This publication provides a general overview of the competition rules applicable to companies carrying on business in Europe or whose business conduct may have effects in Europe. It identifies the broad areas where there is scope for investigations or legal proceedings under the competition rules.1
The Treaty on the Functioning of the European Union (TFEU) provides for a single internal market with free movement of goods and services throughout the European Union (EU). To achieve this, it includes rules to ensure that competition within the EU is not restricted or distorted inter alia by cartels or anti-competitive agreements, abuses of market power, certain mergers and acquisitions or unfair State aid. These European competition rules have the force of law throughout the European Economic Area (EEA). They are enforced by the European Commission and, in certain circumstances, by the Member States’ national competition authorities (NCAs). The countries in the EEA also each have their own domestic competition rules that tend to be modelled on the EU rule.2
The general antitrust rules
The EU’s general antitrust rules are set out at Articles 101 and 102 TFEU.
Article 101(1) prohibits any agreement or concerted practice – formal or informal, written or unwritten – made between two or more “undertakings” (independent businesses) that may affect trade between Member States and that has the object or effect of preventing, restricting or distorting competition. It catches:
secret price-fixing or market-sharing cartels, as considered in Chapter 2. These are viewed as serious “hardcore” infringements (per se violations of the antitrust rules), which will almost always be prohibited (and will not meet the exemption criteria of Article 101(3)); and other agreements between businesses that have the object or effect of restricting competition, for example, by including exclusive dealing provisions or territorial restrictions. Depending on the surrounding circumstances (and provided they are properly drafted and implemented) many business agreements of this type may nevertheless be compatible with the competition rules – either because they fall outside the scope of the Article 101(1) prohibition or because they meet the exemption criteria of Article 101(3): see Chapter 3 for general observations, Chapters 4, 5 and 6 for more specific observations on “horizontal” agreements, “vertical” agreements and intellectual property licensing, and Chapter 8 for observations on strategic alliances and joint ventures (JVs).
Article 102 makes it illegal for dominant companies to abuse their market power in a way that may affect trade between Member States (considered in Chapter 7. Although these special rules on unilateral market behaviour and conduct only apply to undertakings holding a dominant position on a relevant market, the market can be defined narrowly for these purposes.
1 For more detailed guidance on how the competition rules are applied, see the various Slaughter and May publications referred to elsewhere in this publication.
2 The current 27 EU Member States are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal,
Romania, Slovakia, Slovenia, Spain, and Sweden. The United Kingdom left the EU on 31 January 2020 and the transition period, in which EU competition law continued to apply in the UK, expired on 31 December 2020. By virtue of the 1992 EEA Agreement, the EU competition rules also extend to three other countries: Iceland, Liechtenstein and Norway (sometimes referred to as the EFTA contracting states). Together, the EU Member States and EFTA contracting states make up the EEA.
Agreements caught by the Article 101 or 102 prohibitions are unenforceable and expose the parties to third party actions for damages in national courts within the EEA.3 In addition, the Commission and NCAs can investigate and have the power to impose substantial fines for serious breaches (of up to 10% of worldwide group turnover). The European competition rules apply even to conduct or agreements entered into outside the EEA if they have effects within the EEA (the “effects doctrine”).
The merger control rules
The EU Merger Regulation complements Articles 101 and 102 by allowing the Commission to control certain “concentrations” (mergers, acquisitions and JVs) involving companies operating in Europe, as considered briefly at Chapter 8. If the parties meet certain worldwide and EU-wide turnover thresholds they must generally notify the deal to the Commission, answering a detailed questionnaire (Form CO). Where a merger is not subject to notification under the Merger Regulation, national merger control regimes may instead be applicable at the Member State level. The rules also provide for the possibility of parties benefiting from this “one-stop shop” principle of EU-level notification in cases where the deal would otherwise be notifiable in at least three of the 27 Member States.
Rules on State aid and liberalisation
The EU competition rules also contain special rules aimed at preventing Member States from distorting competition through the granting of State aid (considered in Chapter 9). There also are special rules applicable to State monopolies that seek to encourage the liberalisation of markets within the EU.
Enforcement of the EU competition rules by the Commission and NCAs
The principal enforcement agency for the EU competition rules is the Commission, through the Directorate-General for Competition (DG Competition) based in Brussels. The NCAs also have powers to apply the European competition rules (as well as domestic competition rules) as explained below.
The European Commissioner responsible for competition matters is Margrethe Vestager. DG Competition is headed by its Director-General, Olivier Guersent. In addition there are three Deputy Director-General positions with special responsibility for respectively (a) Antitrust, (b) Mergers, and
(c) State aid. There are nine Directorates within DG Competition:4
Directorate A: Policy and Strategy Directorate B: Energy and Environment Directorate C: Information, Communication and Media
3 Although the precise rules of standing, procedure and quantification of damages still varies between the Member States, Directive 2014/104/EU (OJ 2014 L349/1, 05.12.2014) came into force in December 2014 aimed at harmonising the rules governing actions for damages under national law. Member States had until 27 December 2016 to implement the Directive. If called upon to decide whether particular facts involve infringements of Arts. 101 and 102, a national court is able to request guidance from the
Commission. It is also possible for the national courts to refer questions to the Court of Justice (CJ) for a preliminary ruling under Art. 267 TFEU. In certain circumstances, parties may also be exposed to damages actions elsewhere in the world, for example where the agreement also breaches antitrust law in other jurisdictions.
4 For details of who heads the different Directorates and units, see Commission organigram at http://ec.europa.eu/dgs/ competition/directory/organi_en.pdf.
Directorate D: Financial Services Directorate E: Basic Industries, Manufacturing and Agriculture Directorate F: Transport, Post and other services Directorate G: Cartels Directorate H: State aid: General Scrutiny and Enforcement Directorate R: Horizontal Management (Registry, finance and IT issues within DG Competition) Directorates A to F each have separate units for antitrust, mergers and State aid.
DG Competition also has a Chief Economist, currently Pierre Régibeau, who heads a team of economists (the Chief Economist’s Team or CET) that provides economic support both in individual competition cases and on general policy issues.
Commission decisions can be appealed to the General Court (GC) in Luxembourg under Article 263 TFEU. In turn, GC judgments can be appealed on points of law to the Court of Justice (CJ).
NCAs and the domestic courts are able not only to apply the Article 101(1) prohibition on anti- competitive agreements but also to declare whether the criteria of Article 101(3) are met by a particular agreement. Previously, formal exemptions under Article 101(3) could only be granted by an express decision of the Commission following the submission of a detailed notification by the parties. Council Regulation (EC) 1/2003 replaced this old system of notification and exemption with a system where undertakings are encouraged to “self-assess” whether their conduct and agreements are compatible with the principles of Articles 101 and 102.5 Where disputes on the application of the competition rules arise, the national courts are able to rule on the case (including on the applicability of Article 101(3)), subject to ensuring that their ruling does not conflict with a decision taken or contemplated by the Commission.6
If an NCA applies its national competition rules to an agreement or conduct where trade between Member States is affected, they are obliged (by virtue of Article 3 of Regulation 1/2003) also to apply the EU competition rules. As a result, the vast majority of Article 101 and 102 cases are now handled at the NCA level rather than by the Commission, and a substantial proportion of NCA decisions are based on the EU competition rules rather than solely on domestic competition rules. Generally, national competition rules should not be used to prohibit agreements that are authorised under the EU competition rules nor to authorise agreements that are prohibited under the EU competition rules. However, NCAs may still apply relevant national rules on the prohibition or sanctioning of unilateral conduct where those rules are stricter than the EU competition rules.7
5 OJ 2003 L1/1, 4.1.2003. It is still possible to approach DG Competition (or the NCAs) for guidance on the application of the competition rules to cases that raise novel questions of law or fact that cannot be easily resolved by reference to existing case law or Commission Notices. In exceptional circumstances, the Commission may provide informal guidance in such circumstances by way of a reasoned statement (known as a “guidance letter”), a non-confidential copy of which would be published on DG Competition’s website.
6 The Commission has committed to assist national courts in the application of the EU competition rules by performing the role of amicus curiae. Member States are required to send the Commission copies of national judgments on the application of Arts. 101 and 102 that the Commission then makes available on DG Competition’s website.
7 See observations at para 7.7.
Member States may also continue to apply national laws where the predominant objective of those laws is different from the competition-focused objectives of Articles 101 and 102.8
The Commission and the NCAs cooperate extensively with each other through the European Competition Network (ECN), including in the exchange of confidential information necessary to prove an infringement of the EU competition rules. The ECN serves as a forum for discussion and cooperation for the enforcement of EU competition policy. The various authorities exchange information inter alia using a common intranet, and cooperate through the ECN structures to ensure the efficient allocation and investigation of cases. In principle, the Commission (rather than the NCAs) will generally be seen as the best placed authority to deal with any case where:
the relevant market affected by the agreement or conduct concerns more than three Member States; the agreement or conduct is closely linked to other EU rules that may be exclusively or more effectively applied by the Commission; a Commission decision is needed to develop EU competition policy; or it is appropriate for the Commission to act to ensure effective enforcement of the antitrust rules.
The Commission has substantial powers of enforcement and investigation, including the power to require companies to provide information (so-called “Article 18 requests/decisions”) and the power to conduct surprise inspection visits (so-called “dawn raids”) at company premises or employees’ homes within the EU.9 In addition to its powers to impose fines for substantive breaches of the competition rules, the Commission also has powers to impose structural remedies such as breaking up a dominant company. The Commission may also impose fines for procedural infringements, e.g. failure to provide information.
Investigations may be triggered by one or more of the parties engaged in the relevant conduct approaching the Commission or NCAs (for example, as a “whistleblower” under the Commission’s leniency programme for cartel cases: see Chapter 2), by a third party making a complaint, or by the authorities launching an inquiry of their own initiative. Complaints provide an important source of information for the Commission and the NCAs.
Other general points
It is important to remember that the EU’s competition rules are part of the TFEU, which has much wider policy objectives of creating an “ever closer union” among the peoples of Europe. Given this context, any attempts by businesses to partition the EU’s internal market along national or other territorial lines will be viewed as serious “hardcore” infringements of the competition rules; this extends to any attempts to impose export bans within the EU or to prevent dealers from engaging in “parallel trade” (selling goods in one Member State when the supplier may have envisaged that they would have been sold in another Member State). Other “hardcore” infringements under the competition rules include price fixing (including resale price maintenance) and other market sharing
8 For example, this would permit the application of national legislation on unfair trading practices.
9 For more detailed guidance on dawn raids, see the separate Slaughter and May publication on The EU competition rules on cartels. The Commission’s powers to conduct investigations and dawn raids apply to any suspected infringement of Arts. 101 or 102 (and not just cartels).
agreements (e.g. customer allocation between competitors) and, in particular, arrangements that may be characterised as cartels.
The EU competition rules apply to undertakings rather than to individuals, so employees engaged in anti-competitive practices will not be individually liable to legal action under these rules; however, criminal or other proceedings could be brought under some national rules. In any event, companies will be held liable for the improper actions of their directors and employees. Where employees put their company in breach of the EU competition rules, they may also be subject to disciplinary proceedings for breach of competition law compliance policies that their employer may have in place.
DG Competition’s responsibilities also extend to cooperation with other competition authorities around the world (including the US antitrust agencies). The EFTA Surveillance Authority, also based in Brussels, is a separate body with primary responsibility for enforcing the European competition rules in the three EFTA contracting states (Iceland, Liechtenstein and Norway); it works closely with the Commission.
Any secret agreement or understanding between competitors that fixes prices, limits output, shares markets, customers or sources of supply, or involves other cartel behaviour such as bid-rigging, will almost certainly be regarded as an agreement restricting competition within the meaning of Article 101.10
Serious hardcore infringements
Some agreements caught by the Article 101(1) prohibition are exempted provided that the conditions of Article 101(3) are fulfilled.11 This requires that the efficiencies flowing from the agreement outweigh the anti-competitive effects, with a fair share of those benefits flowing to consumers. Cartels, however, will generally be viewed as involving “hardcore” infringements that can be presumed to have negative market effects. It is therefore almost inconceivable that a cartel agreement would satisfy the criteria of Article 101(3).
There has been a clear trend towards increasing fines for cartels in recent years.
In 2006, the Commission adopted a revised Notice on immunity from fines and reduction of fines in cartel cases (the Leniency Notice).12 The Leniency Notice is essentially based on two principles: first, that the earlier undertakings contact the Commission to blow the whistle on a cartel, the higher the reward; second, that the value of the reward will depend on the usefulness of the materials supplied.
Virtually all Member States have also adopted leniency programmes relating to cartel investigations. However, there is no “one-stop shop” for leniency; an application for leniency to one authority within the ECN is not treated as an application to any other authority. Where a company is considering making an application for leniency to the Commission, it may therefore be in its interest to make parallel leniency applications to other NCAs that have competence to apply Article 101 and that may be considered well placed to act against the cartel. There remains a risk that NCAs that have not received a leniency application (or those that do not operate a leniency programme) will be able to initiate an investigation of their own without the parties being protected by the leniency application made to the Commission. The ECN’s Model Leniency Programme seeks to facilitate the making of simultaneous leniency applications in multiple jurisdictions.
10 For more detailed guidance, see the separate Slaughter and May publication on The EU competition rules on cartels.
11 The four conditions are that: (a) the agreement contributes to improving the production or distribution of goods or to promoting technical or economic progress; (b) consumers receive a fair share of the resulting benefits; (c) the restrictions must be indispensable to the attainment of conditions (a) and (b); and (d) the agreement must not afford the possibility of eliminating competition in respect of a substantial part of the products in question.
12 Commission Notice on immunity from fines and reduction of fines in cartel cases (OJ 2006 C298/17, 8.12.2006).
3. Commercial cooperation generally
If a business’s commercial agreements or trading terms have sufficient effects on competition in the marketplace, they may be caught by the Article 101(1) prohibition. If so, any restrictive provisions are unenforceable (Article 101(2)) – and in serious cases the parties may risk fines – unless they meet the exemption criteria of Article 101(3).
It is important to bear in mind that third parties may take advantage of the competition rules by complaining to the Commission or NCAs about the conduct of others. They can also bring legal action against the parties in the national courts if they suffer damage as a result of the operation of agreements that infringe the competition rules. The burden of proving an infringement rests on the party alleging the infringement. However, any party claiming the benefit of Article 101(3) has the burden of proving that those criteria are satisfied.
These issues are considered in more detail below by reference to three broad categories of commercial cooperation – horizontal cooperation, vertical cooperation and intellectual property licensing – see Chapters 4, 5, and 6.
Need for an appreciable effect on competition
An agreement will only be caught by Article 101(1) if it affects trade between Member States and restricts or distorts competition to an appreciable extent. This is not always easy to ascertain. It is essentially a question of fact and degree, involving identifying:
trade flows that may be affected: if there is no appreciable effect on trade between Member States, any competition issues should be a matter exclusively for national competition rules;13 and the markets that may be affected by the agreement and the parties’ strengths on those markets: an agreement will not be caught if considerations such as the weak market position of the parties mean that it does not have an appreciable effect on market behaviour or on the opportunities available to third parties (customers, competitors and suppliers).
In appraising whether a commercial agreement is caught by the Article 101(1) prohibition, it is therefore necessary to identify the affected markets, taking account of relevant product and geographic market considerations. The Commission’s Market Definition Notice14 provides guidance on how it arrives at a relevant market definition for competition law purposes. The Notice emphasises that every case must be examined on an individual basis. The Commission’s analysis primarily consists of reviewing a product’s characteristics and intended use, taking account of the views of the parties, customers and competitors.
The Commission’s De Minimis Notice deals with the issue of appreciable effect on competition primarily by reference to the parties’ market shares on the relevant market.15 This Notice proceeds
13 In connection with the implementation of Reg. 1/2003, the Commission adopted a Notice providing guidance on this issue of appreciable effect of trade between Member States (including when such effects may be considered de minimis such that the EU competition rules are not applicable).
14 Commission Notice on the definition of relevant market for the purposes of EU competition law (OJ 1997 C372/3, 9.12.1997).
15 Commission Notice on agreements of minor importance that do not appreciably restrict competition under Art. 101(1) (OJ 2014 C291/1, 30.8.2014).
on the basis that agreements between actual or potential competitors are more likely to pose a threat to competition than agreements between non-competitors. Under the Notice:
The Commission accepts that ag