EUR-Charts

Exercise:

Häberli and Böckli are well known chocolate companies having their seats in Berne and Zurich respectively (both in Switzerland). They sell their products all over Europe. Lately, the European Commission has received complaints from Belgian chocolate producers about the pricing policy of Häberli and Böckli. After a detailed investigation the Commission comes to the conclusion that the two Swiss chocolate companies have entered into an agreement that is contrary to Art. 101 TFEU. Can the Commission issue a decision imposing fines on Häberli and Böckli?

Suggested solution:

Indeed, it can do so. The fact that the two companies are established outside the EU and have probably entered into their agreement in a location outside the EU does not matter in this respect, as long as their conduct is implemented within the EU.

[Relevant Charts: C3]

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Exercise:

Potz GmbH, Glanz GmbH and Blank GmbH are three big Austrian companies producing household cleaning products. In June 2008, the directors of these companies participated in an international conference on the cleaning business in Europe. Two months later, the prices for the products made by them all rise simultaneously by 10%. Assess this situation in the light of EU law.

Suggested solution:

Such a scenario might involve two different situations:

First, it seems possible that the three companies agreed on the price rise, though this may be difficult to prove. If so, the case involves a horizontal agreement by which prices are fixed within the meaning of Art. 101(1) TFEU. The further conditions for the prohibition under Art. 101(1) TFEU to apply is that the conduct may affect trade between the Member States (inter-state element) and that it has as its object or effect the prevention, restriction or distortion of competition (competition element). The fact that all participating companies are in Austria does not mean that the inter-state element is not present. First, the companies may sell their products in other EU Member States and, second, the Austrian market is susceptible to imports. Conduct meeting the conditions of Art. 101(1) TFEU is prohibited unless an exemption applies, i.e. a block exemption or an individual exemption under Art. 101(3) TFEU. However, price fixing is a hardcore restriction (namely because a price fixing agreement has as its object to restrict the market). Agreements containing hardcore restrictions cannot benefit from the block exemptions.

Second, in the absence of an agreement, it remains that there is parallel behaviour, which raises the question of whether this parallel behaviour is caused by a concerted practice. In this context, it needs to be remembered that parallel conduct may be the natural state of the market, for example where there are only few market players (oligopolistic market). The fact that the companies involved are big might play a role in this context. If the parallel conduct is the natural state of the market, rather than that of a concerted practice, then Art. 101(1) TFEU does not apply (Woodpulp). If not and if it can be proven that the companies exchanged price information, then there is a presumption of a concerted practice (see further question 2).

[Relevant Charts: C6 – C22]

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Exercise:

Two beer brewing companies, Kilsen and Amphtel, are operating in the horeca (hotels, restaurants, and cafés) sector of an EU Member State, each of them holding roughly a 37.5% share of that market. They independently set their wholesale prices (i.e. the prices they charge to their outlets). The basic list prices are publicly available. Each company reserves, however, the freedom to negotiate secret rebates bilaterally with its outlets. They agree to exchange

information about their sales volumes for every type of beer sold and to do so on a monthly basis, with the purpose of having some “guidelines” as to how the market will behave and adapt their planning accordingly. In doing so, are they liable of infringing EU competition law?

Further, does it make a difference if the product concerned is not beer but milk?

Suggested solution:

According to the Court’s case law, the exchange of sensitive business information is deemed to constitute a concerted practice within the meaning of Art. 101(1) TFEU, even if it does not lead to adaptations in the companies’ conduct (Case C-49/92 P Commission v Anic Partecipazioni SpA [1999] ECR I-4125). This is a rebuttable presumption. A concerted practice is prohibited if the other conditions are met, i.e. the conduct may affect trade between the Member States (inter-state element) and that it has as its object or effect the prevention, restriction or distortion of competition (competition element) and if there is no exemption (block exemption or individual exemption under Art. 101(3) TFEU). The large market shares indicate the possibility that the relevant market only consists of very few players (oligopolistic market). In that case, it might well be that parallel conduct is the natural state of the market, rather than that of a concerted practice. In that case, Art. 101(1) TFEU would not apply.

[Relevant Charts: C8]

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Exercise:

Mr. Schmidt is a judge in Freiburg, Germany, and is very eager to improve his knowledge about European law. During a course he has heard that a “dominant position” is one of the requirements in the context of Art. 102 TFEU. Mr. Schmidt asks you to explain to him how to determine whether in a given case an enterprise is in a dominant position. He would also like to know whether a dominant position is considered something bad under EU law.

Suggested solution:

A dominant position is not by itself considered something bad under EU law. According to the Court of Justice (Michelin), such a position simply implies a particular responsibility on the economic operator involved. Art. 102 TFEU only prohibits the abuse of such a position. The existence of a dominant position depends on the strength of the economic operator in question in the relevant market (United Brands). The relevant market must be determined in terms of the products and services (substitutability) and the geographical dimension (a sufficiently homogeneous area), sometimes it also has a temporal dimension. The main criterion for determining the economic operators’ strength in the relevant market is his/her/its market share. If the market share is less than 50%, other factors (e.g. relative market shares, financial strength, technical advantages) will be needed in order to support a finding of dominance.

[Relevant Charts: C28 – C32]

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Exercise:

Assume that the two retail companies established in the EU, Save and Lüdl, wish to merge into one single company. In developing their plans in this regard, do they have to consider EU law?

Suggested solution:

Indeed, they do. If the planned merger meets the thresholds laid down in the Merger Regulation, then that Regulation applies. The planned merger has to be notified to the Commission, which has to approve it before it can be effected. The Commission will examine whether the planned merger would significantly impede effective competition in the internal market or in a substantial part of it. If the planned merger does not meet the thresholds of the Merger Regulation, the merger will have to be examined under national competition law (i.e. it needs to be notified to the national competition authorities).

[Relevant Charts: C39 – C40]

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Exercise:

How is the term “state aid” defined? To what extent is state aid acceptable under EU law?

Suggested solution:

The term “state aid” denotes a financial advantage granted in a selective manner by the State or through State resources. State aid is acceptable if either 1) the other conditions mentioned in Art. 107(1) TFEU are not fulfilled (i.e. the aid does not affect trade between Member States or it does not distort or threaten to distort competition) or 2) it falls under the block exemption or under a derogation listed in Art. 107(2) or (3) TFEU, Art. 106(2) TFEU (services of general economic interest) or Art. 93 TFEU (rail, road and inland waterway transport). If it constitutes state aid, the Commission still has to approve it. Only in the case of the block exemption is a notification not necessary.

[Relevant Charts: C48 – C55]

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Exercise:

In an EU Member State, the formerly state-owned airline has been privatized. Unfortunately, it does less and less well and finally threatens to go bankrupt. In order to save it, a new shareholding company is set up which takes over the assets of the old company. In this new company, the State holds 80% of the shares. However, economists are warning that the reorganisation has not been taken sufficiently seriously. They are unanimous that the airline has too many large airplanes, too many employees and too many economically non-viable destinations to which it flies. The economists therefore predict that is impossible for the new company to operate without very grave losses. Against this background, some citizens of the relevant Member State complain that their tax money is being wasted by putting it into this company and that in addition such an investment is contrary to EU law. A low cost airline operating in the same country is also unhappy and thinks that EU law is being infringed. Do you agree?

Suggested solution:

Participation in the capital of a company is a form of state aid (Art. 107 TFEU) if a private investor would not have made the same investment (market economy investor principle). It is not acceptable if it meets the other conditions stated in Art. 107(1) TFEU (effect on trade, distortion of competition) and if it cannot be justified (Art. 107(2) and (3) TFEU). In a case like the one at issue, one should check the Commission’s Guidelines on State aid for rescuing and restructuring firms in difficulty.

[Relevant Charts: C49 – C50]

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