Agreements, decisions and concerted practices prohibited under CSME competition law Article 177(1) (a) RTC prohibits

any agreement between enterprises, decision of associations of enterprises and any concerted practice by enterprises, which have as their object or effect restrictions on competition within the Community. In order to be within the prohibition any arrangement within the scope of Article 177(1)(a) RTC must have appreciable cross-border effect . Article 177(2) RTC provides some examples of prohibited arrangements set out in Article 177(1)(a) RTC. Under Article 177(3) RTC any prohibited agreement or decision is null and void (see Chapter). Concerted practices are not mentioned as they are informal arrangements and therefore cannot be rendered void. Arrangements which fall within the scope of Article 177(1)(a) RTC may escape the prohibition if they meet the criteria set out in Article 177(4) RTC. Horizontal and vertical agreements Horizontal agreements are those which are entered into between enterprises that compete with each other at the same level of the production/distribution chain, for example, agreements between producers, or m. Vertical agreements are those which are entered into by enterprises which operate at different levels of the production/distribution chain, for example, agreements between producers and retailers. The enterprises involved do not, in any event, compete with each other because they operate at different levels of the market. manufacturers, or retailers

Horizontal agreements Horizontal agreements may be perfectly lawful, e.g. co-operation and specialisation agreements, even though they may contain anti-competitive clauses which may bring them within the scope of Article 177(1)(a) RTC. However, the last mentioned agreements are not the main concern of Article 177(1)(a) RTC which will be primarily used to combat collusive arrangements between competitors and potential competitors. The meaning of an agreement, decisions and concerted practices EU competition law, as well as CSME competition law, distinguishes between various forms of prohibited co-operation between undertakings. None is defined by either the RTC or the EU Treaties. The ECJ, when finding itself having to define them, embraced an expansive and flexible approach rather than a narrow, legalistic one. The concept of agreement EU law has adopted a pragmatic approach to the identification of an agreement within the meaning of Article 101(1) TFEU. In Case T-41/96 Bayer the General Court defined the concept of an agreement, in the following terms:

. . the concept of an agreement within the meaning of [Article 101(1) TFEU], as interpreted by the case-law, centres round the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties intention. Case T-99/04 AC-Treuhand The concept of a single, overall agreement The ECJ in Case C-49/92 P Anic held that an undertaking may be held responsible for the conduct of other undertakings which participated in the same infringement: . . . where it is proved that the undertaking in question was aware of the unlawful conduct of the other participants, or could reasonably foresee such conduct, and was prepared to accept the risk. Such a conclusion is not at odds with the principle that responsibility for such infringements is personal in nature, nor does it neglect individual analysis of the evidence adduced, in disregard of the applicable rules of evidence, or infringe the rights of defence of the undertakings involved. The concept of a single, overall agreement eases the evidentiary burden imposed on the European Commission in that it establishes a presumption that an undertaking will be liable for all aspects of a cartel, even thus it had not participated in all arrangements made by the cartel if it can be shown that it was aware of the unlawful conduct of other participants, or could reasonable foresee such conduct, and was prepared to accept the risk. aggregation into a single infringement of various complex arrangements made by a cartel which take place over a lengthy period of time and often involving many countries entails that the European Commission is not required to make a distinction between various form of collusion(Consumer Detergents case).

Participation in meetings Under EU law there is a presumption that when an undertaking participates in a meeting during which its competitor discloses its future policy regarding the relevant market, that undertaking takes account of such information for the purpose of determining its own conduct on the market. This is a rebuttable presumption in that unless an undertaking distances itself publicly from what was discussed during an anti-competitive meeting it will be presumed to have participated in an anti-competitive agreement or a concerted practice. The General Court held that the concept of an undertaking publically distancing itself must be interpreted narrowly (Case T-61/99 Adriatica di Navigazione. An undertaking must: report to the relevant administrative authorities, or

make a statement to other participants of a cartel expressing its intention to terminate its participation in an agreement/concerted practice and ensure that other participants are convinced that it has terminated its participation in the cartel (Case C-510/06 P ADM)

Non-implementation by an undertaking of any unlawful policy discussed at a meeting will not be sufficient to exclude it from liability under Article 101(1) TFEU (Case T-334/94 Sarri) Subsequent conduct on the relevant market contrary to what was discussed at an anticompetitive meeting will not be enough to exclude the liability of an undertaking. (Industrial and Medical Gases); Silence at an anti-competitive meeting will amount to tacit approval and thus render the participating undertaking liable under Article 101 TFEU (Case T-208/06 Quinn Barlo)

Decisions by associations of undertakings Under EU law, both the concept of an associations and the concept of a decision have been interpreted broadly. The matter of whether a non-binding recommendation of an association may amount to a decision within the meaning of Article 101(1) TFEU was considered by the ECJ in Case 8/72 Cementhandelaren

Information exchange system that can be put in place by a trade association The following three factors will decide whether such a system is compatible with EU law: o The degree of concentration of the market. For example, in an oligopolistic market competition is already greatly reduced, and thus any exchange of information substantially risks impairing the competition which exists between traders; Whether such a system reveals to all the competitors the market positions and strategies of the various individual competitors. Thus, an exchange of information system must not reduce or remove uncertainty regarding the conduct of competitors in the relevant market; Whether non-discriminatory access to the system is available, in law and in fact, to all operators in the relevant area.

Concerted practices Three cases decided by the EU courts have, for the purposes of EU law, defined the meaning of a concerted practice. Case 48/69 ICI (Dyestuffs) The ECJ held that a concerted practice refers to a form of cooperation between undertakings which, without having been taken to the stage where an agreement

properly so-called has been concluded, knowingly substitutes for the risk of competition practical cooperation between them; Joined Cases 4048/73, etc, Suiker Unie. The ECJ held that That the criteria of co-ordination and co-operation must be understood in the light of the concept inherent in the provision of the Treaty relating to competition that each economic operator must determine independently the policy which he intends to adopt on the [internal market]. It is necessary that undertakings have direct or indirect contact, the object or effect of which is to either influence the conduct of an actual or potential competitor or to disclose to such a competitor the course of action that the colluding undertakings have agreed to adopt, or envisage adopting, in the relevant market. In Joined Cases T-25 to 104/95 Cimenteries the General Court: o o First, made a distinction between passive reception of information and active reception of information; and Second, stated that: a concerted practice implies, besides undertakings concerting together, conduct on the market pursuant to those collusive practices, and a relationship of cause and effect between the two.

Concerted practices-definition For there to be a concerted practice there must be direct or indirect contact between competing undertakings which influences the conduct on the market of an actual or potential competitor, the object or effect of such contact must be to create conditions of competition which would not correspond to the normal conditions of the market in question; and a relationship of cause and effect between the concertation and the market conduct. Case T-208/06 Quinn Barlo

Direct or indirect contact between undertakings This requirement raises two questions: First, what kind of information can be exchanged between competing undertakings without breaching Article 101(1) TFEU? (see Guidelines on the Applicability of Article 101[TFEU] to Horizontal Co-operation Agreements) Second, whether participation in meetings attended by competitors will be sufficient to prove the existence of a concerted practice? (See Case C-8/08 T-Mobile) Conduct pursuant to direct or indirect contact and the relationship of cause and effect between the concertation and the market conduct In Case C-199/92 Hls the ECJ established:

a rebuttable presumption that concertation is followed by anti-competitive conduct if an undertaking taking part in the concertation remains active on the relevant market; a concerted practice (as well as an agreement or a decision) is within the scope of Article 101(1) TFEU, even in the absence of anti-competitive effects on the market when it imposes restrictions on competition by object.

Parallel behaviour in an oligopolistic market: Joined Cases 89, 104, 114, 116, 117 and 125129/85 Ahlstrm and Others [Re Wood Pulp Cartel] Concertation must be the only plausible explanation for the parallel conduct. The European Commissionin the Cartonboard cases stated that unless direct proof of collusion were forthcoming - which the undertakings concerned would go to some length to ensure it was not, undertakings in an oligopolistic market may rely on the defence of oligopolistic interdependence to justify parallel price increases.

The burden of proof The European Commission must prove the following: The existence of a prohibited form of co-operation between undertakings; Which has as its object or effect the prevention, restriction or distortion of competition, and Which has effect on trade within the EU

The distinction between infringement by object and infringement by effect In Case 56/65 STM the ECJ stated that the terms object and effect are to be read disjunctively. The restriction of competition by object entails a rebuttable presumption that collusive conduct has anti-competitive market effects. Not only actual, but also potential effects are sufficient to trigger the application of the presumption. Examples of restriction by object in respect of horizontal agreements are: price fixing, exchange of information which reduces uncertainty about future conduct of competitors in the relevant market, market-sharing agreements, and collective exclusive dealing. The distinction between infringement by object and infringement by effect When it has been established that an agreement, decision or a concerted practice does not restrict competition by object, the European Commission must assess whether they restrict competition by effect. The case law shows that the European Commission is required to determine, at the least, what would be the state of competition, actual and potential, in the relevant market if the agreement,

with its alleged restrictions, did not exist. This is known as a Counterfactual standard or But for analysis. Exemption under Article 177(4) RTC Article 177(4) RTC states: An enterprise shall not be treated as engaging in anti-competitive business conduct if it establishes that the activity complained of: (a) contributes to: (i) the improvement of production or distribution of goods and services; or (ii) the promotion of technical or economic progress, while allowing consumers a fair share of the resulting benefit; (b) imposes on the enterprises affected only such restrictions as are indispensable to the attainment of the objectives mentioned in sub-paragraph (a); or (c) does not afford the enterprise engaged in the activity the possibility of eliminating competition in respect of a substantial part of the market for goods or services concerned.

ARTICLE 177(4) RTC The literal interpretation of Article 177(4) (b) and (c) RTC suggests that the two negative criteria for exemption are alternative rather than cumulative. Accordingly, it seems that if both positive criteria set out in Article 177(a) RTC are satisfied, anti-competitive business conduct will be eligible for exemption if it satisfies either the criterion set out in Article 177(4) (b) or Article 177(4)(c) RTC.

Criterion 1: Improvement in the production or distribution of goods or the promotion of technical or economic progress. It is sufficient if only one of the four possibilities set out in Article 174(4)(a) RTC occurs. In applying the first criterion, any advantages flowing from the business conduct must be compared with any disadvantages resulting from the restriction that it imposes on competition. In order to qualify for exemption the advantages must prevail over the disadvantages. According to the European Commissions Guidelines on the Application of *Article 101(3) TFEU] all types of objective economic efficiencies can be claimed by undertakings. Under EU law there is a debate as to whether only economic improvements should be taken into account or whether non-economic improvements, e.g. full employment and the protection of the environment, should also be considered when applying Article 101(3) TFEU. Criterion 2: benefit to consumers

 Under EU law, the term consumers applies not only to final consumers, but also to wholesalers and retailers, who purchase products in the course of their trade and business. The European Commission takes into consideration the interests of the majority of consumers. In VBBB/VBVB. The fair share concept entails that the pass-on of benefits must at least compensate consumers for any actual or likely negative impact caused to them by the restriction of competition found under Article 101(3) TFEU. As a result, the net effect of an agreement on the affected consumers must at least be neutral. If they are worse off, the second criterion will not be fulfilled. The term benefit covers not only reduction of purchase prices, but also improvements in the quality of products, improvement of after-sales service, the possibility of a greater range of products, etc.

Criterion 3: indispensable restrictions This first negative criterion requires that the anti-competitive activity complained of must not impose on the enterprises affected restrictions which are not indispensable to the attainment of the objectives specified in Article 177(4)(a) RTC. This requires that the anti-competitive effects of the activity in question must not go beyond what is absolutely necessary to achieve the objectives regarded as beneficial. This will be assessed in the light of the principle of proportionality. Criterion 4: no possibility of eliminating competition The application of this criterion ensures the protection of reasonable rivalry on the relevant market. The European Commission Guidelines on the Application of Article 101(3) TFEU state that: When competition is eliminated the competitive process is brought to an end and short-term efficiency gains are outweighed by longer-term losses stemming inter alia from expenditures incurred by the incumbent to maintain its position (rent seeking), misallocation of resources, reduced innovation and higher prices.