Sample Law Paper on EU Competition Law

The EU competition law arises from articles 109 to 110 of the Treaty of the Functioning of the European Union. EU competition Law regulates the business behavior of companies operating within the single market to ensure that they do not engage in anti-competitive practices. It prevents dominant companies from abusing their market dominance and prohibits a group of companies within the EU from forming cartels. The EU competition law is also concerned with mergers and acquisitions.  Mergers and acquisition law ensure businesses do not conglomerate and create anti-competitive business environment that stifles the growth of small businesses within the EU. The EU competition law is often legal commentators as a weapon against the growing influence of American companies operating within the EU. American companies have suffered heavy penalties for engaging in anti-competitive practices.

Cartel Operations in the European Union are investigated and prosecuted by the European Commission or the National Authorities operating within the EU. The Commission has broad powers of investigation and taking statements from businesses that are suspected of engaging in cartel activities. The Commission can also penalize businesses for violating procedural rules during the course of the investigation such as the failure to provide business records. The National Courts must apply anti-trust rules in their jurisdiction together with Article 101 and 102 of the TFEU.

Article 101(1) TFEU states that all the agreements within the undertakings and the decisions by the associations of the undertakings and the concerted effort by association or businesses that may adversely affect business within the European Union member states are prohibited. Article 101(1) TFEU provides a list of practices that are considered to be in violation of the EU competition law (Ashton). These practices are directly or indirectly fixing selling or purchase prices of commodities and services traded within the EU. Limiting or controlling production, markets, technical development or investments and the share of the markets. Article 101 of the TFEU also prohibits horizontal and vertical agreements within the EU that are meant to control the market share or limit production of a commodity.

Article 101(2) TFEU states that agreements that are prohibited by Article 101(1) are void without need for further investigation by the commission. In common practice, any agreement that fixes prices, shares market and controls the production of goods and services is considered to be an agreement restricting competition within the meaning of Article 101(1). The European Court of Justice has found that covenants in restraint of trade are hard core and often lead to deleterious consequences in the market.

Article 101 of the TFEU applies to agreements that are made by corporations and entities located outside the EU but have effect on competition within the EU. Manufacturers of cartelized products that are located outside the European Union make also become subject of investigation by the Commission if the individual components are assembled within the EU and sold as a different product. The decisive factor in determining whether a restrictive agreement is subject to Article 101 of the TFEU is determining where the agreement takes effect (Ashton). If the agreement takes effect in the EU but the parties are located outside the EU then Article 101 is applicable. In addition, the European Court of Justice has followed the “effects doctrine” in interpreting the provisions of Article 101 has stated that pubic international law should be applicable to all.

The Paraffin Cartel

On 1 October 2008, the European Commission found that ENI, ExxonMobil, Hansen and Rosenthal/Tapadero, MOL, Repsol, Sasol, Shell, RWE, and Total had taken an extensive interest in Europe-wide paraffin wax cartel and actively participated in anti-competitive trade practices for a period of 13 years starting from 1992.  The Commission relied on over 50 pieces of evidence and several restricted agreements collected from all over Europe which included letters, faxes and messages the cartel individuals settled target costs and observed their execution, dispensed clients just as pieces of the overall industry and traded monetarily delicate Information. Article 101 (3) of the TFEU stated that such contracts are void on their face value even before interpretation by the commission (Jones). As per the European Commission, the general arrangement was to diminish and avoid rivalry on costs so as to balance out or raise costs by concurring on least costs and cost increments. The cartel individuals went for diminishing or notwithstanding killing challenge with a definitive objective of accomplishing higher benefits and higher returns of investments in their business operations (Jones). Four gatherings recognized their investment in the cartel and participated with the Commission under its tolerance program. The Commission forced the culpable business entities to pay fines of more than EUR 676 million on all gatherings of organizations.

The companies held regular meetings to discuss the manner in which they would control and dominate the paraffin and wax market. The large oil producers engaged in market allocation and exchanged sensitive commercial information that would give  advantage to the bearer. Sasol was the leader of the Cartel and as such it’s sales increased by 50%.  Paraffin Wax is the main supplier of candles and when the cartel was in full operation it controlled 75% market share and offered almost every household in Europe was adversely affected by the actions of the paraffin cartel.

Remedies in C-597/13 P Total SA v Commission and C-634/13 P Total Marketing Services SA v Commission

The Court of Justice of European Union held that the General Court had erred in law and fact reduced the fine incurred by €128 million to €125 million (Aston). The ruling follows the finding by the Commission whereby the Commission found that Total France engaged in anti-competitive practices.  In addition, the Commission was of the opinion that Total and its auxiliary, Total France, had, with different endeavors, took an interest in a cartel concerning the EEA showcase for paraffin waxes (from 1992 to 2005) and the German market for slack wax (from 1997 to 2004). Absolute France was held mutually and severally at risk with Total to pay a fine of €128 163 000 (Total, as a parent organization, being subject for the unlawful lead of its completely claimed auxiliary). The subsidiary company had requested that the General Court cancel the Commission’s holding because it was a different company and being a multinational in the energy sector it was inevitable for subsidiaries to take a different and independent role from their parent company. In a judgment dated 13 September 2013, Ashton reports that the General Court rejected Total’s application. By and by, in the parallel case with respect to the utilization of the backup, The European Court of Justice agreed with the pleadings filed by Total France and reduced the fine to €125 459 842. The reduction of the file is not evidence that Total France was not guilty of engaging in anti-competitive practices but rather that the General Court had misapplied the law in fining Total France.

With respect to Total’s intrigue, the Court of Justice takes note of that in a circumstance where the obligation of a parent organization is simply subordinate of that of its auxiliary and where no other factor exclusively mirrors the lead for which the parent organization is held subject, the obligation of that organization can’t surpass that of its auxiliary. Besides, the Court noticed that where a parent organization and its auxiliary each bring parallel applications having a similar item (just like the case before the General Court), there isn’t just the likelihood, regarding the application brought by the parent organization, of having respect to the result of the utilization of the auxiliary from which its obligation is altogether determined, in any case, the parent organization must, on a fundamental level, likewise advantage from any decrease in the risk of its backup which had been ascribed to it. Thus, the Court held that the General Court failed in law in not having respect to the result of the Total France judgment opposite Total. The Court accordingly sets aside the judgment of the General Court in so far as that court did not bring the fine forced on Total into line with the fine forced on Total 1 Commission Decision C (2008) 5476 last of 1 October 2008, identifying with a procedure under Article [81 EC] and Article.

 

All out France’s allure was brought by the aberrant methods for Total Marketing Services. France. In practicing its capacity to correct, the Court in this way sets the fine forced on Total together and severally with Total France at €125 459 842. Absolute France, as far as it matters for its, guarantees a decrease in the fine on the ground most importantly that it stopped taking an interest in the cartel from May 2004 and furthermore that it interfered with its support in the cartel from May 2000 to June 2001.

The Court holds that the General Court failed in law in thinking about that an endeavor’s publicly separating itself from a cartel establishes the main methods accessible to an undertaking of demonstrating that it has stopped taking an interest in a cartel, even for the situation where that organization has not taken an interest in some enemy of focused gatherings. All things considered, that blunder of law can’t prompt the putting aside of the judgment in so far as Total France’s interest in the encroachment in those periods is concerned (Parcu, Luigi, Monti, and Botta). As to the period between May 2004 and the finish of the cartel at issue, the Court holds that in spite of the fact that it didn’t all things considered take part in the last three deceitful gatherings of the cartel between 12 May 2004 and 29 April 2005, Total France did not stop taking an interest in the cartel, based on target and reliable indicia surveyed related to the way that that endeavor did not remove itself publicly from the cartel.

 

In connection to the period between May 2000 and June 2001, the Court holds that there are, essentially, objective and predictable indicia which permit the finding that Total France’s interest in the cartel was not intruded on amid that period; the way that Total France’s delegate left a meeting in May 2000 (Parcu, Luigi, Monti, and Botta). This suspicious act is clarified by close to home reasons, and can’t be viewed as an articulation of Total France’s very own goal to remove itself from the cartel, especially on the grounds that, after that delegate’s substitution by another worker, Total France started to take an interest in the conniving gatherings once more.  The initiative by Total France made sure that the cartel was operational and it operated on regular basis. In addition, documents rendered before the court as evidence indicate that some of the meetings of the cartel were conducted in Paris.

Any party that considers itself to be adversely affected by the cartels can approach the court and  seek for damages. Parrafin waxes are used in a couple of items such as candles, paper cups, plates, cheese and as adhesives in packaging. Most of the companies that formed he cartel are petro-chemical companies with  global presence in the oil industry.

 

 

Differences in Approach between Horizontal and Vertical Cooperation

EU generally defines horizontal agreements as the “cooperation between two or more actual or potential competitors” and vertical agreements as “cooperation between companies operating at different levels of the production or distribution chain.” The CJEU takes that efficiency approach and fails to make a clear distinction between the vertical and horizontal cooperation. This is perhaps guided by the fact that EU is strongly influenced by the strong principles of market integration.

Nevertheless, case law provides an opportunity to examine the CJEU’s approach to distinguishing between vertical and horizontal cooperation. In the case of Cons ten and Grundig the AG tried arguing that article 101 TFEU was not applicable for an agreement between a distributer and producer because they were not competitors. However, the court correctly identified the vertical agreement and stating that wording of article 101 included “all agreements” that could harm competition within the common market. This is to mean that EU does not require a distinction between the horizontal and vertical agreements due to the wording of article 101. For the, Société Technique Mini ere involving French and German companies a vertical agreement was found to be anticompetitive because it limited the competition at a distribution level because all distributers and consumers can only obtain supplies from the same producers. On the other hand, in the case of Rhone –Poulenc, Polypropylene Producers the ruling indicated that there was a need for action to be taken by the manufacturers in sharing useful information that affected their industry and therefore the horizontal agreement was not anti-competitive. In the case of the British Sugar involving the British Sugar Manufacturers and Traders the AG stated that “Pricing cartels normally serve to safeguard particularly high prices, and are therefore, in principle, liable rather to cause or increase imports…” and ruled that the horizontal agreement was anti-competitive. Finally, in the case of Sane-Equifax, involving Spanish Financial Institutions exchange credit information the EU court ruled that the horizontal agreement was essential, as “Information sharing between the banks was beneficial to the industry because it helped prevent bad loans to borrowers who could not satisfy the loans.

It is paramount to note that the distinction between vertical and horizontal agreements in the United States jurisprudence play a crucial role unlike in the EU where it is not emphasized. In the United States, there is an increased willingness to condemn horizontal cooperation readily and apply per se approach while having a rule of reason approach to vertical agreements.  Majority of the companies that were penalized for engaging in Anti-competitive practices within the EU have parent companies located in the United States. The different legal environments and business opportunities across the Atlantic make legal compliance an expensive venture.

Factors Determining Assessment to be Used

Having considered the above legal background across the EU it is only fair to develop an overview of the factors that ought to be applied in the European context to determine assessment that should be applied whether the ‘object’ /rule of reason assessment or the strict/’per se. The key factor that should be used to determine the application of per se rule is only in the manifestly anticompetitive cases. Otherwise, all the other cases should apply the rule of reason. This is to prevent the obvious injustice that would arise in the cases of frivolous lawsuits and unsubstantiated charges. The American landmark case of United States v. Arnold, Schwinn & Co (1967). that had been primarily set pace for the per se rule was later found to wrongful with the Supreme Court failing to apply it in the Continental Television v. GTE Sylvania (1977). In fact, the court stated that “per se rules of illegality are appropriate only when they relate to conduct that is manifestly anticompetitive.” This approach has been consistently applied in the American competition law jurisprudence in cases such as Broadcast Music v. Columbia Broadcasting System (1979) where all judged led by White J, were unanimous in holding that such practices should instead be examined under the rule of reason to determine if it is unlawful. It is apparent that the current trend in competition law and anti-trust law jurisprudence it to apply the rule of reason in most cases with the exception of the blatant, obvious and manifestly unjust cases where the per se rule applies.

The European Union has been criticized for using its Anti-trust laws to crack down on American companies operating in its market space and promote the interests of  local companies. The EU has not escaped the image  of a biased regulatory system that is hellbent on protecting local companies at the expense of  multinationals. The Paraffin mafia is a case in point of businesses that have entered into contracts in the restraint of trade. By organizing the cartel, the petro-companies recorded significant boost in their sales. Violation of  Article 101 of the TFEU is usually detrimental for companies because of the high fines that are likely to be incurred from the Commission.

 

 

Works Cited

Ashton, David. Competition damages actions in the EU: Law and practice. Edward Elgar

Publishing, 2018.

Jones, Alison, and Brenda Sufrin. EU competition law: text, cases, and materials. oxford university

Press, 2016.

Parcu, Pier Luigi, Giorgio Monti, and Marco Botta, eds. Abuse of Dominance in EU Competition

Law: Emerging Trends. Edward Elgar Publishing, 2017.

Turner, Jonathan. Intellectual Property and EU Competition Law, 2 u. Oxford University Press, Oxford, 2015.