the current financial crisis a Member State may also wish to carry
out a controlled winding-up of certain financial institutions in its jurisdiction. Such a
controlled liquidation, possibly carried out in conjunction with a contribution of public
funds, may be applied in individual cases, either as a second step, after rescue aid to an
individual financial institution when it becomes clear that the latter cannot be
restructured successfully, or in one single action. Controlled winding-up may also
constitute an element of a general guarantee scheme, e.g. where a Member State
undertakes to initiate liquidation of the financial institutions for which the guarantee
needs to be activated.
Par - 53. When applying the State aid rules to the measures dealt with in this
Communication in a manner that takes account of prevailing financial market conditions,
the Commission, in co-operation with the Member States, should ensure both that they
achieve their objective and that the related distortions of competition both within and
between Member States are kept to a minimum. In order to facilitate this cooperation and
to provide both Member States and third parties with the necessary legal certainty on the
compliance of the measures undertaken with the Treaty (which is a significant component
of restoring confidence to the markets), it is of paramount importance that Member
States inform the Commission of their intentions and notify plans to introduce such
measures as early and comprehensively as possible and in any event before the measure
is implemented. The Commission has taken appropriate steps to ensure the swift
adoption of decisions upon complete notification, if necessary within 24 hours and over a
weekend.

COMMISSION COMMUNICATION 2009

Par 1.2 about coordination of state aid among different member states. The general
economic situation of the Union is considered, hence we need coordination in state aids.
The broader effect of the crisis and the need to act together was clear in 2009. State aids
are put under a general project of intervention. R&D and green sectors and respective aid
are emphasized. The importance of SMEs is emphasized as well. The de minimis
exemption is reconsidered and more flexibility is granted. One of the aspects the
Commission tried to deal with is simplifying the procedure for accessing aids.
1.1. The financial crisis and its impact on the real economy
On 26 November 2008 the Commission adopted the Communication A European
Economic Recovery Plan ( 1 ) (the Recovery Plan) to drive Europes recovery from the
current financial crisis. The Recovery Plan is based on two mutually reinforcing main
elements. Firstly, short-term measures to boost demand, save jobs and help restore
confidence and, secondly, smart investment to yield higher growth and sustainable
prosperity in the longer term. The Recovery Plan will intensify and accelerate reforms
already underway under the Lisbon Strategy.
In this context, the challenge for the Community is avoiding public intervention which
would undermine the objective of less and better targeted State aid. Nevertheless, under
certain conditions, there is a need for new temporary State aid.
The Recovery Plan also includes further initiatives to apply State aid rules in a way that
achieves maximum flexibility for tackling the crisis while maintaining a level playing field
and avoiding undue restrictions of competition. This Communication gives details of a
number of additional temporary openings for Member States to grant State aid.
First, the financial crisis has a hard impact on the banking sector in the Community. The
Council has stressed that, although public intervention has to be decided at national
level, this needs to be done within a coordinated framework and on the basis of a number
of common Community principles ( 2 ). The Commission reacted immediately with
various measures including the adoption of the Communication on the application of
State aid rules to measures taken in relation to financial institutions in the context of the
current global financial crisis ( 3 ) and of a number of decisions authorising rescue aid to
financial institutions.
Sufficient and affordable access to finance is a precondition for investment, growth and
job creation by the private sector. Member States need to use the leverage they have
acquired as a result of providing substantial financial support to the banking sector to
ensure that this support does not lead merely to an improvement in the financial
situation of the banks without any benefit to the economy at large. Support for the
financial sector should therefore be well targeted to guarantee that banks resume their
normal lending activities. The Commission will take this into account when reviewing
State aid to banks.

While the situation on financial markets appears to be improving, the full impact of the
financial crisis on the real economy is now being felt. A very serious downturn is affecting
the wider economy and hitting households, businesses and jobs. In particular, as a
consequence of the crisis on financial markets, banks are deleveraging and becoming
much more risk-averse than in previous years, leading to a credit squeeze. This financial
crisis could trigger credit rationing, a drop in demand and recession.
Such difficulties could affect not only weak companies without solvency buffers, but also
healthy companies which will find themselves facing a sudden shortage or even
unavailability of credit. This will be particularly true for small and medium-sized
undertakings (SMEs), which in any event face greater difficulties with access to finance
than larger companies. This situation could not only seriously affect the economic
situation of many healthy companies and their employees in the short and medium term
but also have longer-lasting negative effects since all Community investments in the
future in particular, towards sustainable growth and other objectives of the Lisbon
Strategy could be delayed or even abandoned.
1.2. The need for close European coordination of national aid measures
In the current financial situation, Member States could be tempted to go it alone and, in
particular, to wage a subsidy race to support their companies. Past experience shows that
individual action of this kind cannot be effective and could seriously damage the internal
market. When granting support, taking fully into consideration the current specific
economic situation, it is crucial to ensure a level playing field for European companies
and to avoid Member States engaging in subsidy races which would be unsustainable and
detrimental to the Community as a whole. Competition policy is there to ensure this.
4.2. Compatible limited amount of aid
Article 2 of the de minimis Regulation, states that:
Aid measures shall be deemed not to meet all the criteria of Article 87(1) of the Treaty
and shall therefore be exempt from the notification requirement of Article 88(3) of the
Treaty, if they fulfil the conditions laid down in paragraphs 2 to 5 of this Article.
The total de minimis aid granted to any one undertaking shall not exceed EUR 200 000
over any period of three fiscal years. The total de minimis aid granted to any one
undertaking active in the road transport sector shall not exceed EUR 100 000 over any
period of three fiscal years. These ceilings shall apply irrespective of the form of the de
minimis aid or the objective pursued and regardless of whether the aid granted by the
Member State is financed entirely or partly by resources of Community origin. The period
shall be determined by reference to the fiscal years used by the undertaking in the
Member State concerned.

ART 108 TFEU

Talks about obligations of the Commission to monitor the aid. An information exchange
leads to conclusions: is the aid compatible or not with the common market? Does is need
to be abolished? A member state might ask the Council, which acts on unanimous

decision, whether an aid is compatible. If the Commission starts a proceeding in the

meantime, it shall be set aside waiting for the Councils decision.
Article 108
1. The Commission shall, in cooperation with Member States, keep under constant review
all systems of aid existing in those States. It shall propose to the latter any appropriate
measures required by the progressive development or by the functioning of the internal
market.
2. If, after giving notice to the parties concerned to submit their comments, the
Commission finds that aid granted by a State or through State resources is not
compatible with the internal market having regard to Article 107, or that such aid is being
misused, it shall decide that the State concerned shall abolish or alter such aid within a
period of time to be determined by the Commission.
If the State concerned does not comply with this decision within the prescribed time, the
Commission or any other interested State may, in derogation from the provisions of
Articles 258 and 259, refer the matter to the Court of Justice of the European Union
direct.
On application by a Member State, the Council may, acting unanimously, decide that aid
which that State is granting or intends to grant shall be considered to be compatible with
the internal market, in derogation from the provisions of Article 107 or from the
regulations provided for in Article 109, if such a decision is justified by exceptional
circumstances. If, as regards the aid in question, the Commission has already initiated
the procedure provided for in the first subparagraph of this paragraph, the fact that the
State concerned has made its application to the Council shall have the effect of
suspending that procedure until the Council has made its attitude known.
If, however, the Council has not made its attitude known within three months of the said
application being made, the Commission shall give its decision on the case.

3. The Commission shall be informed, in sufficient time to enable it to submit its

comments, of any plans to grant or alter aid. If it considers that any such plan is not
compatible with the internal market having regard to Article 107, it shall without delay
initiate the procedure provided for in paragraph 2. The Member State concerned shall not
put its proposed measures into effect until this procedure has resulted in a final decision.
4. The Commission may adopt regulations relating to the categories of State aid that the
Council has, pursuant to Article 109, determined may be exempted from the procedure
provided for by paragraph 3 of this Article.