European Competition Law Final

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European Competition Law final
European Competition Law (Maastricht University)
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EUROPEAN
COMPETITION
LAW
NOTES LECTURES 2017
BARBARA GHALI

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Contents
European Competition Law....................................................................................................... 3
Lecture 1: Introduction to EU Competition Law and its field of application................................3
Essentials.............................................................................................................................. 3
Field of application............................................................................................................. 4
Model of rule of reason...................................................................................................... 5
Sources of EU competition law.............................................................................................. 5
Institutional: legal instruments........................................................................................... 6
Link with the internal market.............................................................................................. 7
II. Field of application of EU competition law.........................................................................7
Ratione personae = ‘undertaking’......................................................................................7
Undertakings in the sharing economy................................................................................8
Lecture 2: Restrictive practices (Art. 101 TFEU) - substance.................................................12
Restriction by object v restriction by effect.......................................................................15
Maxima Latvija case........................................................................................................ 16
Rule of reason in competition law?..................................................................................21
Lecture 3: The procedural dimension of EU competition law: leniency programs,
commitments, fining and the damages directive.....................................................................23
Modernization.................................................................................................................. 23
Parallel application of national competition law and EU completion law (art. 3) Reg.
1/2003.............................................................................................................................. 24
Fining............................................................................................................................... 28
Negotiated solutions:....................................................................................................... 30
Private enforcement of competition law...........................................................................33
Damages Directive.......................................................................................................... 34
Lecture 4: Abuse of dominance (Art. 102 TFEU) - Substance................................................36
Abuse of dominance under art. 102.................................................................................37
Dominance...................................................................................................................... 38
Joint dominance.............................................................................................................. 39
Market definition.............................................................................................................. 41
Relevant product market.................................................................................................. 41
Relevant geographic market............................................................................................ 43
Network effects................................................................................................................ 43
Two-sided markets........................................................................................................... 45
Market power................................................................................................................... 46
Abuse.............................................................................................................................. 47
Possible abusive practices..............................................................................................48
Intel case......................................................................................................................... 51
Tying vs bundling............................................................................................................. 52
Mixed bundling................................................................................................................ 53
Defense: objective justification........................................................................................54
Lecture 5: Concentration (merger) control Substance and procedure....................................55
Merger control................................................................................................................. 55
Principles......................................................................................................................... 55
Comparison with art. 101 - 102........................................................................................56

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Concentration.................................................................................................................. 56
Concentration with community dimension.......................................................................57
Exercise........................................................................................................................... 58
Substantive test............................................................................................................... 59
Joint ventures.................................................................................................................. 61
Examples......................................................................................................................... 62
Procedure........................................................................................................................ 64
Investigative powers........................................................................................................ 65
First bridge: the German clause......................................................................................66
Second bridge: The Dutch clause....................................................................................67
Third bridge: art. 21......................................................................................................... 67
Strategic questions.......................................................................................................... 68
New ideas........................................................................................................................ 69
Lecture 6: State aid – Substance and procedure....................................................................70
State aid - General........................................................................................................... 70
Field of application (2nd line) after State Aid Modernization.................................................73
Trade between MS.......................................................................................................... 78
Exemptions (3rd line after) SAM...........................................................................................79
Automatic exemptions..................................................................................................... 81
Facultative exemptions.................................................................................................... 82
System of the block exemption regulation.......................................................................84
Procedure after SAM (state aid measures).........................................................................86
Recovery of state aid....................................................................................................... 88
Lecture 7: Fifth branch – Public undertakings & SGEI art. 106...............................................90
Public undertakings, privatization........................................................................................90
Monopolies.......................................................................................................................... 92
Have a look at the different routes...................................................................................93
SGEI and state aid – Altmark......................................................................................... 103
Conclusions....................................................................................................................... 105
Is the pendulum swinging back?....................................................................................105
Challenges for competition law......................................................................................106

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European Competition Law

Lecture 1: Introduction to EU Competition Law and its field of
application
Written exam – open book

Zie eventueel ook youtube filmpje: https://www.youtube.com/watch?v=v8EhhsTPpUc
Essentials
What is competition?
- Perspective: behavior of economic operators
o Rivalry (between undertakings but also unsettled limits between rivalry!)
o Autonomy
- Perspective: market structure
o Competition <-> monopoly power
Why competition?
There are economic reasons, but not only economic!
- Allocate scarce resources efficiently
- Aversion of monopolies for economic reasons
o Deadweight loss, net loss for society (= being net loss for society in a
situation of monopoly -> consumers lose more than monopolists gain)
o X-inefficiency
- Aversion of monopolies for policy reasons
o No sympathy for monopolistic gains (distribution of income) - We want
freedom of choice in the market!
o No sympathy for concentration of power
o EU: market integration (Internal market without boundaries!) - Competition
law is seen as a part of the internal market.
Why competition law?
- Theoretical (ideal) versus real world
- Prevent/remove barriers to entry
- Place accents
- Enhance consumer welfare!
o What is consumer welfare? Do they only want the lowest price? Or do they
want to have a choice? Is consumer welfare not too materialistic? Is
consumer welfare the only goal?
o Cf 3.10.2014 EC Decision in case C-413/14 P – Intel
- But be aware of the cost of law
Ex. Facebook – WhatsApp merger decision. FB took over WA. The commission looked into
the merger and allowed it. Commission said: we are not going to deal with any non-economic
issues in the assessment of this case. (for ex. Not privacy) The commission is the only
institution that has the power to stop this merger. But the commission said competition law is
about consumer welfare and consumer welfare is about low price. Privacy is not for us, but for
national authorities. Knowing that the national authorities are not able to impose the sanctions
that the commission could impose. ==> A lot of critique
Commission was a little embarrassed ==> fined FB afterwards (some people say this is a
belated sorry of the commission)

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Ex 2: Intel case: Starting in 2002 – Intel abused its dominant position by granting exclusivity
rebates. (Intel told 4 large pc makers: if you use only my chips we will give you some loyalty
rebates)
Commission said it was going to fine, without even checking whether the price of the chips
went up or down. As the consumer choice was limited by Intel’s practice ==> this is
considered to be an offense and Commission doesn’t check effects.
ECJ has found that the general court had erred as it should have checked the effects.==>
Consumer choice is not considered to be sufficient.
Ex. 3: Debate farmers not earning enough money – supermarkets take all the profit.
Commission promotes to sit around the table. Supermarkets to give farmers more profit. This
can be seen as a cartel.
Why rules against State aid?

- Specific for EU
- ‘Common self-discipline’ mutual disarmament
Very strict prohibition against state aid and exceptions.
It is needed because we tend to be less against public intervention than people in US
The MS have the power to give state aid and they make use of it. The richest members give
most state aid.
Ex. BE: hard to do business (high salary costs, social security is expensive)
Undertakings will want some benefits otherwise they leave ==> BE will give them money.
Next day they go to France and tell what BE gave ==> France is now less attractive ==>
France will also give money.
State aid rules: you can’t give state aid.
Competition is not a goal but an instrument!
Free competition was never a goal of the Union, it was always an instrument to achieve the
goals.
If you can show there is a higher nobler goal involved, you may escape from these
prohibitions!
- Competition is not absolute or unlimited, but balanced and ‘workable’
- Free competition is reconciled with other interests ex. Environment, regional
development, R&D, …
- Important social corrections, protection of services of general interest <-> social
exclusion
 EU competition law model
Field of application

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Broad field of application. Not all applications will be sanctioned. There are exceptions and
exemptions. (ex. For the environment) What remains is a core of sanctionable practices which
will be sanctioned harder than almost anything else. Cartel in EU is sanctioned very hard!
How is it sanctioned?
- Very high fines! (truck maker cartel more than 3 billion euro fine)
- Heaviest possible civil sanction = nullity! Agreements are nullified without intervention
of judge
- It is being introduced at national level to go after the persons! Personal sanctions, in
some MS criminal sanctions!
- Idea of the last years: All these sanctions are not enough. Private enforcement. EU
citizens are encouraged by the commission to sue the cartel parties. Damages claims
are becoming as high as public enforcements. There are no territorial barriers.
Model of rule of reason
In this model of rule of reason it is not such a broad field of application. Limits field of
application to those practices where the anticompetitive outweighs the procompetitive. And
you look at these and sanction. End result is the same. You sanction.
The way of getting there is completely different. Typical of EU model is large field of
application and then working with exemptions or exceptions. It is in state aid as under 101
restrictive practices ==> state aid is not completely different.
Sources of EU competition law

Completely different from all rest of EU law. Yes there are treaties, primary and secondary
legislation. But very often most important is interpretative notices (formally not even binding)
or individual decisions which are important because they set precedence. Some sources are
not published.
Sources:
- Primary legislation
o Treaties: TFEU, charter,…
o Based on TFEU: Merger Regulation
- Implementing legislation
o Council: ex. Council regulation 1/2003
o Commission: ex. Transparency directive 106(3) TFEU
- Commission (EC) decisions
- GC/ECJ judgments and orders, national judgments
- Interpretative notices, communications, guidelines, letters (legal value?)
- Reports, green papers, green/white books,…
- (legal doctrine)
Where to find EU competition law? Transparency?

Online, but certain sources are not published. ==> criticism in terms of transparency

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Institutional: Institutions
- EC as α and Ω (<-> dual model, hybrid model)
- GC/ECJ: Division of powers. Often only marginal control.
- Council
- EP
- National judges
- National competition authorities (NCAs)
Parliament is not important in competition law! The commission is everything! Commission
drafts legislation, applies legislation and will be judge examining and fining! Commission
under control of court and ECJ? Not entirely! Marginal control. ==> very strong commission.
Very efficient, but also dangerous. Concentration of power! Some MS had a dual model.
Investigation and decision making is separate.
On national level also 1 institution does everything.
Some MS like France, have a hybrid model. 1 institution, but within that institution the ones
who make the decision will never be involved in investigating the case.
It is a controversial issue.
Institutional: legal instruments

- Mainly regulations and decisions
- (almost) no directives, recommendations
- Soft lawInstitutional: judicial protection
- Laboratory function for the rest of EU law
- All six vertical dimensions are present
- 1 horizontal dimension very well developed
- One set of facts often leads to several procedures
- Exceptional power of competition law
Enforcement of competition is very hard law.
Laboratory function for the rest of EU law.

The perfect law system would be: Every level should have the power to go after each other
level and to go after any others.
If I am a farmer and I feel the Commission is acting in violation of my right, can I go after the
Commission? You cannot always go after the commission as an individual. You have to show
that you have standing and that you are concerned.
Is it possible for the EC to come after you when they think you are in breach of EU law?
Normally not! EC will have to go through the MS.
Ex. You have received state aid that appears to be illegal. EC will have to go through MS. The
same MS that gave you the money will have to ask it back.
In competition law, the EC can come directly after me (fines).

Individual suffered damage and under EU law that individual wants to get damages from the
other individual – this is possible in competition law.

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Link with the internal market

- Competition law does not only protect consumers or competitors but also the internal
market
- Internal market = prohibition for MSs to discriminate or restrict free movement of
goods, persons, services, capital
- Competition law = prohibition for undertakings to enter into cartels, abuse dominant
position, …
- But now: convergence – internal market and competition law work together
- Examples: fixed book price, Becu
What is the link between competition law and internal market law?
Internal market law that is meant to make MS obey. Competition law is drafted for
undertakings. In reality the two are converging. Internal market rules are applied horizontally.
Competition law is being used for MS behavior. It is becoming less ordered, but you can
choose which to use, or both! There is no hierarchy.
Ex. There is a monopoly that you don’t like, how will you attack it?
Under comp law or if state monopoly, under free movement provisions.
Restrictive practices: Cartel agreement

Truck cartel, 1 party that didn’t settle, and they got a fine of EUR 880.000.000
We are not against big, dominant companies. It is only wrong when they abuse this
dominance. Artificially use this power to achieve advantages you would not achieve without
this power.
Merger control is the most lucrative. Let’s not wait for abuse of dominance, let s try to
prevent it. How?
Notify artificial growth (public bid, or takeover) to the commission or to the national cartel
authority, they will decide whether you can continue.
Social exclusion:
- State owned undertakings.
- Service of general economic interest (important services, ex. Utilities)
Three lines of defense: every case should be solved according to the same
scheme of thinking:
- You will argue that EU competition law does not apply to your case
- If that doesn’t work: you say that branch does not apply to your case (ex.
there is no restrictive objective)
- If this doesn’t work: Ok above applies to me, but I have an exemption (ex.

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noble cause)
II. Field of application of EU competition law

To whom does competition law apply? Where does it apply? Are there excluded sectors
where it does not apply?
Ratione personae = ‘undertaking’

To whom? To undertakings. ==> you have to show there is an undertaking involved!
Any entity engaged in economic activity.
- Entity:
o Look at economic reality dependence
o Groups: intra group immunity, fining of groups
o Intermediaries
o Employers, employees, ‘labor’ exemption
o Succession of companies
o Public – private
- Economic activity:
o Case law not consistent ex. Diego Cali <-> Ambulanz Glöckner (see text)
o NEW: Can this differ per MS?
Ex. Parker pen case

Dutch retailer wants to resale parker pens, the Dutch wholesaler can provide them for EUR
10, the retailer checks in Germany, there it would only be EUR 8. The Dutch retailor wants to
order with the German wholesaler, but it was not possible because the retailer was a Dutch
company.
Which of the 5 branches would you apply to this case?
Restrictive agreement. Restricting movement of pens and restricting competition.
Combination of prohibition active and passive selling in the agreement between the
wholesaler and the head office. Europe really dislikes this! This is hardcore cartels!
Dutch retailer goes to court, court asks court in LUX and court cannot do anything about it.
Court checked:
- Whether there is an undertaking involved – in the view of the court the HO +
wholesalers is one entity. They only look at economic reality wholesalers are
dependent of HO. If there is only 1 entity, there cannot be a restrictive agreement,
because you cannot enter into an agreement alone.
Court said more than required: Maybe I could have helped you in another way, but not under
art: 101.
Maybe dominance abuse would have been more productive than acting under art. 101!
Intragroup immunity: whatever you do between a group of companies is immune.
But commission says if you are 1 entity, you also are 1 entity when it comes to fining. The
smallest mistake in a third generation subsidiary can cause big fines for the group.
To determine whether there is a group you can ask some questions like: Does a subsidiary
have the power to sign on their own?
Challenges: Uber drivers, are they undertakings? People cooking and offering the food
through a platform, are they undertakings? This is a debate.

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Undertakings in the sharing economy

Labor exemption: if employers and employees enter into agreements and these agreements
are intended to improve employment and working conditions, then they escape from the field
of application = the labor exemption.
Otherwise collective bargaining agreements would be nullified.
Is an Uber driver an employee, or an independent person? 1
ECJ 4 December 2014 Case C-413/13 FNV trade union v NL State = about purely internal
situation. The trade Union represented employees, but also independent persons and these
independent persons acted as substitutes in an orchestra. The trade union had negotiated an
agreement for its employees’ members, but also for the independent members.
Then the national competition authority in NL wrote a reflection paper saying that: ‘We believe
that if this trade union negotiates for independent substitute orchestra members, it is subject
to competition law’. The trade union was so offended that it went to court to fight the reflection
paper and to have the national court declare that the reflection paper was wrong and that they
were under the labor exemption and thus not in scope of competition law. The court is in
doubt ==> preliminary ruling question. The Court of Justice says it is a purely internal
situation, there is NO EU dimension. The substitutes are Dutch, the trade Union is Dutch, the
orchestras are Dutch. You expect them to say it is inadmissible, but they don’t! They say,
since national competition law is copied from EU competition law and the judge tells us that
he wants to interpret national competition law in line with EU competition law, we will still
interpret and answer the question. This is a creeping move of the court into purely internal
situations. Court said: Only if you can show that these self-employed persons are fake self-
employed persons and in reality are employees, only then will you come under the labor
exemption. They also say it is to the national judge to assess it.
The national judge ruled that these independent orchestra substitutes are indeed fake self-
employed and therefore should be treated as employees and should benefit from the labor
exemption.
But if you read the judgments you will see that the question really remains unanswered.
What the court says here is: ‘you should be a service provider in a situation comparable to
that of a worker’ An Uber taxi driver is in a situation compared to a worker. Uber will control
the driver if the vehicle is insured, where the driver is, the rating etc. ==> you could say he is
a worker. But in the same paragraph, the court gives a criteria. See print screen below:
worker = if you act under the direction of your employer and particularly as regard your
freedom to choose the time, place and content of your work. That is already less certain. The
Uber taxi driver may be in a position comparable to that of a worker, but is he also under the
direction of Uber? Or can he still decide he is not working on a certain day. Employees can’t
say that. At the moment of the lecture, there was no answer on this question. It is a labor law
debate, but also a competition law debate! Who is an undertaking?
Is a person cooking meals and selling them on a platform an undertaking? Can the buyers
come after that person for excessive pricing?
- OLD: “agreements… within the framework of collective bargaining between
employers and employees and intended to improve employment and working
conditions must be regarded as not falling within the scope of 101(1) TFEU”
- NEW: “It is only when self-employed service providers who… perform for an
employer… the same activity as that employer’s employed workers, are ‘false self-
employed’, in other words, service providers in a situation comparable to that of those
1 On Wednesday the 20th of December, the Court of Justice rendered its judgment
in Case C-434/15, Asociación Profesional Elite Taxi v Uber Systems Spain
(http://curia.europa.eu/juris/liste.jsf?num=C-434/15 ). Whereas the case does not
directly concern Competition Law, the Court in the end declared Uber to be a
'transport company' rather than an 'internet service' which, if you remember, will
have implications for the application of competition law...

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workers, that a provision of a collective labor agreement… does not fall within the
scope of 101(1) TFEU. It is for the national court to…”
Is an Uber driver under the direction of his employer?
Second debate: What is the economic activity?

We still need to determine the economic activity. Is not simple either. Case law is inconsistent.
Certain cases are by nature not economic activity.
Ex. Air traffic control is by nature NOT economic activity, pollution control in a port is not an
economic. This means that we cannot apply cartel law, abuse of dominance – First line of
defense! Social security is not an economic activity either. It is not explained why these
activities are not economic activities! This should mean in theory that if your social security
system is privatized and you work with private entities providing social security, they are
immune. It may sound very social, but the effect may be the opposite. Economic activity is
not very clear.
Fortunately there is a second line of cases which is predominant. In most cases the court will
say you are engaged in an economic activity if you provide a service on the market according
to market principles (then look at the few exceptions).
New and troublesome tendency: there now are cases where the EC appears to imply that
was is economic activity in one MS, is not always an economic in another MS. This is
shocking!
Is waste disposal an economic activity? You can make money out of it, so it should be an
economic activity. But this is not sure anymore! If you are a MS opting to ground 1 monopoly
for waste collection and disposal, you can say there is no market in my MS for this activity
and so it is not economic. We don’t like it, but it can come in very handy. MS have to regularly
notify to the EC all the services of general economic interests that should be subject to
competition and most of them forget services like waste collection. If EC would come after
them, MS could say it is a monopoly.
There are no excluded sectors. Some exceptions for defense.
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Where does EU competition law apply? Simple aspect: It applies where EU law applies.
Difficult question: Can we apply our law with extraterritorial effect?

YES. And if you are fined in the US, you can still be fined in the EU! There is no concern
about over-enforcement only for under-enforcement. No one has ever won a case with ‘Ne bis
in idem’ in competition law. This is really problematic.
The implementation doctrine is used: whatever is implemented in the EU comes under the
scope of EU competition. The Americans say, whatever has any effect on my territory falls
under US competition law - effects doctrine).
This leads to friction between countries!
GE-Honeywell merge-case: GE and Honeywell were the 2 largest industrial conglomerates
in the US and wanted to merge. They go to the US authorities and they say it is OK for them
to merge. But all companies are global these days, so they also have assets in the EU. They
went to the EC and the EC said no, because you would be too powerful!
In case of conflicting rules for example between US – EU, the strictest rule will always win!
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Lecture 2: Restrictive practices (Art. 101 TFEU) - substance
Doctrine of combined application: Rules written for undertakings will be applied to MS

behavior under certain circumstances.
The EU not only imposes obligations on these undertakings, but also enforces the rules
directly when necessary.
What we are going to do for this branch is what we are going to do for every branch. Always
apply the same system: we start out from the text in the treaty and then we cut that text in
pieces and will use the elements we absolutely need in order to apply article 101. See text of
art 101 below:
We are now in the second line of defense. We have determined that EU competition law
applies to us.==> second line of defense: Does this branch apply to me?
What are the necessary elements in this text? First paragraph is a prohibition. The second
paragraph gives the heaviest possible sanction – sanction of nullity will depend on the MS (it
depends on national private law). Third paragraph is the exception.
We go back to the first paragraph and cut it in pieces.
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Two new elements: one is about behavior and the other is about object. Object is the most
controversial debate (what is the restrictive object or effect?).
We need meeting of the minds, we need a form of collusion: I feel bound by my agreement
==> I have lost autonomy. I am no longer free to set prices, I am bound by my agreement.
Why you entered into the agreement, doesn’t matter. Whether it is horizontal or vertical
doesn’t matter.
What do we do with hybrid cartel agreements? This always moves, people come up with
new ideas to defraud. Hub and spoke cartel or hybrid cartels.
Hybrid: you don’t know whether they are horizontal or vertical.
Ex. Supermarket and producers cartels.
Supermarket chains like for ex. Spar. We know that the producers never talk to each other
and supermarket chains never talk to each other and nevertheless prices are similar
throughout these supermarket chains.
When another supermarket, for ex. AH, sells a product at a lower price, Spar will go to the
supplier and tell him to talk to AH. If AH doesn’t lower his price, Spar won’t work with the
supplier anymore (supermarkets have that power because they have their own labels) ==>
The supplier will go talk to AH. ==> prices tend to converge.
In some states this is seen as horizontal cartel between the supermarkets.
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Some states say they see these producers are policing the agreements between
supermarkets (= cartel facilitators). Also cartel facilitators can be sanctioned. Difficulty if cartel
facilitator is not active on that market, can he be fined? Answer is yes.
Other MS don’t care if it is vertical or horizontal, we are going to fine you.
Can the EC fine you or a cartel on a market where you are not active? Yes! (cartel facilitator
was not active on that market)
Decision by association of undertakings:
Ex. I am a bakery and iso fixing prices with another bakery, I ask the federation of bakeries to
impose a price. They may give a consideration, but if everyone follows this recommendation,
it will be considered a decision and it will be fined.
Next step would be: if I know that I cannot enter into a cartel with you, I go to my association
but I know that my association cannot get involved in a cartels, so I can go to the MS,
legislator and ask them to …?
Concerted practice: a situation where there is a contact, but not a contract! Because in a
contract, there would be a notion of agreement. There is some form of coordination, but it is
not really clear whether it is collusive or whether it is just rational parallel engagement. This is
really difficult.
Ex. 1 Gas station prices, the competitor in the same street has the same price, the competitor
further away has different prices. Is this collusion or not?
Ex. 2 One bank announces that it will raise the costs of the financial services for consumers,
next day a competing bank announces the exact same price! Is this wrong? Should they be
fined? Or was the first bank just the price leader followed by the other bank? This would be
OK. Problem is that the line between the two is so fine and the consequences are so
enormous. We better find a correct criteria to divide between what is perfectly OK and what is
collusion.
What is the criteria for collusion?
First EC said: If two enterprises have the exact same price, it is considered collusion.
Court said NO! Commission has to show that these exact same prices are consequence of
collusion. Show that there is no other plausible explanation but collusion. That is impossible to
prove. Undertakings will always have some other plausible explanation.
Court says if the commission can show that companies have exchanged commercially
sensitive info, then the Burdon Of Proof changes to companies. Companies will have to show
to authority that they did not act on the information exchanged. This is also impossible.
There have been cases where was said: ‘Dear EC, this cartel was a cartel of compelatice?
they hated each other so much that they gave false information. So they could not have acted
upon it, it was false information.
Or the EC will say: ‘I have this global cartel, I am sure the Japanese company shared
information with the Europeans.’
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Enterprises can say: They were not even present on the market.
EC will say: But why were they not present on the market?
 It is impossible to prove that once you have exchanged commercial sensitive
information that you did not act upon it.
Bring these two elements together:
First you say: ‘EC, you have to prove that there is no other plausible explanation but
collusion.’
And we combine that with the second element: If however, EC, you can prove that information
was exchanged, the BOP now falls upon the undertakings and they have to show that they
didn’t act upon this information. It is also impossible to prove!
If you combine both elements, you get something like this: If you exchange commercially
sensitive information, you hang!
Question: I am an undertaking and I have a client who says, your competitor is going to raise
prices. Are you going to follow?
Ask yourself: Would it be restriction by object or restriction by effect?
Restriction by object v restriction by effect

If you have a restriction by object, EC is not required to check the effects on the market of that
restriction. It saves them resources, because they will simply say what you did was wrong
regardless the effect on the market. ==> EC will try to have as many qualifications as
restrictions by object as possible!
Undertakings (like Intel) will say: ‘EC, you should at least check whether what I did harmed
consumers. Perhaps it did not harm consumers and you should not fine us’. This is the
debate.
Guidance from court (not worth too much) Court says: ‘You should interpret restriction by
object restrictively. EC should be careful to call something restriction by object’. ==> so EC
cannot simply say in every case it is a restriction by object.
What exactly is restriction by object? We know that so-called hard core restrictions (price
fixing,…) come under the scope of object restrictions.
Interesting in below case (Maxima Latvija) is that it is a purely internal case (in point 12 it is
explained why it is treated by the CJEU) This happens more and more.
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Maxima Latvija case
This was a case about a big supermarket in Latvija and they forced upon the lesser of
commercial property a clause in the contract saying: if I am going to be in your building, I want
to know who else is going to be in the building, because I am the most important one. If it is
my competitor, I won’t accept! Is this wrong?
Def. restriction by object: Some practices may by their nature (= without us having checked
what the effects on the market are) be likely to have negative effects.
 Def: an agreement is restrictive by object if it reveals in itself a sufficient degree of
harm to competition for it to be considered that it is not appropriate to assess its
effects.
In other words, I have a restriction by object, if the restriction is so wrong, then I don’t
have to check the effects.
Above judgment doesn’t help us much ==> we hoped we would find out in the Intel judgment.
What they said in Intel was: ‘EC, you qualified the restriction as being an object restriction, but
you then nevertheless checked the effects on the markets and that is wrong, because if you
follow that approach you should have answered all the economic arguments of Intel.
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Art. 101 is not very clear.
In the treaty text, it says that a restrictive object or effect is needed, but the restrictive object
or effect should be noticeable! De minimis is about: what is too unimportant to care. It should
be noticeable.
What is noticeable?
Look at above mentioned percentages. The red percentages are new and higher ==> the EC
has ruled that there are more practices and agreements they don’t care about than in the
past. The EC has too much unimportant work and wants to focus on the important cases.
Undertakings with a market share between 5 and 10% are safe.
5% in case of Cumulative effects: you may have agreements which if you consider them
separately, they are unimportant. Ex. Beer tight agreement. Ex. Inbev.
The three circles are defined in terms of market share.
- First circle
- Second circle: up to 30% Block exemption circle
- Third circle: more than 30% market share = the do it yourself circle.
New de minimis regime, hasn’t changed much, same percentages, only difference: It only
applies to effect restriction, not to object restrictions ==> Important to have a good definition
for object restrictions.
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Ancillary restraints:
Ex. I buy your company on condition that tomorrow you don’t start a new company competing
against me. This condition is restriction of competition. But, under these circumstances, it is
accepted.
Conditions to be fulfilled are:
- Restrictive condition should be absolutely necessary (means I should not have
entered into the master agreement if I could not also impose that condition. In other
words, I would not have bought your company if I wouldn’t have been certain that you
would not compete with me tomorrow)
- Directly Related (Usually it means that it should be amongst the same parties)
These two conditions are not that important under 101, but they are much more important
under merger controls. Merger controls are full of ancillary restraints where you impose
certain conditions that are restrictive of free competition, nevertheless we accept it.
‘Accessorium sequitur principale’: The less important agreement follows the status of the
main agreement.
Who judges? Who will determine whether an agreement is ancillary or not?
In the past, the commission, now you have to do it yourself. (not important enough for EC) (=
ex. nr 4 of modernization)
Third line of defense (second circle)

In the second circle, you still have some safety, because EC says that what you are doing is
OK. The EC applies the 4 conditions of art. 101(3). What do we see in 101 (3)?
101 (1) is the principle: You should not enter into cartel agreements etc.
101 (2): Sanction!
101 (3): You can justify your behavior if you have a higher, noble goal.
The 4 conditions of art 101 (3)
- First condition: I need the noble goal. What is the noble goal in the perfume
example? To pay more for a perfume in a perfume shop than to pay less in a
supermarket. The advice that you get at the perfume shop.
- Second condition: If you make more money because of your restrictive agreement,
you should not put in in your pocket, but you should share it with the consumers (In
the example the perfume store is sharing as it gives advice for the extra price)
- Third condition: EU law proportionality pact, no less restrictive alternative to
achieve the noble goal should be available.
- Fourth condition: don’t go below the level, don’t eliminate all competition, some
competition should remain!
It might seem difficult to apply all the conditions; risk to fall in a case by case approach ==>
the EC has applied these 4 conditions in a number of areas.
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We just need to look at the block exemption regulation of the EC. Block exemption
regulation is the EC saying: ‘on the basis of my experience, if you have an agreement with
your distributor, this is what you can and cannot do’. As long as you follow this, you are safe.
More concerns about horizontal agreements than vertical agreements. ==> you will find 1
umbrella broad block exemption regulation for all vertical restraints, but you won’t find one
umbrella block exemption regulation for horizontal restraints.
For horizontal restraints, we have less block exemption regulations and the thresholds are
lower (20% iso 30%) (because EC is more afraid).
Iso making one big block exemption regulation for all horizontal restraints, EC makes one for
ex. for R&D, one for specialization agreements, but they don’t make one for pricing
agreements, they don’t want to give any certainty there.
In the block exemption regulations, (modernization) there is now a more economic approach.
They refocused in terms of market shares.
The third circle, the do it yourself zone

Example to show difference between old and new regime.
Old regime:
1/1: Entrance into agreement
3/1: Afraid that it might be a restrictive agreement ==> you call your lawyer.
16/1: In the old regime, the lawyer would take the agreement, put it in a file and would join a
so called form A/B. A side: EC, tell me that EU competition law doesn’t apply to me.
B side: If you don’t agree, could you please tell me I have a right to an exemption?
This was the notification of the agreement.
16/02: Reply of EC = comfort letter saying that the EC doesn’t see any reason to intervene for
the time being.
16/03: Competitor takes you to court ==> you go back to the CE and ask them to say whether
the agreement was OK.
 EC would say they checked it and there is no problem ==> you show it to the national
court ==> case closed
 Or EC says that it is an illegal practice and to stop it immediately ==> you don’t show
that letter to the court, but you do stop your practice.
The comfort of the comfort letter means that you would have immunity of fines, from the date
of notification 16/1 until 16/03.
New regime:
1/1: Entrance into agreement
3/1: Afraid that it might be a restrictive agreement ==> you call your lawyer.
There is no possibility anymore to notify your agreement. There is a prohibition to notify and
all the nationals have followed the EU example. ==> you cannot go to the national level
instead.
If you don’t notify, you won’t get a comfort letter (as the EC is not even aware of your
agreement)
You can still be taken to court by your competitor. But there is no EC to run back to! So the
EC cannot say what you are doing is fine or wrong. ==> no more immunity for fines!
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Increased decentralization: the more block exemption regulations cover the more
decentralization you have. It is a regulation, directly applicable in the national legal order. Will
be applied by national judges. Some national authorities even apply it.
What has changed since 2010? Not much. In the old days, we looked at the 30% of the
stronger party and now we look at the 30% of the two sides of the story and that is important.
Because it is the first time that you come across some care for buyer power.
In competition law we always cared about seller power and we never cared about buyer
power. Buyer power may be at least as big a problem as seller power.
Why are the farmers so unhappy? Because buyer power of supermarkets is too large.
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But nobody cared about buyer power. This is the first time we did care by writing into
regulation 330/2010 that we should also look at the buyer.
They have expanded the regulation to also cover e-commerce. Ex. Parker pen case: you
cannot prohibit active and passive selling, you cannot prohibit an undertaking to go outside its
own territory searching for customers and at the same time prohibit them to serve customers
coming into their territory, because if you do that you make parallel trade impossible. If we
don’t want that in the real world, why would we allow it in the e-commerce? We are not going
to allow it, so from now on when you go to a platform and that platform automatically redirects
you to your national platform, come to us, because they should allow you to buy on for ex.
Ebay UK.
Where do you start first?
Always start with block exemption regulation, only if that doesn’t work, move to 101(3).
You always have controversy surrounding individual sectors. Ex. the pharmaceutical sector.
The pharma sector engages in prohibitions of passive and active selling. At first you might
think it is devious, and they need to be fined.
But then, if you look closer, perhaps what they are doing is not so bad. Maybe big pharma
companies sell their products cheaper in 1 country than in another. Ex. Medicine is cheaper in
Italy than in the UK. Price discrimination on itself is allowed. The only problem - What will
happen? The medicine will be moved to the UK. Nice for UK, more offer than demand, not
nice for Italy, because med is not available!
Solution of the pharmaceutical companies: If you buy in Italy, we are going to prohibit to resell
outside your own territory. ==> EC that is active and passive selling, you cannot prohibit.
All the rules we have discussed don’t apply to all sectors.
We should always be aware of new forms of collusion.
Rule of reason in competition law?

Rule of reason: the system where we define the field of application in function of weighing
pro and anti-competitor.
Formally courts confirm we don’t have a rule of reason.
EU official approach: we don’t do this, if we want to weigh, we will do in our third line of
defense (when we look at the exemptions and not when we determine the field of application)
Part of authors says there is a rule of reason (as in Wouters, Meca-Medina…).
Tip of prof: Distinguish between the classical Rule Of Reason where you weigh the pro-
competitive against the anti-competitive on the one hand and situations where you weigh the
competitive element against something outside competition law, like the proper functioning of
the profession in Wouters. It is not because you are weighing interests that you are
necessarily applying a rule of reason.
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MFN agreements: Most Favorite Nation, most favorite customer, most favorite supplier. Ex
hotel booking platforms like Trivago, Booking.com, …
Can Trivago ask the hotels to commit that the price offered through this platform will be the
lowest price offered anywhere? At first you might think these platforms are great and provide
for price transparency on the market. But if you look closer, maybe it is not so great, because
maybe they hinder price competition much more than they promote it. They come in different
forms and certainly against the so-called white retail MFN, there is a lot of objection.
Similarly the English clauses. I make an agreement with you and in that agreement I write that
you will buy my product, unless you find it at another supplier at a lower price. If you find a
lower price elsewhere, you contact me and you give me the opportunity to match that price. If
I can’t match it, you can buy elsewhere.
This is not so pro-competitive as may seem at first! If I oblige you to come to me and to ask to
match the competitors price, I will know the competitor’s price. And perhaps this is dangerous.
Very often your first view of a particular clause or agreement has to be nuanced!
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Lecture 3: The procedural dimension of EU competition law:

leniency programs, commitments, fining and the damages
directive
Modernization
An older video about a cartel was shown during the lecture.

In US sanction for fixing prices can be jail, in EU not yet (unless there was falsification of
documents, because this could be a criminal offense, and people can be sent to prison for
this)
In the previous lecture, we have already seen the first two aspects (of three) of modernization:
the abolishment of notification – you have to do it yourself, you will have to engage in giving
yourself an exception.
An exemption refers to a new situation which is created, an exception has always been there.
Some might think that self-assessment is wonderful. If I have to assess myself whether I was
engaged in prohibited practices, chances are that I will find that I was not engaged in
prohibited practices. Unfortunately, it doesn’t work that way, because if your assessment is
wrong, you get all these sanctions and you get the private enforcement on top of it. So the
result could actually be the opposite. You see this on the highway as well, when drivers see a
camera, they don’t continue driving the maximum speed, but they slow down a little bit. So the
consequence may rather be that we do not engage anymore in practices which are actually
perfectly legal. We don’t dare to because the risks are too high. The advisors of the company
will tell they better don’t do it because it is a bit risky (thinking about their own liability). But if
this happens, society as a whole is worse off than before. So think carefully about this whole
modernization system.
The modernization has advantages, but also disadvantages.
The parallel application of national and EU comp law is complicated.
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Parallel application of national competition law and EU completion law (art. 3) Reg.
1/2003
National competition authorities or courts: as soon as there is an impact on trade between
MS, we are obliged to apply EU competition law. This was not the case before reg. 2003.
We could have made life easy and could have said: If there is an impact on trade between
MS, you apply EU comp law and if there is no such impact, you apply your national
competition law. But there was no political majority to do this. Some MS have very strong
national cartel laws and did not want to give up there national competition law.
In merger control we do apply this logical division where it is either the community or the
nationals. Here we don’t do this. Here we say, you must apply EU law as soon as there is an
impact between MS, but you are still allowed to apply your national law in such a case. If
there is no impact on trade between MS, then you will apply your national law. This leads to
extremely difficult situations.
Ex. If you are a national competition authority and you are a court (this happens in some
states) and there is an appeal against your decision. Do you then go to the court of appeal to
explain, yes or no? In Belgium there is a rule saying that if you are a judge you never go in
person to higher judge to defend your judgement. The judgement should speak for itself.
NCA refused to go to the court of appeal. Actually they didn’t t even want to come to the court
of justice. This court of appeal doesn’t see the NCA. The court of justice stated that they
respect the rule that a judge never goes to explain his judgement in appeal, but they asked to
change this rule for competition matters.
 This rule of procedural law is no longer applicable for competition law. We changed
the structure of NCA - We will stop having a court as an NCA, we will do as a
commission. When you change procedural law you don t only change it in EU
competition law cases, you change it in ALL competition law cases. This is thus
another example of EU law being applied in cases where EU has no competence.
This is the difficult relationship between a national competition authority and the EC.
But there is also a difficult relationship between national competition law and EU competition
law. What are the rules there? How to apply these two different spheres of competition law?
On the one hand reg. 1/2003 will say, NCA (national competition authority), you have to make
sure that you never contradict the Commission. You cannot contradict the Commission on the
basis of EU law, nor on the basis of your national competition law.
Even if the Commission contemplates taking a decision (so they have in mind a decision that
they may take) you should respect this. You should ask them and respect their decision.
For the NCA’s this is one thing (because NCA’s are part of the executive and the commission
is also part of the executive – supremacy of EU law), but the same happens for courts!
National courts also have to make sure that their judgements don’t counter EC decisions. And
this is a different world because there was an independent judiciary. The courts have to do the
maximum possible to respect decisions of the EC. It is an example of Competition law setting
aside to some extent the trias politica, the independence of the judiciary by saying that
national court is bound by what this part of the executive, the commission is saying. So
national competition law by enlarge should follow EU completion law. National enforces
should follow the EC. However, 2 exceptions:
- Art. 3 tells us that national law can be stricter than EU law when it comes to unilateral
behavior. It is about buyer power, it is about economic dependence, it is about
farmers claiming that they don’t get enough for their food products. Individual MS are
adopting acts to tackle economic dependence. (Ex. see below!)
- If your national rule pursues a different objective for unfair trading rules, unfair market
practices, these rules are not under the scope of competition law.
Ex. of economic dependency: Every time the editor of a newspaper has a campaign like for
example, if you buy the newspaper, you receive a CD for 1 euro extra, the newspaper seller
bares part of the cost of this campaign. They don’t like this, but if they would refuse, the
newspaper would withdraw their product and the newspaper seller would not be able to sell
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this newspaper anymore. Is this caught under EU comp law? NO! Because the editor is not
dominant! This is irrelative dominance. The editor is dominant in the relationship with the
newspaper, but there is no absolute dominance and so we cannot catch it. For these
situations, art. 3 tells us you can be stricter under your national law. Individual MS are
adopting acts to tackle economic dependency. (Not always successful, but they can do
because of art. 3)
There is a network, the European Competition Network, ECN, within this network the partners
exchange information, also confidential information. The network is also meant to appoint the
best placed authority. The idea is that we are a network of 29 and within this network, we will
choose the NCA or the EC which is best placed to deal with your case.
In theory this is beautiful, in practice, it is not. Because what happens in practice: You are in a
cartel and you receive news that the German cartel ambt is the best placed authority. You
might not like this, as they are too strict.
On the other hand if you would be in that cartel and the Belgian authority will take the case,
you would be more lucky. Because the Belgian authority is not too strict.
The problem is that you don’t have the right to appeal this decision. And this is strange,
because it would make a big difference in practice.
There is a set of measures and regulations in reg. 1/2003 to prevent renationalization of
competition law. (READ instrument carefully)
Is there a risk of renationalization of competition law? Yes of course! If we give all the powers
back to the NCA’s and national courts, where you come with your self-assessed cases, then
there is a risk that the courts and the NCA’s in Germany will rule differently than the courts in
Greece.
How can we avoid this?
There are a couple of mechanisms in the regulation:
- One of them is, the EC can take the case out of your hands.
- Or they can send to the national court a so called amicus curea, a friend of the court.
They can tell the national court: national court you are about to rule on this case, and of
course it is your competence we are not intervening, but just for your information, this is
how we believe this is how you should solve this situation.
- A finding of inapplicability: the EC can say I decide that EU competition law doesn’t
apply to your case even though you never asked me. They do so to set a precedent and
to show to other authorities that to this type of cases EU competition law should not
apply. That is the finding of inapplicability it is the successor to the negative
clearing/exemption of the old days.
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Conclusions:
1. Decentralization is not really decentralization. It is decentralization of a certain
particular kind. You do what is unimportant and I will focus on what is important. But,
as soon as I want to decide for you, I will = new position of EC.
We call the ECN a network of equals, but it is of course not a network of equals. It is
a network of equals + the EC.
2. Under-enforcement is the concern, not over-enforcement!
3. Spill-over effect of EU law to areas where the EU has no competence. If EU law
speaks out on the procedure in a competition matter, you should realize that you
don’t have in a MS two sets of procedural law, 1 for cases with EU dimension and
one for cases without a EU dimension. No, we one set of procedural laws. So if we
change it under the influence of EU law, we change it also for purely national cases.
We should be aware of this.
How will you be confronted with these cases? How will the EC react?
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Look above at all the months ==> cases can easily take 10 years or more. No duration limit.
1. Pre-investigation phase: the EC gets to know about your behavior. In some cases
the EC overheard some discussions, but the majority starts by complaints by
competitors or nowadays by leniency (people in the cartel snitching on each other)
During this pre-investigation phase, the EC will decide whether they will take the
case (due to their limited resources, they have to select). They will also take into
account whether they can win the case.
Sector inquiries: the EC identifies specific sectors where they believe there is a risk
of collusion. The EC will investigate the sector as a whole and normally after the
sector inquiry we will see a number of cases coming in that sector. (ex.
Pharmaceutical sector, car-industry)
2. Investigation phase: At this moment you are still unaware of all the pre-investigation
that had been going on. The first time you may be confronted with this procedure is
when you receive a so-called request for information from the EC.
3. Actual procedure (says 6 months, but could be 2 years)
Dawn raid2?
a. Statement of objection: very important document, now for the first time, you
will see what exactly they have against you, who the other members are of
the alleged cartel etc.
They are bound by this document. If for example they say this is about the
collusion in the sector for car parts, then they cannot come later with fines
for other collusive behavior. (but they can always start a new investigation)
b. Access to the file: you will get a set of dvd-roms, and there you will find
everything in the file that is common for all parties and all the things they
found for you. At this point the company will already have hired a company
specialist in forensic searches like Fox IT in NL – they will have gone
through all mails and then you can compare with what the EC has found.
You can start considering your strategy. (am I going to fight this, Am I going
to cooperate)
c. There will be a neutral hearing
4. Decision: the EC will say we are going to fine you with this amount for this behavior.
You have 2 months only to reply.
5. Court procedure starts
(EU wide: inhouse legal counsel is NOT protected and external legal counsel is protected).
There are not many cases. (But each case can each take about 10 to 20 years)
2 From time to time, the European Commission and other regulatory authorities conduct
surprise onsite inspections called “dawn raids”. The Commission investigates suspicions of
anticompetitive agreements or other conduct potentially violating antitrust law. A dawn raid is
stressful for the company's employees.
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Fining
Client will always ask:

- What did I do wrong?
- How much will I have to pay?
Answer on last question will be: ‘somewhere in between 0 and 1 billion’ :)
For the basic amount they will look at your sales volume and they will say, how much did you
sell in this cartelized product on the relevant market. Let’s imagine that the sale on the market
was 100 (turnover, not profit). They will take a percentage of this amount and it can go up to
30%. This will depend on how wrong your behavior was. Was it a hard-core cartel then it may
be 30%, if it is not hardcore, it could be 5%, 10% etc.
In our example, let’s take 20%. They will look at the last full year of the participation in the
restrictive agreement or the restrictive practice. (this is not a rule, the EC could also take the
last 3 years for example)
Then they say you were in the cartel for the last 5 years, and they will multiply the 20 by 5
==> becomes 100%.
Then they will say, we really have to make certain, you never do this again. The 100% for you
is a too small amount, so we are going to impose an additional 15% (could be the percentage
the EC feels like) ==> 115%
Then the EC looks at:
- Aggravating circumstances: If you are a repeat offender or if you were the ring leader
(you initiated the whole cartel)
- Mitigating circumstances: If you distanced yourself from the cartel or you are a very
small player on the market
If there are no aggravating or mitigating circumstances, you stay with the 115%.
But then we come to the global fine cap. That is 10% of your global turnover.
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If this was a company, which has a turnover of 100.000, then the maximum for them is 10.000
and they won’t reach it.
But if this is a car glass cartel and all you ever do in your life is producing car glass, then the
10% can be very beneficial, because then the 115% will have to be reduced to 10% of your
global worldwide turnover.
The tricky thing is that the 30% for the basic amount and the 10% for the global amount are
not calculated at the same time.
For the basic amount we look at the last full year of participation in the cartel.
For the 10% for the global fine cap we look at the last year before the year that we imposed
the fine upon you.
The ideal world for the company is the following: You have a turnover which at the time of the
offense was 100, but gradually, it went down to 20. The EC will be limited to 2. You cannot
organize this. If the EC would find out you have organized your business so that from 100
after 5 years you went to 20 because you sold off parts just to avoid the fine, this won’t work –
you will even get more. But if it happens that there was already a restructuring plan
announced before the fine was imposed, and then the parts are sold and in the end, there is
not enough turnover anymore to impose a decent fine.
Impact of post-infringement facts:

- Inability to pay: if I have to pay this fine, I will go broke. In a state aid case, the EC will
say: ‘well then, go broke’. In a cartel or dominance case, the EC won’t say this,
because they want to protect the employees. And thus if you can prove you would go
broke then they will reduce the fine. This is a social human aspect of the EC.
- Leniency
List of fines:
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Negotiated solutions:
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Leniency
We became very dependent on leniency (80, 90%).
You are in a cartel and you want immunity because you snitch on your co-cartelist. The EC
has a long experience with leniency. They have gradually adapted the system to make it more
efficient. All the words in italics are new. Because the EC has learned that companies tend to
even when they apply for leniency, to defraud the commission. They will give some
information, but not enough. That is why now the text clearly says ‘incriminating evidence’…
You have to stay in the cartel if the EC asks for it, so you can become the undercover agent.
Just to get more information. You can never get immunity if you were the ringleader.
And you have to cooperate.
The risks are that you go to the EC with your information and that the EC says, thank you,
but we already had this information, but now we know you were involved.
Or you go to EC, give all info, and two days later US authorities come after you.
Or you should realize it gives immunity from fines, but it doesn’t t give immunity from criminal
sanctions. And most of all, it won’t give immunity from civil sanctions.
In practice we see that the people who step forward for leniency and thereby confess are the
first victims of private enforcements.
New developments:
Undercover – see above
Individual leniency: We are creating regimes of individual liability, individual sanctions. If you
are the manager of a company, I am going to sanction you, because I want you to become a
leniency applicant. If you know that there is a fine above your personal head, that may be an
incentive for you to betray your company. Employees are being set up against their company
– it is very efficient.
Apply for ranking first, file later: You go to the EC, you say you have information, I want to
be the first, but you ask for some days to finalize things. EC gives a ranking, you are n° 1.
This makes a big difference ( difference between immunity and paying 50%, 30%...)
Also new is the hypothetical case: I go to EC and say to the EC I have a friend and this
friend did something stupid, and now he wants to confess. Would he be the first? EC says
yes, and then you say it is you.
Commitment
Commitment: I promise never to do it again and in return, you let me go. Why would EC do
this? In case where they want to save on resources. If they would have to fight the case, it
would take about 10 years. If you promise never to do it again, your practice stops
immediately and your competitors can compete freely again. There is no fine, but there is a
binding promise. The EC says that they only apply this where they had no intention to fine
anyways.
Strategic issues – what will you offer as a commitment?
Are you going to offer the EC to sell off parts of your business? Are you going to promise to
EC that you will never use that distribution agreement again?
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If you promise this, the EC will make it binding and will enforce it upon you and if necessary,
they will require you to pay for a monitoring trustee to check whether you are doing what you
promised. What if you offer too much?
Procedure:
You need a market test. If you offer something, the EC will ask your competitors if this is a
good idea, and if the market is opposed (as in ebooks case), they won’t use the commitment.
Commitments are becoming more important (green blocks)
Settlement
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Big difference between a settlement and a commitment:

- In a commitment I don’t confess. Is a case where EC does not want to fine.
- In a settlement I confess. Is a case where the EC most certainly is going to fine.
So these are two different mechanisms. If you can choose, you will of course go for
commitment.
Also for private enforcement if I give a commitment, and the next day CDC is at my door, I will
say I did not confess. If I have settled, I have confessed, so I am an easy victim for private
enforcement.
Ex. settlement: If you confess, you get a 10% reduction. The fine can be 1 billion. ==> you
give up your innocence and your right to fight.
The truck cartel is a hybrid settlement. The EC settled with all parties, except with one.
In the official legal text the following is stated:
You have no right to a settlement. The EC can offer you a settlement and you can only say
yes or no. However in practice this is NOT the case. You go to the EC and let them know you
want to settle. If they are convinced, you will draft your own fining decision. You will say that
you have right to a 10% fine reduction. But on what?
If you say you are ready to settle, you get much more than 10%. You can draft the decision in
such vague terms that you make it extremely difficult for private enforcers. So if the EC asked
you to settle, it is a good idea to say yes. They will invite you and they will show you what they
have against you and after that meeting you can still withdraw (also the EC can withdraw).
Private enforcement of competition law
Private enforcement is different in four regards from public enforcements.

Under public enforcements, an EU or national public authority will fine you in the public
interest. Under private enforcement a national court will ground damages (not fines) in the
private interest (not in the public interest).
That is why you cannot apply ne bis in idem to them, because they are different.
You may say what a difference does it make whether it is in the public or private interest? It
makes a big difference. What companies often do is say we had a fight, but let’s forget about
it and we stop all court cases against each other. The EC will say, they continue, because
they work in the public interest.
In every decision we take under public enforcement we should think about what comes after.
Do we go for leniency, do we settle?
Another advice, if you fight a commission decision, do not only fight the fine, but also fight the
substance of the case. Because if you only fight the fine, the national judge may say the case
is still under appeal, but the appeal only concerns the public enforcement fine and I can
already go ahead with my private enforcement case.
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If on the contrary you also fight the substance, you say that there was no infringement, then it
will take longer for them to start the case.
Courage and Manfredi

Private enforcement case in competition law – beer tie agreement
Pub is linked to brewery, the brewery sells beer, the pub does not pay ==> brewery takes pub
to court. In court the pub says: I’m not going to pay you. Why should I? Brewery: Because you
bought 50.000 hl of beer from us.
Pub says: True, but our agreement was a restrictive agreement and therefor absolutely null
and void under art. 101.2 and thus I don’t have to pay you.
Then the pub says: can you pay me? Because I see you charge less to independent pubs
then to me and I want damages.
Question: Is it possible if you are yourself party to an illegal agreement, is it possible to
claim damages on the basis of that agreement?
Court confirmed that everyone should be able to claim damages if there is an infringement of
such an important provision of EU law as art 101.
MS can’t a priori exclude this possibility.
Principle: If there is a breach of EU law, there should be liability and damages should be paid.
That has created the private enforcement story.
The commission ordered a report from a law firm and the report stated that the EU is totally
underdeveloped when it comes to private enforcement. This is not true! What was totally
underdeveloped were the damages claims. There is a very rich tradition in EU of taking
competition cases to court and ask the judge to order to issue an injunction that the behavior
should stop.
Read directive 2014/104/EU from A-Z!!!
Damages Directive
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General principles of the directive:

First principle: We do not want to copy the US style damages claims. This means that the
directive goes for full compensation for the damage, but not more! No overcompensation.
Second important principle: The EC absolutely wanted to preserve leniency. Private
enforcement is a big enemy of leniency. Companies will no longer step forward and apply for
leniency if they know that the next day CDC will be at their door. So we needed a regime
which would not harm leniency and what the directive is, is a regime which promotes leniency.
Because the directive gives certain extra advantages to those companies applying for
leniency. Your leniency statements under the directive will be protected. Under the case law of
the court before the directive they were not protected. Now they are.
In terms of joint and several liability you will be protected if you were a successful applicant.
That is an extra incentive to go for leniency.
Third principle: The directive applies to collective action, but does not organize it. So
directive does not say you all need to have your MS a collective damages claim.
In this directive there is a world of magnificent elements.
Joint and several liability is becoming a sanction in itself. If I am a victim in a cartel, I have the
right under the directive, to go after each of the cartelist separately. If there are 7 cartelists
and I have a damage of 100, I don’t have to go to each of the 7, I can go to 1 and ask my 100.
Afterwards he has to make sure to recover the rest of the other cartelists. With big quantities,
this is a big issue ==> it is becoming a sanction.
Law firms like CDC are using this! They have developed a program: Leniency +. They tell the
companies to step forward, not to the authorities, but to CDC. CDC won’t give you immunity,
but CDC will ask you to pay your share in the cartel. If you come, you give CDC all
information about the others, and CDC promises you to recover from you only your part and
not the whole amount. This will give you certainty. If CDC can devise this legal instrument, it
means that this joint and several liability has become a sanction by itself.
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Lecture 4: Abuse of dominance (Art. 102 TFEU) - Substance
Google shopping: when you google for a certain product, like for example iPhone, the first
thing you will see appear on search page is a comparison of Google where they say where
you can buy the product at what price.
They received a fine of 2.42 bn for this. (highest fine ever for an individual undertaking)
Google had tried in the past to have a shopping comparing service called Froogle, but this
was a flop, it didn’t work. Competitors were much better ==> Google said: I will use my
dominant position in the market for general search engines and from now on whenever
someone is looking for a product they will automatically see my comparing shopping service
first. Traffic for Google’s comparing shopping service went up with 45% and traffic for the
competitors went down with that amount. This is why the commission stepped in, started a
formal investigation and fined Google, Google had 90 days to comply with the request of the
EC. You can see that they are still doing the comparing shopping service, but now it is
sponsored. Maybe in this way they are complying. Because if they would not comply they
could get a penalty payment of 5% of their worldwide daily turnover!
90 days after 27/06/2017 we will maybe hear more about this.
Amount is not yet known, but will be soon. (amount risks to be double or more than previous
discussed case)
What is the complaint here?
It is ironic, Apple which has a completely closed system, no third parties have access to this
system, is not under investigation. Google, which uses Android, which was meant to be an
open system available to everybody, is under competition investigation and risks a fine of 5bn
or more.
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Because according to EC, what is officially called an open source Android system is not really
so open if you want to have access to the goodies (= play store, apps). They are actually
paying people not to install search engines other than their own.
They are bundling and tying. (= form of abuse of dominance). They are hindering the
innovation according to the Commission because they hinder the so-called forks which are
competing systems built on Android.
Another case:
A company, somewhere in a garage with enthusiasts who believed in 3D printing. The
company started small and is now on the NY stock exchange and they are amongst the
market leaders of that field. They don’t earn their money with 3D printers, they make their
money with software. Their software makes their 3D printers communicate with the old-
fashioned printers. They go to HP etc and say they want to develop software which makes
your printers communicate with ours. Often it is the opposite, producers of printers come to
them and ask: Can you please develop software which makes my printers communicate with
yours.
Then the firm says it will cost me a lot of money, so they will only do it if I am certain that after
I have invested all that money, I will actually have some return. Therefore I am going to ask
you to bundle it with every printer you sell. And I want to know that my software is the only
software you will sell with that printer. And if you do this, I will give you a rebate, the so called
exclusivity rebate (the kind of rebate as in Intel).
They go along with this business model, and then at once when there are commercial
negotiations, no lawyers are present. One of the counterparties says: I don’t think I have to
brand exclusivity to you, because that would be abuse of dominance. You are abusing your
dominant position by imposing those conditions on me. And I have nowhere else to go,
because I need your software.
The firm wants to know if they can defend themselves.
Abuse of dominance under art. 102
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The differences between art. 101 and 102 are interesting. As we remember from the Parker
pen case: you don’t need to be 2, you can be alone in order to violate art. 102. No condition of
plurality! 102 does not apply to associations of undertakings. If you are an association of
undertakings, you can get caught under 101, but not under 102. Relation between 101 and
102 is one of pure autonomy. There is no hierarchy between these articles. If you can apply
both cumulative, you may. However, this can have bizarre effects as in Alrosa. This case is
about Alrosa, one of the bigger producers of diamantes. They enter into an agreement with
the world’s largest producer and distributor of diamantes, De Beers. Alrosa would produce
and De Beers would sell. When parties enter into an agreement that has a potential to be a
restrictive agreement and a long time ago, when they still could, they notified the EC and
asked them if they could live with the agreement. The EC says NO! I think it should stop and I
am going to start 2 cases. Autonomous relationship between art 101 and 102. I am going to
start a 101 case against the 2 of you and I am going to start a 102 case, abuse of dominance
against De Beers. In the first case, Al Rosa and De Beers come together and discuss. They
go jointly to the commission and say they understand there is a problem, we will gradually
stop this. Give us 5 or 10 years to stop with this distribution mechanism. EC said it was not
enough! At that point and under art. 102 De Beers goes to the EC without Alrosa knowing this
and commits to stop now. The EC is fine and makes it binding.
Al Rosa has now a problem, because Al Rosa has no distribution system because they
always worked with De Beers. Al Rosa has no way to sell the diamantes thanks to the 102
case.This goes to the general court, the general court is in favor of Al Rosa, it then goes on
appeal and the ECJ is in favor of the EC.
One of the risks of working with commitments is the effects they have on third parties. But it
also tells a lot about the relationship between 101 and 102. Beware that 102 is a unilateral
thing, there is no obligation to involve third parties.
There are no exemptions under 102, but there is something that may resemble it (see later)
Dominance
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When are you dominant? See above slide.

Easier definition of dominance:
You are dominant if you can autonomously determine your behavior on the market.
The article says that one or more undertakings can be jointly dominant. ==> there is
something like collective dominance. Collective dominance is difficult!
Joint dominance
We know what it is not:

- We do not need it for behavior of two undertakings that are part of the same group,
because that we can catch as being one undertaking.
- We already have concerted practice: two undertakings being independent in the
market, having no contracts, but still colluding - we can already catch that with
concerted practice.
So why do we have a new notion, ‘collective dominance’?
It is not a synonym for an oligopoly. Oligopoly is more than just a few players, there are other
conditions. There may be a connection, but it is not the same.
What is then a collective dominant position?
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In the beginning, the court was always talking about undertakings with structural links.
These structural links enable the companies involved to present themselves on the market as
one.
The court said there are three conditions:
- There should be transparency on the market
- We know from each other that we cannot deviate
- We have to be able as a jointly dominant entity to impose this on newcomers on the
market and to impose this on consumers.
A good example is the Piau case:
Piau is a player’s agent in the soccer world. He wants to establish as a player’s agent, but he
never does, because he fears he won’t be accepted under the FIFA’s player’s agent
regulation and he acts against the FIFA. How? What are the tools?
Check who is the undertaking here. The soccer clubs are undertakings, they are entities with
an economic activity. The national association of soccer clubs is therefore an association of
undertakings. FIFA is an association of national soccer and therefor FIFA is an association of
an association of undertakings. Unless we could show that the national associations of soccer
clubs are also undertakings themselves and not only associations of undertakings. And we
could show that if we can show that they have themselves an economic activity. They do have
an economic activity because they manage the broadcasting of the soccer rights on national
level.
So we have:
- The clubs – undertakings
- The national federations – undertakings + associations of undertakings
- FIFA – association of an association of undertakings
This person wants to go after FIFA.
The person, knowing that associations of undertakings are not mentioned in art. 102, goes
after FIFA under 101. He says: FIFA, you have created together with the associations and the
soccer clubs, this regulation on player’s agents, which prohibits me to enter the market, and I
see this as a restrictive agreement.
EC follows that analysis. The question is if it really is only a 101 case? The court said no, also
102 case as FIFA holds a collective dominant position!
Reasoning of the court:
You have different undertakings, you have associations of undertakings which are also
undertakings and these together close the market by working under this regulation. And that
is why Piau cannot enter the market. Because they hold a collective dominant position. They
have structural links which enable them to present themselves on the market as one entity.
The structural links is the regulation drafted by FIFA.
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The bizarre element is that FIFA holds a collective dominant position (on its own). The court
explains that FIFA here is an emanation of the associations and the clubs and that FIFA
operates on the market through the associations and the clubs.
It stays strange to hold a collective dominant position on your own… But at least it is an
example.
Another example in the case law of a collective dominant position is: Shipping companies all
being subject to the same block exemption. The shipping companies have not talked to each
other (there is no collusion, we cannot call it restrictive agreement,…). Nevertheless, they are
presenting them on the market as one. How can they do it? Because they all benefit from a
block exemption regulation. So the source of the collective dominance is actually outside. It is
from the legislator, or in the previous example from FIFA.
Under 102, joint dominance has never played an important role (there are only few cases).
It was very important under merger control. That is why the EC invented this concept. There
was a time that the EC could only stop mergers if your merger would strengthen or create a
dominant position. At one point the EC said: ‘I will interpret dominant position as including
collective dominance. I can stop your merger if you create or strengthen a collective dominant
position’ ==> EC received much more power.
Market definition
In order for someone to be dominant, it all depends on what your relevant market is. The
relevant market is essential in ALL branches of competition law and will determine the entire
outcome of a case. Classical case, EC says that the relevant product market and geographic
market is very small and you are very big and therefor they should stop you or you should
give commitments. And on the other hand you have market players, also with economists,
arguing that the market is very large and that they are small.
Two elements:
- Relevant product market
- Relevant geographic market
- (Temporal factor – nobody cares about it anymore)
Relevant product market
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Relevant product market has to do with interchangeability, substitutability. We want to find

products that are substitutable. But how do we do this?
We have always done it according to two factors:
- We look at product characteristics: is your product so special that it is not
substitutional with another product
- Price substitution
We have always used and still use these factors, but the relevant weight has completely
changed.
Whereas in the past, the emphasis was on product characteristics, today the emphasis is on
price substitution. We still look a bit at product characteristics, but less.
Therefor there is case law which states that bananas are in a separate product category
because they have certain characteristics which set them apart from other fresh fruit and that
is that they can bet eaten by babies and old people.
Today we would look at the SSNIP test. Small but Significant Non transitory increase in price.
The idea is imagine if hypothetical monopolists in a given product, increasing the price with
5%. It is small but significant. It is a permanent price change. Will people still keep buying this
product, or will they switch to another product?
If they switch to another product, you have to take that other product in your relevant product
market. If they stick to the product, even 5% more expensive, then you have found your
relevant product market. That is the idea. And this, you combine with product characteristics.
Ex. Is there a separate relevant product market for the burial of pets? Or is that part of a wider
relevant product market for the removal of farm animals? It will determine your case.
There was a small company which found a niche in the market, the burial of pets. But then a
bigger player entered that market with all its money and the little player was driven out of the
market. But is there a separate market for such funerals or not? Unfortunately, we don’t know,
because the company didn’t dare to file a complaint.
Another example is the example of newspapers: You have a merger of Belgian newspapers.
One person owns the French speaking Financial newspaper, called ‘Le code de la bourse’.
The same person wants to buy the only Dutch speaking business newspaper, ‘De Tijd’. What
is the relevant market?
Some people say is the market for newspapers. Others say it is too broad and the relevant
market is the market for quality newspapers. Others say it is still too big and the relevant
market is the market for financial newspapers. There was one party saying it was still too big
and that the relevant market is the market for the French speaking business newspapers in
Belgium and the Dutch speaking financial newspapers in Belgium. So in fact whomever has
that title is a monopolist.
The bizarre thing was that the one making that last claim was the notifying party. And usually
it is the opposite. It is the party standing in front of the authorities that says that the market is
big and we are small. But here the notifying party said I am a monopolist and I want another
monopoly. It was a very clever move. And the move was inspired by the criteria to assess
mergers. It was: ‘we will stop your merger if you create or strengthen a dominant position’. But
I already have a dominant position. I want another monopoly position but in a different
market. I am not creating or strengthening a dominant position, so allow it. And it was allowed
due to product characteristics and the SSNIP-test. Product characteristics: you had all kinds
of evidence for instance there was a strike at this financial newspaper and you could see
where people were going. The first two days people were still buying other quality
newspapers, but the third day not anymore. No Dutch-speaking people buy French
newspapers and vice versa. So maybe these have special product characteristics.
And SSNIP-test is not needed because the newspapers are sold on a daily basis with more
than 5% extra, and people put up with it. So there is apparently a specific product market for
these newspapers.
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The EC has a tendency to make the relevant product market as narrow as possible. For
instance when two airlines merge, the EC will define the relevant product market as: Every
point of departure and every point of arrival is a separate relevant market. You fly from AMS to
ZUR, and the merging entity is also flying on that route, then you are dominant and have to
sell off your slots.
In this route we are ready to compare what airlines do with what high speed trains do on that
route. But it is very difficult if you are merging, there will always be a few routes where you are
dominant. The reasoning is that if you are a traveler and you want to go to ZUR, you are not
going to Geneva. (which is not necessarily true for students)
Relevant geographic market
Relevant geographic market is easier. Here we say we need the largest possible zone where
trading conditions are sufficiently homogenous. And we start with the EU as a whole. So it is
the EU unless there are certain factors which make the market smaller. Such as: preferences
of consumers, restrictive legislation, technical things for instance: the ‘bouwfraude’ case.
There were concrete mills. What is the relevant market for concrete mills? Knowing that
concrete can be transported for like 100 km, but after that, the concrete will become concrete
(hard). The question is then: should we now say that all the concrete mills have a relevant
geographic market of about 100 km? And in that zone are then all monopolists? NO!
That is why we invented the chain of substitution: as long as these small zones are partially
overlapping and as long as you see that within these small zones the trading conditions are
more or less homogenous, (so you don’t pay double in one zone than what it costs in the
other zone) then we are willing to consider this as one relevant geographic market.
This was the classical story of the relevant product market. This is now under fire. People are
saying you can no longer apply these classical theories of market definition because there are
strange things happening which have to do with network effects.
Network effects
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There are no official definitions for network effects. The value of my service depends on the
number of users. The more users, the higher I will value my service. Classical example:
Phone network. Historically the reason to have the Big bell company in the US was this.
There were all kinds of small phone companies and at one point somebody said let’s join all
these, so we can give better service. Universal service.
- Direct network effects: Users of one product directly benefit if more or less people
use the same product as well. You benefit if there are more people connected to your
phone network. You may also be hindered by too many people on the network. Speed
may go down.
- Indirect or multi-sided network effects: there are two groups of users, and the
value for each participant of the first category of users goes up if there are more
participants in the second category. So it does not only depend on how many people
are using this particular phone network. Your wellbeing depends on another category
of users on that same network. Ex. The platforms we know: Facebook, Amazon… On
the one hand they deal with you, on the other hand they handle with advertising
agents. The more there are of us, the happier the advertisers will be. But the more
advertisers there are won’t make you happier. So it can also become negative. But it
can also have some positive effect on you like free service. So the two groups are
interdependent but are active on the same or on different markets??? This is the
problem of market definition. Is Facebook active on at least two markets? Or is there
only one market for Facebook kind of platforms?
Ex. A dating website.
People prefer to go to the dating sites with most users
The two persons looking for a partner, went to match.com as Match.com has the
most members. As everybody joins the most popular dating site, there is no room for
all these separate dating sites.
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- Positive loophole effect: they will tend to all come together, because it is much
more interesting for users to have as many as possible users on the other side.
This can of course and does lead to enormous competition problems. Since you have
this natural tendency on these multisided platforms to come to one. We went from
many and go to one.
You can stop this by diversification, by searching for niches, by saying you have a
special dating site on the basis of profession, relation… This is what is happening.
These platforms have a tendency to become extremely dominant!
How do we deal with this? We don’t want to completely stop it, because it is easy and
in some regards it leads to more consumer welfare. But on the other hand we realize
that there is a tendency to have monopolists. (monopolist facebook, ebay, amazon…)
Two-sided markets
In the past, we spoke about two-sided markets. Before the digital age: take a classic
newspaper – it has a group of consumers: readers and a group of consumers: advertisers.
The advertisers will be happier if there are more readers. The readers at first glance may not
be happier if there are more advertisers, but in fact they are because this makes the
newspaper cheaper, more pages … These markets have always existed. What is new is the
rise of these multisided platforms. Multisided platforms and not two-sided markets because
these are not always only two markets.
How should we analyze this in terms of market definition? Is there one market or are there
two markets. There is a proposal (no case law yet) to say that if it is a non-transaction
markets, like Facebook, you really would see two markets and you would say, to what extent
is Facebook active on a market for online advertising for instance.
On the other hand, if it would be a two sided transaction market like Amazon, then you would
define your market in function of the whole. Saying Amazon is active on the market for buyer
seller online platform. Prof likes the proposal. To take away from all this: The whole classical
story about market definition is not under threat, but we should be aware that it doesn’t
always work anymore in a modern digital age.
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Nicolas Petit: ‘I see this rise of dominant platforms and I see them becoming monopolists in
their markets and still I believe there is competitive pressure from the 5 biggest players on
each other. Even though they are not active in the same market’.
Classically, we would never say that there is pressure from Apple on Google to the extent
they are not active in the same markets. But we nevertheless feel that these 5 are really
watching each other very closely and we know that they have the power to enter the market
as soon as they would like to. So the idea is: Is it not so that if Google goes too far, one of the
other 4 will step in with all the money they all have, and will start competing.
This basically means, even though you have 80% of the market share, you are not dominant,
because there is competitive pressure on you from others who are as powerful in other
markets. The court has actually already applied this! See below.
Market power
The Microsoft skype merger: EC defines relevant market as ‘windows based video calls’. You
have 80%/90% of that market, but I am still going to allow you to merge. Why am I going to
allow you to merge? It is very dynamic, tomorrow there can be a new player, … (see above
slide). EC allowed the merger because EC believes there is competitive pressure from others
who are not active on your market.
Market definition itself becomes more difficult, think about how should we define the relevant
market of a platform (1 or 2) and the idea that if you have a high market percentage we
should stop you, is no longer valid. We may allow you to function with very high market
percentages, believing that there will be pressure from others who are active in other markets.
Market power: The market share should always be compared with the market share of other
participants. You can have an enormous market share as a seller, but if your buyers are 100
times as big as you are, you may expect them to control your competitive behavior. We
should be more aware of buyer power. So the market share, not only your market share, but
also the market share of your contracting party or other party is important.
However this is never the only factor to be taken into account. All these other factors have
also been taken into account by the commission and by the court.
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Are you vertically integrated or not? Do you have a very strong brand name or not? Do
you have privileged access to raw materials or to technology?
All of these can be factors to be taken into account when we assess market power.
Last factor is not nice: abusive conduct of the firm- it says: what you are doing is so wrong
that I am sure you can only do it because you are dominant. It should be the other way
around. We should first assess what the market is, are you dominant on the market, and if
you are not dominant on the market, the case is closed. We should not deduct the market
power from the alleged abusive conduct of the firm.
So please be aware that even with 80 – 90%, you can still be found not to be in a position
where you could possibly abuse your dominance.
Abuse
Maybe you have won your case because you were able to define markets very broadly.
Maybe you won you case by showing that even though you had a very high market share,
you have no market power because your contract parties are stronger, or other factors should
be taken into account. If none of this works, we come to abuse.
When is there abuse? This is not defined in our treaty, however what we learn from the case
law of the court are two things:
- It is an objective concept. Your intent can be taken into account, but will never
determine whether you are abusing or not. Unfortunately for the little firm in the 3D
printing market, whom never had any wrong intention, they can still be found to abuse
their dominant position as much as anyone else
- There has to be an artificial element: you extract advantages, which you could not
have extracted without that dominant position.
Abuse can be: exploitative, you harm consumers or exclusionary, you harm competitors.
What is the link between the dominance and the abuse? There is no automatic link. The court
has always confirmed this. There is nothing wrong with being the biggest because you are the
best, but what is wrong is if you start to artificially use the position of dominance. In other
words you have a particular responsibility. Lots of things you could do when you were small,
are now impossible.
Exclusivity rebate, who cares as long as you are not dominant?!? No one!
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Possible abusive practices
- Mergers: if you are a dominant player on the market and you buy up everything that
comes to life around you, just in the hope that it will never become a competitor, that
in itself can be an abusive practice. You could not only try to prevent it, you could also
ex-post intervene under art 102.
- Refusal to supply and the essential facility doctrine: an essential facility is
product or service, which you cannot copy in an economically viable way. It can be
something tangible or intangible, for example rail tracks.
We should be very careful with qualifying something as an essential facility. Because
if I hold an essential facility, I may be forced under competition law to open it up to my
competitors. So now we have two completely conflicting interests,
o one is free competition and then of course we should open up essential
facilities to others. That is how we have liberalized all these large sectors of
the internal market (mail, phone, transport…)
o On the other hand, the essential facility may be the product of investment. It
may be that you have been investing for years and years to find such an
essential facility and if we force you to open it up too soon to your
competitors, you won’t invest anymore and we kill innovation.
So free competition can be in a direct conflict with innovation. The question is how do
you solve this conflict? In the case law of the courts there was a point where we
thought that the court was being a bit more restrictive on recognizing something as an
essential facility and was looking more at innovation.
Ex. Mcguil case: Mcguil, an editor, wants to publish a tv guide with the tv programs of
all the broadcasters. This was not evident in Ireland at that time. They go to the
editors and one of them says I don’t want to give my time schedule because I want to
have my own tv guide for my products. Can we then consider that time schedule to
be an essential facility? Someone absolutely needs it to develop a product. The court
said yes, we will force them to give it to you, because you are making something new.
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See in the readings Oscar Bronner case: Case of firm of editors of newspapers. This
firm learns that it doesn’t really help to work through the regular mail to bring the
newspaper on time. So they set up their own distribution system to bring newspapers
to the customer at 5:00. Then Oscar Bronner comes in small newspaper, only
financial. He asks if his paper can be distributed with the big editor’s distribution
system. He will of course pay for it. But the big editor refuses. Case goes to court and
court sides with the large editing group and denies the qualification of that distributing
system as an essential facility. Because they say, you have alternatives + they say
you’re not developing something new, you just want to do the same.
Are we moving away from too much attention for free competition to a little bit more
attention for innovation? We don’t know, because then came along the competitors of
Microsoft and said they wanted access to the source code of your operating system
because we want to compete with your office products. And the commission said to
give them access.
We should be aware that essential facilities is really a debate of free competition
versus innovation and respect for investment in technology. And you have to find a
balance somewhere.
Lots of practices dealing with pricing:

o excessively high prices extracted by dominant sellers,
o liberalization of telecom in Europe and overnight prices dropped sometimes
by 90% because we opened up the market,
o extracting excessively low prices because you are a dominant buyer and you
have the power to do so
o rebates: if your rebate is linked to your cost structure and you are dominant, it
is OK. In other words, if I am a dominant player and I give you a volume
rebate, so I charge you less because you buy a lot from me, but it also costs
me less to bring it to you, it is fine.
Exclusive rebates, loyalty rebates: I give you a rebate on condition that you
only buy from me. Perfect as long as you are not dominant, but if you’re
dominant, it is abusive.
Loyalty inducing rebates: we want you back as a customer, you get a rebate.
This type of selective rebates is called loyalty inducing rebates. So here you
need to look at the circumstances of the case.
o Predatory pricing:
If I have a product and the cost to produce that product is the average total
cost of the product. Part of that cost will be a fixed cost, example the cost of
my production facilities, the cost of my research and development and
whether I produce 50 entities or 100 entities, that cost is the same. I don’t
have to pay more to produce an extra entity.
There is also a variable cost which is the cost to produce one extra entity,
example the cost of the raw material to produce this one extra widget.
The theory of predatory pricing says that if you sell your products at a price
which is lower than this average variable cost it will be presumed that it is
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abusive. Because why would you do this? Who is going to invest extra
money to produce something and then sell it at less than that investment; You
knew beforehand that you would lose on selling this item ==> presumption
that what you are doing is abusive. However if you are selling your item at a
cost which is lower than the total cost, but higher than the variable cost, the
idea would be that it is not good, but maybe you had a good reason to do this
(like old stock you had to sell out), therefor we will be less strict in this case
and we will say, only if we can show that this selling below cost was part of
your plan to drive out the competitor out of the market then we will hold it to
be abusive.
Akzo case
AEC test: the As Efficient Competitor – comparing the behavior of the dominant firm with the
behavior of an as efficient competitor; We are going to see whether the AEC could still
operate in such an environment or not, if not, then there is a problem of abuse.
This test is something where we can only stand by and watch. As lawyers, we know nothing
about this test. The more references to this test you find in case law, the less powerful
lawyers and the more we have to trust economists. This is perhaps becoming a little bit a risk
on its own.
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Here we have the rebate scheme and the three categories of rebates:
- Volume rebates
- Exclusivity rebates
- Loyalty-inducing rebates
Prof is convinced that this test and that an economic analyses tailored for each specific case
will lead in the end to the best result.
How much are we willing to pay for it in terms of costs (ton engage in that type of analysis)
and mostly in terms of uncertainty and unpredictability.
You feel so helpless if as a lawyer, you have to defend the position of the commission and the
general court in the Intel case and that you have to defend as a lawyer that we would have
something as a per se prohibition for exclusivity rebates granted by dominant players.
Because you feel that the analysis could be more refined if it were more economic. But at the
same time it makes for complete unpredictable cases and for cases that will go on for 10 – 20
years without discussion. Prof is in minority position.
Intel case
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Does the court in this case impose an AEC test for dominant players granting exclusivity
rebates? NO.
This question is still open. The only thing the court says is; If Commission, you engage in an
AEC test and you get good economic argument from Intel and you deny that, you don’t
answer their arguments, that is wrong.
That is all we know now. We cannot say that we now know that in terms of exclusivity rebates,
we need to engage in an effect analysis. So Intel is of enormous importance, but at the same
time is not conclusive.
Tying vs bundling
Tying: two different products, you can buy them separately, but you are strongly encouraged
to buy them together.
Pure bundling: you have no choice. You have to buy two products together.
To some extent, that is what the commission has against Google in the Google Android case.
They say Google, officially, you say that Android is open, but phone producers can only buy
the goodies in your package if they also have your vision, your control mechanism and your
certificates and that in the view of the commission is bundling.
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The leading case on tying was Hilty. This is a case on staple nailing guns. There are guns,
staples and a kind of explosive device, which you need to shoot the nails in the wall. Hilty was
telling its distributors that if people would want to buy only the explosive device, without the
staples, don’t sell them the explosives, because they would buy the staples somewhere else.
Officially you could buy them separately, but they did everything possible to make it in fact
impossible to buy the explosive device and the staples separately. That is a typical case of
tying.
What are the conditions here? Dominance on the tying market.
Microsoft was dominant on the market for operating systems when it started to give the
windows media players for free.
Hilty was dominant on the market for stapling guns when it started its tying policy.
So you need dominance on one market, two distinct products and foreclosure effects. It
becomes impossible for firms who have invested in media players to compete with Microsoft if
Microsoft gives away the windows media player with every operating system. Why? Not
because of quality, only because Microsoft is dominant in the market for operating software.
This is artificial and thus abusive.
Mixed bundling
Mixed bundling: sold separately but at a higher price.
Big Data does not only lead to classical competition problems. The other issue is that to what
extent should we involve privacy regulations in competition law.
Compare Facebook-WhatsApp merger decision of the commission where the commission
said that data protection was not for competition law, with Bundeskartell ambt. The
Bundeskartell ambt initiates proceedings against Facebook on suspicion of having abused its
market power by infringing data protection rules. So now, we are at the exact other side of the
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scale. Instead of denying that data protection has any relevance in completion law, we are
turning the non-obedience with data protection rules into a form of abusive dominance. So
yes, data are important.
Defense: objective justification
We have no 102.3. We have no exemptions. But still you can objectively justify your abuse of
dominance. How bizarre it may sound. You can show to the EC that what you did was
objectively necessary or very efficient.
So what should I advise to the 3D printing company? Are they really abusing their dominant
position? What can we do to help them?
- Try to show that the market you are active on is so broad that you are not dominant.
This will be hard, because if you are developing a software product to make two
hardware products communicate with each other it will be extremely difficult to say
that there is not a specific product market for that communication software. But try it.
- Since Intel, we can say that you cannot a priori exclude that an exclusivity rebate is
not an abuse. That you should look at the effects of that exclusivity rebate and
perhaps in this case the exclusivity rebate would have a positive effect on consumers,
for the simple reason that there would be no software without exclusivity rebate.
- Is there an objective reason in this case for the so-called abuse? Yes, there is: you
cannot make the investment if there is not some form of guaranteed return. Prof
thinks this argument would pass the laughing test. This is when you develop a legal
argument in your practice, you tell your colleagues about it, if they all start to laugh, it
is not good.
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Lecture 5: Concentration (merger) control Substance and

procedure
Merger control
Merger control is a bit atypical in competition law. It is not a very intellectual part where you
can have endless discussions. This is about deal making. The lawyers here, are in a different
position compared to the clients and compared to the commission. Because in this case in the
heads of the businesspeople the deal is done as soon as they have shaken hands. One
company buys the other, shaking hands and the deal is done. Then they come to you and
they say they need approval for something for this deal, make it happen. Merger control is the
most lucrative area. The whole thinking is in function of this situation. Everything has to be
fast and final. We have no time for long assessments.
There is a second difference. In this area of competition law, everyone likes the commission
(in the other areas we are all afraid of the commission). Why? Because there is one thing
worse than having to notify the commission, and that is having to notify 4 or 5 different
authorities! You want one fast and final decision ==> everyone will try to go to the
commission.
Principles
It is the preventive part of abuse of dominance. Instead of waiting for an abuse of dominance
to occur, we want to prevent abuse of dominance and therefore we will assess all kinds of
artificial growth of companies. If you grow to be the biggest because you were the best, we
don’t care. But if you grow artificially, you take over someone, you merge, you have a public
takeover bid, that type of situations, that is artificial growth. And that is what we want to check
in merger control.
The one-stop shop principle: It is easier than 101, 102. You don’t apply national and EU law
in parallel, it is either EU law or national law. You either have a community dimension and
then your merger is checked under EU merger control rules or you don’t have a community
dimension and then your merger is checked under national laws.
Institutional balance: The commission is important. For the smaller transactions it is the
nationals.
Keep in mind that also third countries are very important here. Most deals are larger than the
EU. When these business people call you, you need to go through your database where you
have for all the jurisdictions in the world the thresholds that apply. Will I have to notify this
merger in the EU? Will I have to notify with the MS? In Brazil? China? US?... All these
jurisdictions should be in your database and you will check where to notify.
In Europe, you will determine this on the basis of turnover. In other jurisdictions, there are
other criteria, ex. How many people do you employ? In some jurisdictions you don’t have to
notify.
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No treaty for merger control! There is a merger regulation, secondary legislation, is a key-
instrument. So there was nothing in the treaty and the EC was trying to establish EU wide
merger control and the MS refused. The MS, certainly the stronger MS like Germany and UK,
said ‘no, we have our own instruments, we don’t need and EU wide merger control regime’.
And then the court of justice stepped in and it only intervened twice and then all the MS were
rushing for an EU regime. The court of justice did two things:
- It said: if you are a dominant company and you buy everything that comes to life, that
can be an abuse of dominance, so we can check your transactions if you are
dominant under 102.
- Then the court of justice said if you enter into a merger with someone, there will be a
master agreement setting out the conditions. This agreement is a restrictive
agreement, because you go from for instance, 5 players to 4 players. I can check it
under art. 101. ==> this scared the MS as it would take a lot of time. ==> MS created
merger regulation.
Comparison with art. 101 - 102
The major difference is that you have to notify. We abolished notification under 101, but here
you have to notify. You have no real direct effect, which is strange because it is a regulation,
so you would say this has direct effects with legal instruments, but not really because the
regulation is giving all the powers to the EC. No prohibition, no mention of nullity, no
exemptions. Simple, fast, fast and final.
Concentration
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The merger regulation is not a logically structured legal instrument. It is only in art 3 that they
define what a concentration is.
What we need for a concentration is a lasting change in the structure.
Structure is control. Whenever control over undertakings changes, then you have a
concentration. But what is control? Control is very well defined. It is control over strategic
decision making.
- A and B together become C = classical merge
- If you split A into B and C,
- or we have A and B and A and B set up together joint venture C,
- or A controls B and A brings in C and A and C become the parents of joint venture B
- or A controls B and A sells out to C, C now controls B
There are also some exceptions in the merger regulation.
Ex. You become a controlling entity a bit against your will. When for instance your debtor is
unable to pay and instead of bonds, you will now convert these into shares ==> you become
the controlling shareholder but you didn’t want to have decisive influence over the company.
Or you are a financial holding company and you control other companies, but you don’t do
this to control them, it is purely financial.
Concentration with community dimension
Next question: Does my concentration have a community dimension? The consequences are
enormous. If your operation has a community dimension, you will notify it with the EC, if it
doesn’t have a community dimension, you will notify it with the national authority. Maybe
several of them, and you don’t want this, you really want a community dimension. So people
are trying to present their operations as much as possible as operations with a community
dimension. What does that word ‘community dimension’ entail exactly?
All things that we do separately under 101 and to some extent 102, we do here in one
calculation because it has to be fast and final. Therefore, instead of making a separate
statement on this de minimis, we incorporate de minimis in the criteria, instead of making a
separate story about whether there is an impact on trade between MS, we put it into these
criteria, instead of saying ‘is this really an EU transaction and not a Brazil transaction’, we put
it into the criteria. All of this together, gives us a set of criteria.
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One set of turnover criteria (in other jurisdictions we use different criteria like nr of employees
etc) All these are cumulative, if one is not fulfilled, you move to the next set of criteria.
How does it work? FIRST SET OF CRITERIA
- First criterion is one of global worldwide turnover. We have to make sure that your
transaction is large enough. = de minimis.
- Second concerns your Union wide turnover. We want to make sure that this is a
transaction which is really important in the EU, otherwise, we will not spend time on it.
- The third criterion: ‘Unless each of the undertakings concerned achieves more then 2/3
of its Union-wide turnover in one and the same MS, this is impact on trade between
MS.
So all these things neatly come together in one set of criteria. It does not stop here! There is a
second set of criteria. This was added later. Why? Because in the beginning in 1989, there
were many MS without their own concentration control regime. However as time evolved,
more and more MS established their own concentration control regime, with their own
thresholds. And having to notify in 3 or 4 MS became much more of an issue then it was in
1989 and therefore, a second set of criteria was introduced. This second set is a bit the
translation of what is called a three+ rule. This is: ‘Dear notifying parties, if you would have to
notify in 3 or more MS, we will give you the right to come to the EC instead’. You don’t
automatically get this right! It is translated into a second set of criteria. The first criteria of this
second set resembles very much the first set but the thresholds are cut more or less in half.
So it becomes easier to get access to the Commission.
Again, the criteria per set are cumulative. So if one criteria within the first set is not fulfilled,
you stop and go to the second set of criteria. sOne of the criteria in both sets is exactly the
same, so if this is not fulfilled in the first set, it has no use moving to the second set. (It is the
Unless – criteria)
CRITERIA SET 1 CRITERIA SET 2
The first two criteria are more or less the same as in the first set, the third criterion is exactly
the same and (d) and (e) are the extra criteria. These are the translation of the 3+ rule. You
will have to find sufficient turnover in 3 MS.
Exercise
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We go to the first set of criteria. We don’t reach the + 5000 worldwide turnover ==> we go to
the second set of criteria.
First criterion: fulfilled. Second criterion: fulfilled Third criterion: If each of the undertakings
concerned achieved more than 2/3 of the Union turn over in one and the same MS, there is
no community dimension.
Our first company A, achieved more than 2/3 of the its community wide turnover in one MS.
The community turnover is: 1.201 + 200 +100 + 100 +100 +100 = 1801 ==> is more than 2/3
of 2.301.
For B: 1.201 + 300 + 100 + 100 + 100 = 1.801 ==> is more than 2/3 of Union-wide turnover.
The criterion was: UNLESS you achieve more than 2/3 of your Union-wide turnover within
one and the same MS. They both achieve more than 2/3 in one MS, one is NL, the other is IE
==> it is not the same MS ==> this is NOT a purely national case, this is a case where you
have at least big activity in two MS. ==> we are still on track for a community dimension.
3+ criteria:
(d) We have to show that in at least 3 MS we have a combined turnover of all the
undertakings concerned of more than 100 MIO.
- NL: yes (together more than 100)
- BE: yes
- LUX: no
- FR: no
- DE: no
- UK: yes (because A has 100 and B has 100 ==> together this is more than 100)
- IE: yes
 There are 4 MS with more than 100 MIO turnover. ==> at least 3 MS have a
combined turnover of more than 100 Mio ==> criteria (d) is fulfilled
Can we find amongst these 4 MS three MS where each of the undertakings has more than 25
mio?
NL: no only one is active there
BE: do both companies have more than 25 mio in BE? YES
LUX: no only one is active there
FR: only one is active there
DE: Only one is active there
UK: both have more than 25 mio
IE: only one is active there
 If we do not have at least 3 MS where they both have 25 mio turnover, then there is
no community dimension and we only have two! ==> we are not allowed to notify the
commission, we have to notify the national authorities. Which ones will depend on the
national laws.
At this stage you know what a concentration is, you know whether your concentration has a
community dimension or not and so you know where to notify. If it has a community
dimension, how do we proceed? We go to the commission and what is the test the
commission will apply? Will the commission allow our concentration or will it prohibit the
concentration. There are two tests, the original one and the current one (see slide below).
Substantive test
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Today the EC will check whether your concentration significantly impedes effective
competition. An example of a significance impediment would be: you create or you strengthen
a dominant position.
The old test was: we will prohibit your concentration if it creates or strengthens a dominant
position as a consequence of which.
If you are an advisor of notifying parties, which test would you prefer? The old test or the new
test? Prof would prefer the old test, because it was much more difficult for the EC to show that
you were creating or strengthening a dominant position, so it was much more difficult for the
EC under the old test to prohibit your operation.
Creation or strengthening of dominant position is only 1 example of what they can have
against you.
Collective dominance was invented for merger control, to make it easier to show that you are
creating or strengthening a dominant position.
Why did we change the test?
Significantly impede effective competition SOUNDS much more like significantly lessening
competition, which is the US test. There are big conflicts between US and EU in merger
control. Where for instance Honeywell and General Electric wanted to merge, for US it was
fine, but not for EU.
So EU said to US, we will adapt our test and make it more like yours and so we will avoid
conflict in the future. This has proven to be an illusion, because we still have conflicts. But at
least the test now SOUNDS alike.
This is art. 2.
We can use all the criteria and notions that we already know from abuse of dominance,
relevant market definition, collective dominance, chain of substitution… in merger control.
We can use the notion of ancillary restraint (I will buy your company on the condition that
tomorrow you don’t start another one against me --> I will buy your company = merger)
There are no exemptions, but you have defenses.
If the EC tells you that your transaction is significantly impeding effective competition and that
you have to stop, then you can use defenses.
- Efficiency defense: Ex. Yes, EC, I know, but if you allow us to merge, I will be able to
fire 5000 people. Then EC will say it is OK, as when you fire 5000 people, prices for
the consumers may go down.
- Failing company defense: EC, we were 5 big players on the market, I am nr 4 and I
want to buy nr 3. EC will say, no, you can’t do that because I want 5 players on the
market. I say: nr. 3 was almost broke, so if I don’t buy them, they will disappear from
the market anyway. Therefore, please allow me to buy them and at least save some
of the workforce… This is used more often than the efficiency defense and was used
more often in times of crisis.
- Emerging market defense: EC, I know that what I am doing creates some monopoly
but it is a new market and soon there will be other entrance in this market.
(sometimes the competitive pressure may come from outside your market. Ex. You
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have an incumbent mail company, a large old monopoly and you have an incumbent
phone company also a large monopoly and the two say they are going to create a
joint venture to send out mail digitally. If they are the first ones to do it, the EC will
allow it, as it is innovative)
Joint ventures
Parent A, parent B, JV C. When is C a joint venture? If there is joint control over C and
therefore the two parents must have veto power over the strategic decisions. Because
otherwise there is no joint control. If that is the case, they go to the Commission.
What are we afraid of in joint ventures? Are we afraid of the relationship between the parents
and the JV? No, not really. We are very much concerned that the JV may become the cartel
secretariat of the parents. We are concerned that the parents through the JV may start to like
each other so much that they want to do some things outside the JV and that would be cartel
agreements. So the whole assessment is based on that relationship. Is there or is there not
coordination of competitive behavior between the parents.
How do you assess your JV today? Ask following two questions:
Question 1: Is your JV full function or not?
What does full function mean? Is it on the market as an autonomous economic entity? So
much so that if you didn’t know it was a JV, you couldn’t possibly see it? How do we measure
this? Does the JV have its own product? Or does it only produce products under other
companies names? Does the JV have its own capital, own managers? So, is it really on the
market as an independent autonomous company. You couldn’t see it if you didn’t know that it
was a JV. You would think it was an independent company. If this is the case then your JV is
full function. And that is great, because it brings you closer to what you really wanted, a fast
and final decision. If your JV is full function, it will come under the scope of the merger
regulation and therefor you will enjoy the fast and final decision making of the merger
regulation. In other words, you will get all the procedural advantages of the merger regulation.
Only if it is full function. That was question nr 1.
And only if it is full function, we go to:

question 2: Does it or does it not lead to coordination of competitive behavior between
the parents?
If your JV is not full function, the EC will not even look at it.
If your JV is full function, but it does lead to coordination of competitive behavior of the
parents, then it is full function cooperative.
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This means that it is full function, so you get all the procedural advantages of the merger
regulation including fast and final decision making, but since it is cooperative, the EC will
apply the substantive test of art 101, being is this a restrictive agreement and if yes, can I
exempt it?
If your full function JV does not lead to coordination of competitive behavior between the
parents, then we call it a concentrative one. In this case, you will not only benefit from the
procedural benefits of the merger regulation, fast and final decision-making, you will also get
the substantive test of art. 2, being does it or does it not significantly impede effective
competition.
It is very simple if you do it in the correct order.
1. First check whether it is full function
a. If it is, you get the procedural advantages of the merger regulation
2. Check whether it is cooperative or concentrative
a. If cooperative ==> apply the substantive test of art. 101
b. If concentrative ==> apply the substantive test of art. 2
So it is possible that the EC within these very short deadlines of the merger regulation, has to
make an assessment under art. 101 for which it normally has years!
Tip: Often if the JV pre-existed, was already there before the transaction, then the chances
are that is was and will be on the market as an autonomous economic entity, if it is a new
entity, then the risk is higher that it is not full function. If it is full function you get the
procedural advantages of the merger regulation, fast and final decision making.
Examples
Fiat, Peugot,… What kind of JV is this?

They don’t have their own products. They only produce products under the name of the
parents. They may have a management, but very often it is people from the parents now
running the JV and they are tied by licensing, they are completely dependent on the parents.
These are obviously not on the market as autonomous economic entities. These are not full
function JVs ==> they are outside the scope of the merger regulation ==> cannot go to the
EC, will have to go to national authorities.
Other example: Volvo Cars and Autoliv
They will set up a JV. It will employ 200 employees taken from both companies. The parents’
company’s products will be sold. ==> This is not an autonomous economic entity, this is not a
full function JV.
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Other example: Sabena
Was it a JV? Was their joined control? Yes there was, the BE state and Swiss air.
What kind of JV was this?
Was Sabena on the market as an autonomous economic entity? Was it on the market so
much as an autonomous economic entity that you didn’t know it was a JV? Yes it was, it had
its own product, capital, management. ==> this was an autonomous economic entity – it
was a full function JV ==> it will get the procedural treatment of the merger regulation,
fast and final decision making.
Is it cooperative or concentrative?
Is there a risk that Sabena would be the cartel secretariat of the parents (BE state and
Swissair)? In order to assess whether there is such a risk, you need to check whether the
parents are active on the same market as the JV and whether the parents are active on the
same market. (because if they are active on the same market, there is a risk of collusion)
In this case, everything the BE state new about flying planes, was in the JV. There was
nothing left of knowhow for the parent. And therefore, there was no risk of coordination of
competitive behavior between the parent, BE state and Swissair.
This is a good example of a full function concentrative JV, which will not only be assessed
under the procedural elements of the merger regulation but also under the substantive test of
the merger regulation.
Other example: Sanofi and Verily Life Sciences (formerly Google life sciences)
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Sanofi is strong in medical care, Google is strong in digital applications.

The JV has a name ‘Onduo’. It has a product, a capital, a management.
It was accepted as a full function concentrative JV creating a new product.
Procedure
Merger and state aid procedure have much in common: it is a two-stage procedure. You have
to notify if you meet the thresholds, just as you have to notify new state aid. The EC will
assess your merger in two stages. In the first stage, they will check whether they have serious
doubts about your transactions. If they have serious doubts, they will start stage two, which is
a longer, more formalized procedure.
Notification:
If I meet the thresholds, I have to notify the EC, if I don’t meet them I go to the national
authorities. There used to be a sanction, if you would not notify, you would be fined. That
sanction is gone because it is only in your own interest that you notify. If you don’t notify you
cannot implement the merger. If you would implement the merger before you have greenlight,
then you will be seriously fined.
An implementation can be as simple as a sales director saying: Since we are becoming one, I
will already start selling your product, or I will move over to the other company. If you do that it
will be seen as implementation and you will be violating the stand still obligation, which
applies pending notification. Fines up to 10% of aggregate turnover.
According to the text, you notify to the EC and you can expect an answer in 25 or 35 working
dates. In reality it is NOT like this at all. Because the 25 days, will have been preceded by 2 or
3 months of pre-notification talks. These talks are not obligatory. If you don’t go to the EC
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before notifying, they will still welcome your notification, but it may happen that on day 24 you
get a call from the EC saying that your file is incomplete, we now have to stop the clock, can
you please give us the missing information?
Possible decisions:
- Majority of decisions are: it is OK, go ahead
- Then there are decisions where it is ok if you give us these commitments
- Or EC can have serious doubts and will open face two
If the EC would not decide, you are allowed to go ahead, but this never happens.
Phase 1 is short and private, phase 2 is much longer and public. In phase 2 they will start
asking your competitors what they think of the operation and you really don’t want that.
The 90 days can be extended if you offer commitments or can be extended if you
spontaneously ask the EC to take a little more time.
Possible decisions:
Here you have much more chance that there will be serious conditions attached.
Or it happens regularly that the EC says it is not compatible and I’m not going to allow you to
have this concentration.
Investigative powers
Very wide investigative powers, just like in the other branches of competition law.
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Some notifications are withdrawn. If you are in the first stage, 25 days, and you feel the EC is
not going to accept your transaction, it may be wise to withdraw it. Because if you
immediately file again, but now with some niceties3 for the commission, you will lose 25 + 25
days which is still less than 25 + 90 days.
The JV are no longer the largest category of concentration. 47% is acquisition of majority.
88% is approved in phase 1 without conditions… see slide above.
What is the best strategy to get the deal through?

It used to be simple, if you had a community dimension, if you had no community dimension,
you would go to the national authorities. Now it is much more complex.
The principle is one-stop shop. All you see on above slide is soft.
We would like to have influence on the decision of the commission.
First bridge: the German clause
There are a number of bridges (principle is one-stop shop) between EU level and national
level. The first of those bridges is the German Clause. Under the German clause as a national
competition authority, you will say: ‘Dear commission, this transaction has a community
dimension, so it is for you to handle it’. One-stop shop. ‘But can I please do it?’
When can you use this clause? When the concentration has a particular impact on your
national market. Yes, it needs the turnover thresholds for a community dimension, but it has a
particular impact on your market.
Ex. Albert Hein and Delhaize want to merge and they meet the threshold for a community
dimension, but the merger will have most of its impact on Belgian territory. There the shops
will need to be closed when the two merge. Then the BE authority can ask the right to deal
with this transaction.
The EC is not obliged to allow this, but if they do, (they regularly do) it is hands-off for them.
The matter will be decided on the national level, by the national competition authority.
3 A fine or subtle detail or distinction.
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Second bridge: The Dutch clause
The Dutch clause: MS saying to the EC, ‘dear commission, this transaction does not have a
community dimension, and therefore you should stay out and it is for me to do, but can you
please take it?’
Why? Because they did not have the tools.
In the meantime, they have a Dutch competition legislation and all MS have their own merger
control, so you would expect the Dutch clause to slowly die. However, what we see is the
opposite. The Dutch clause is more popular than ever before.
This is because one of the changes introduced in 2004 is the opening up of the German and
Dutch clause to the notifying parties. These were clauses, which initially could only be
invoked by MS, but now, everyone is welcome to invoke these clauses. So as a notifying
party you can say: ‘Dear commission, this transaction has no community dimension and
therefor I should go here and here and here, but could you please take it?’
This opens up a whole new world of possibilities. You will have to assess what is the best
strategy. Usually the fastest way to get the deal through in time, is a combination of all the
national procedures.
But then you have to assess what is the risk if I go for these national procedures that one of
the national authorities is going to refer under art. 9 to the commission, or is going to refer
under the Dutch clause to the commission. If this happens, my dream scenario, the fastest
scenario, will end up in a nightmare scenario. Because I first have to do all the notifications
with the nationals. One of them sends the case to the EC, I will have to stop and re-notify with
the EC. In addition, the EC may ask me why I didn’t go to the EC in the first place and
whether I have something to hide. It will be up to you to assess how large the chance is that
your dream scenario ends up in a nightmare scenario.
Third bridge: art. 21

‘A MS may take appropriate measures to protect legitimate interests.’ This is different from the
German and the Dutch clause. The German and the Dutch clause leave the one-stop shop
intact. You will get 1 decision on your transaction.
Under art. 21 you will get 2 decisions. Because art. 21 is saying dear commission this is a
transaction with a community dimension, so please take it. But I want to look at another
legitimate interest than just free competition. I want to look at this case from a regulatory
perspective, or a consumer perspective, or a media liberty perspective. Can I please do that
while you are engaged in your merger assessment?
Again, the commission is not obliged to accept this, except for the few that are mentioned in
the merger regulation (public security, … of the media and prudential rules) but you can bring
any other interest. The Commission is not obliged to accept your request, but if they do, you
have two decisions, one on competition (merger control) and one on another interest.
Example, the UK is liberalizing its water sector, it is privatizing all its former public water
utilities and once privatized, a French public monopoly buys them all. Then UK says it was not
our intention of this privatization process to enhance public ownership in France. Commission
if they buy the water utility, you look at it from the competition side and I want to look at it from
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a regulatory perspective. EC agreed and UK said within 5 years you have to bring this utility
to the stock exchange.
So we have all kind of bridges between the EU level and the national level.
Strategic questions
Some strategic questions:

- Should I have a merger? Maybe I don’t need a merger. Maybe I can get the exact
same results with a strategic alliance.
- These alliances are 101 constructions. You can go very far in a 101 construction and
it can become a valid alternative for a merger. If you for instance see a merger is not
plausible because you are active on the same market and both of you very strong on
this market then another option might be better.
- Where to notify? On EU level? National level? You may chose.
- Will I offer commitments? Which commitments? You should have a plan, ex. I have 5
factories and one of them is losing money anyway, let’s present that as a gift to the
commission. Have it before the transaction. Which commitments will I offer? When
will I offer them? If I offer them too early, the EC may say: thank you, I make them
binding. If you offer them too late, you may go to phase 2 and it may be a failure.
- Shall I park my assets? This may be an option. Imagine there are 4 players on the
market and nr 3 is sold off by a bankruptcy court in the US. You would really like to
have nr 3, but you also know that you might not get approval. Because you are too
strong; In that case you may choose to park the assets. This means you will ask an
investment bank to buy nr 3 for you. The investment bank of course will get
clearance, because they are not active on the same market. They keep the assets for
you until you are ready. It is only postponing the difficulty. Sometimes it can be
necessary, because in case of bankruptcy, the bankruptcy court wants absolute
certainty and they want a fast sell. They cannot wait for you to get approval in Brazil
and China…
- Should I sign a hell or high water clause? Do not sign it unless you are under
enormous pressure, and even then, don’t sign it on your personal account, because
what you are saying is: I will buy that company regardless I get clearance or not. If
you don’t get clearance, there is only 1 option and that is to sell the company back
again on the market but this time the whole market will know you have to sell, so your
price will be depressed ==> you risk to lose an enormous amount if you have to sell
off.
In the example of the bankruptcy court, it may be necessary because the bankruptcy
court will say I’m going to sell to someone else because I have doubts about your
clearance. You may be forced to sign a hell or high water clause.
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Developments: The merger simplification package – you don’t have to know the exact
conditions, just be aware that a large proportion of notifications go through the simplified
procedure, which means less publicity, less conditions, lighter file for you to assemble and an
easier case for the commission. The simplified procedures exist in all MS as well for the
easier cases.
New ideas
Two big issues:

- What do we do with minority shareholdings?
- Are our turnover criteria still adapted to the modern digital times?
First, the non-controlling shareholders, it is possible that you have not 50 but only 45% and
that you don’t have a SH agreement and that in no way you have the control over strategic
decision making over a company, but you may nevertheless have a blocking minority, which in
many jurisdictions you will have with 25%. So you could still have quite a bit of influence over
a company. Imagine that you are an important player on the market and you are 5 and in
each of the 4 others, you buy 25% and they cannot catch you because it is not a
concentration. - We all feel it might be good to do something about this.
In one of their papers the EC presented a nice idea, ‘the targeted transparency system’,
which never made it. The idea of the EC was not to have another obligation to notify, but was
to say if you are in such a situation where you have a minority shareholding where you have
some influence, let us know. This idea is dead for the moment.
The last idea is very much on the table: ‘The question, should we not have different
thresholds, not just turnover thresholds?’
Because we see that the most important technology related concentrations are never notified.
Because very often the big firms buy startups, and these startups don’t have turnover yet,
they only have knowhow. You see that enormous amounts are paid for companies with almost
no turnover. ==> The question is should we not also have thresholds based on the price paid?
The value of the company and not only the turnover of the company. This is going to happen.
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Lecture 6: State aid – Substance and procedure
Practical remark! Today there was an important judgment of the court of justice in C-230/16 -
Coty Germany. The question which arose was: ‘If you have a system of selective distribution,
so where you choose your distributors on the basis of objective criteria related to quality,
can you then, as a supplier prohibit that one of these selected entities starts selling the
products through a third party on an internet platform? Suppliers won’t be happy. So can they
prohibit it. The court said yes, as long as a number of conditions are fulfilled, such as
proportionality and selection strictly on the basis of quality related criteria they can prohibit it.
The court seems to suggest that even if the national court would find that this is a restrictive
agreement that then a block exemption might be available.
State aid - General
We move now to the rules, which are for MS, and of course also apply to undertakings, but
they bridge undertakings and MS. Which are these rules?
3 categories of rules:
- State aid
- Public undertakings (monopoly rights, exclusive rights – is for next week)
- Doctrine of combined application: it is a completely judge made doctrine and it
says that art 101 and 102 are written for undertakings and not for MS. So in principle
you cannot invoke art. 101 and 102 against MS. But there is an exception and this
has everything to do with ‘effet utile’, you cannot as a MS, undermine the effects of art
101, 102. Art 101: I, as an undertaking know that I cannot enter into a restrictive
agreement with you, other undertaking. So, I go to my association, federation and ask
them to impose upon us what we know we cannot do directly. Then we said that
loophole is closed, because art 101 also deals with associations of undertakings. But
now you could go one step further. You could say, if I know that as an undertaking I
cannot enter into a restrictive agreement with you, other undertaking and I cannot ask
my association of undertakings to do it, why don’t I go to my MS and I ask them, MS
please impose this cartel upon me, because I know that I cannot do it myself. If we
would allow this, then we have again created a loophole, because then if you could
convince the politicians to impose this cartel upon you, it would be fine. And there this
doctrine says: we won’t allow MS to reinforce existing cartels, to force undertakings to
enter into cartelistic behavior and we will also not allow them to delegate their own
economic powers, that means we will not allow them to say: Dutch bar association,
you set the prices for legal advice, I give you the power by law to do so. Under the
Doctrine of combined application, this won’t be possible. At least in theory. What do
we ‘combine’? Combined application of what? Art. 101 and 102 combined with the
loyalty obligation in the treaty, saying: MS you should always be loyal to the EU and
vice versa. That is in art. 4(3) of the TFEU. And we combine that with protocol nr 27
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which says competition is important. If we take all this together, we should have
enough to catch MS trying to undo the effects of art. 101, 102. However, in practice it
is very easy as a MS to get around this doctrine, because the doctrine is interpreted
very restrictively. For instance the court will say as long as the MS does not copy
word for word the text of pre-existing cartel agreements, it is OK. Or in terms of
delegation of economic power, the case law will say: if you leave this setting of these
prices to independent people, then it is ok. And if these independent people are
retired representatives of the profession, that is still ok. And if we have a committee
where the independent people are only a minority, it is still ok.
State aid is part of competition law and has the exact same field of application. So the notion
of undertaking, the notion of effect on trade between MS, all of that comes back.
State aid has been modernized, so also in state aid we will find more economic reasoning,
less reasoning in terms of contract clauses and decentralization.
We know why we have state aid rules, we call them mutual disarmament, we call them the
organization of a common self-discipline. MS individually know that state aid is not the best
way to spend taxpayer’s money. But they cannot refrain from saying yes to individual
undertakings who threaten to lay off their voters.
What we have tried to organize is a system whereby MS will say it is impossible to grant state
aid, because Brussels, the bureaucrats prohibit it. As long as this works, we keep it in the
books.
This is specific for EU competition law, you won’t find anything similar in the US. And the
relevance of state aid provisions is growing. Economic and monetary Union appears even to
have reinforced. MS desire to grant state aid. Why? Because MS have lost the beautiful tool
of devaluation; In the past when our companies had trouble in other EU markets, we simply
devalued the Belgian Franc. This is no longer possible so we have to find other ways of
helping our companies. And state aid is one of the few that remains. ==> we see more state
aid. The richest MS are the biggest granters of state aid.
Stade aid is in principle incompatible with the treaty.
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There are exemptions, duty to notify and limited direct effect.

But big difference: NO FINES! It means that in state aid, you can take a risk. The worst that
can happen to you is that you need to give back what you got + interest. Some companies
take that risk.
Smaller companies who are unaware of the state aid rules could go broke when they need to
pay back (if they have spent the state aid money). And contrary to under art. 101, 102, you
have no 10% global fine cap. If you go broke, the commission will say, OK go broke.
We have no parallel application of national state aid rules and EU state aid rules for the
simple reason that there are no national state aid rules. The commission doesn’t’ trust
national competition authorities with state aid. They fear the national competition authorities
would always be in favor of the government who appoints them. Prof thinks this is wrong and
that the national competition authorities are sufficiently independent to be able to deal with
state aid rules.
That means that if we have modernization in state aid, we cannot do it exactly the same way
as we did it under art. 101, 102, where we could simply say: the commission focusses on the
important cases and the unimportant cases are for the nationals, because there are no
nationals. So how are we going to do? (see later)
Then we have also the more economic thinking: refined economic approach. (see later)
These articles are so well drafted that they never had to be amended.
You have 1 article dealing with substance, art. 107. If your aid is in violation with art 107, we
will call it incompatible aid. Substantively there is something wrong. For instances you grant a
date and you have no exemptions.
If your aid is granted in violation of the procedural rules, art. 108, we will call your aid illegal.
And so it is possible to have illegal but compatible aid. Within art. 107 you have three
paragraphs:
- Principle of incompatibility: as a MS you should not grant state aid
- Automatic exemptions: if you fulfill the conditions of these exemptions, the EC must
allow you to grant the aid
- Facultative exemptions: this is where the EC can devise the policy it wants to
devise. Because here the EC sets the conditions. Ex. One year they may say they
think it is important to do a bit extra for research and development. The other year the
might decide to do more for infrastructure
Procedure 108
- Existing aid: I was already granted aid before I signed the treaty – in this case there
will be a generous regime.
- Formal procedure: It applies to both, existing and new aid. Like in concentration
control, it is a more public and longer procedure in case the EC has doubts.
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- New aid: Very strict regime, you have to notify it, you cannot bring it into effect as
soon as you have not received greenlight (like concentration control) and if you do,
there will be sanctions.
Field of application (2nd line) after State Aid Modernization

Second line of defense
In state aid cases more than 60% or more of the discussion will be on the question: Is this
aid? And 30% of the discussions will be: Is it existing aid?
== > Majority of the debate will deal with substance. Is this provision fulfilled or not?
Everything underlined in text on above slide is cumulative. If one of the elements is not
present, we have no state aid so there is no case and MS is free.
Aid:
- Has to be granted by MS or through MS resources
- Has to falsify somehow competition
- ‘Certain’: refers to selectivity – only certain undertakings get aid
- There should be an effect on trade between MS
If we have all this, we have a principled incompatibility.
What do we need in order for there to be aid?
You need a transfer of money from the government to an undertaking. Transfer can also be
tax reduction. We need something artificial. That is difficult. It is easy in the example of tax
advantage, because a tax advantage, we must have some action of parliament and a
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parliament is artificial compared to a market. But in other cases it will be much more difficult.
For example, when a government buys shares in an undertaking and it is state aid when it is
artificial. But, when is it artificial?
In order to check whether the behavior of the government is artificial we use the private
market investor test. We compare the behavior of the government with the behavior of a
normal market investor. If the government would like to invest in a company, which is not
doing well, perhaps would go broke without that government capital injection, then nobody
would invest in this company. So if the government does it, it is artificial and will be state aid
and you have to notify it.
If, on the other hand, they invest at market conditions in a company that is doing well, it is not
artificial, it is not state aid.
Abstract thinking would be to question whether it is not wrong to compare the behavior of the
government with the behavior of normal private investors? Isn’t it so that governments should
do exactly what normal investors don’t do? How many private investors did we see when the
banks went broke? Not many! Fortunately government stepped in.
 Governments should do what private investors don’t do and you should not compare
the behavior of the government with the behavior of a private investor. ==> it is a bad
test, but we don’t have anything better. If we wouldn’t apply this test, there would be a
loophole for MS to grant aid as much as they want.
So in order to have state aid, we need a transfer and we need an artificial advantage.
On above slide: all techniques that MS have already used to grant state aid. They go from the
very obvious to the very difficult to detect.
Very difficult to detect for example:
- Extension of payment: I enter into a contract with an undertaking, give the
undertaking a loan and I tell them that we write on paper that the undertaking has to
pay me back, but don’t worry, I will never ask my money back.
- Dowry in case of privatization: I privatize a company, before I sell it off, I inject a lot
of money in it, and then I sell it at much less.
This is state aid, but it is difficult to trace it. State aid will not be given by subsidies anymore.
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Why state aid was given is irrelevant. In the field of application, we want to see a wide field of
application. We want to see it all, so at this stage we don’t care about why you did it, it is still
state aid. We will care about your motive later, when we come to exemptions.
We look at economic reality and don’t care about names, qualification…
In order for something to be aid it should be granted by a state or through MS resources.

What we know: we need a transfer, aid by local and regional bodies is included, but this is
difficult. The EC only knows MS, if there is a problem, the EC goes after a MS, but a MS often
distributes aid, like regional aid, through regional entities. The MS does not really know what
these regional entities are doing.
Or they may say we give aid to local initiatives and the money is distributed by the city of
Maastricht. Very often the MS doesn’t know what a city is doing and they only find out when
there are problems.
Aid granted by the EU, through for instance the European social fund, or the European
regional fund, is not state aid. As it is the EU, not a state.
But very often the EC says that the money distributed through the regional support funds will
be administered by MS. And as soon as administered by MS, it becomes state aid.
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The big problem: What do you do with aid which is not financed through MS
resources?
For example a MS is saying, this sector of economic life, it is difficult to operate there. It is
difficult to run ships under the Dutch flag, it is much easier under the Panamese flag, or LUX
flag, but it is difficult to do it here. Let’s give an advantage to this sector here. From now on we
will make a law saying: you can pay your employees less then minimum wage, if you are
active in the ship-building sector. Is this state aid?
Or you will say Small and Medium Enterprise, we think it is important in Europe, let’s make it
easier for them. Ex. If you are running a SME, we will make it easier for you to fire people
than for other companies. Case law Petra Kirsamer wak v C189/91
You could say it is state aid, because it make life easier for this sector, whereas all the other
sectors are subject to the normal rules.
If you look at the case law of the court, you will find evidence for both positions. It all has to do
with the ‘or’ in the treaty.
In order for it to be aid, it should be granted by MS ‘OR’ through MS resources.
 I understand that if the aid is not financed by a MS, it still can be aid, because it says
‘or’. And in some cases the court exactly says this! (see slide above)
The problem is that in other cases they say the exact opposite (see second part of slide
above).
Unfortunately, the second half is the law as it stands. In other words, if your aid does not have
an impact on a MS’ budget, it is not state aid. So if I make it easier for you to fire people, it is
not state aid. Because it is not the state paying for this, it is your employees. If I tell you that
you can pay your employees less than the minimum wage, it is not state aid. The court says
this ‘or’ is a cumulative or and not an alternative ‘or’.
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Another tricky thing is the notion of undertaking.

In the most recent commission notice on the notion of state aid, they write this:
‘The question whether a market exists for certain goods and services may depend on the way
those services are organized in the MS and may thus vary from one MS to another.’
So something can be an economic activity in one MS and not in another MS!
This allows MS to say that a certain activity, like for example collection of municipal waste, for
me it is not an economic activity and therefore I can grant aid as much as I like.
It is a very bizarre evolution that you as a MS could say yourself; I don’t want this activity to
be economic. I do this by withdrawing it from the market, I will do it myself and I will do it with
monopoly and now I can grant state aid as much as I like.
Then, we need to distort competition and so we have our own state aid de minimis rule.
This is logical because this is the second line of defense and the second line of defense is
proper to each of the branches.
This state aid de minimis rule says that if you grant no more than EUR 200.000 over three
years, per undertaking, we will not consider it aid.
200.000 euros over 3 years might not seem much, but it can be a lot! This is only about the
state aid component. So perhaps I give a loan of 1 billion and it can still come under de
minimis. Because the state aid component will only be the difference between the interest
rate I charge you and the market interest rate. And as long as that difference is below EUR
200.000, I could use de minimis.
Why do we say that you can grant a loan of 1 billion and still only have state aid for EUR
200.000? You will calculate your state aid on what is artificial, what is not in conformity with
the normal market behavior. So in this case, if I would go to a private bank and I take out a
loan of 1 billion, how much interest would I pay? Then you compare this with: if I go to the
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government and I take out a loan of 1 billion, how much interest would I pay? The difference
between those two is what is artificial. That is your state aid component, the rest is not state
aid, it is market conform. Then we will see how large is the state aid component. And if it
remains below 200.000 threshold, you can still do it. So 200.000 is not that small of an
amount.
However there is a new de minimis regularization as part as modernization of state aid. The
threshold is still the same (200.000 over 3 years), but the change is that it is now only
applicable to transparent aid. Transparent aid is aid of which you know exactly what the aid
component is when you grant it.
In case of a capital injection, I don’t know exactly what the aid component is it will depend on
the evolution of the course of the stock exchange over the years. And therefor it is not
transparent aid and my 200.000 limit will be an upper limit for my capital injection.
New concept ‘Monitoring’. Monitoring is the EC saying: I decentralize, MS, you can decide
whether this is de minimis or not, but from time to time, ex post, I will check whether you were
right. I will no longer a priori control all the cases, but I will control them ex post and if
necessary, I will just take a sample of your cases.
A MS has to warn the recipient that this is de minimis aid and you as a MS have to make sure
that the 200.000 ceiling is not broken. This is extremely difficult for a MS to do.
Ex. I want to give aid for training to a company of EUR 60.000 and I tell this company this is
de minimis aid. But maybe this company has already received aid under R&D, aid under
infrastructure and maybe all this aid together is more than 200.000. Maybe they received aid
from the city of Maastricht. Should the federal government know according to the EC? YES!
 Lots of responsibility for the MS!
When is aid selective? And if aid is not selective, it is not aid.

Ex. You are a MS, you have an inheritance tax, which nobody pays. If someone dies, they
take all the belongings and then they go to the tax authorities. People do this because the
inheritance tax is so high. ==> MS lower the rate, iso of 60%, they charge 20%, hoping that
more people will then pay. Practice has proven this is indeed the case. Is this state aid?
Certainly NOT, because you are not an undertaking! (and it is not selective)
Ex. 2: I am a MS and I lower corporate tax. No state aid, because tax is lowered for everyone.
Ex 3: I am the region of Catalonia and I lower corporate income tax for everyone established
in my region. Is this state aid? Is it selective or not?
In a similar case in the Azores, the court said it is not selective if the region lowers
corporate tax if:
- they have the power constitutionally to do so
- they can decide this without any possibility for federal government to intervene
- the federal government will not pay for the gap in your budget if there is a gap
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Ex. Excess profit ruling Case:

A multinational group of companies. One of the undertakings in that group is going to its
national government and is saying: Government, my accounting income is higher than my
real income in your MS, because I am part of a multinational group and with transfer pricing
and other mechanisms, they have assigned too much profits to me. In Belgium for instance,
you can then go to the tax authorities and ask for a ruling. ‘Tax authorities, please declare that
I am paying too much tax because my accounting income is higher than my real income in
your MS’. Excessive profit ruling. - This is treated as trade aid. The debate is now whether it is
selective or not. Belgium says it is not selective, because everyone has access to this ruling.
The commission says you don’t have access if you are not a multinational company. The
SME’s don’t get such rulings ==> the commission says it is selective. The court in Lux will
decide who wins. It is not to be predicted.
Trade between MS
Evolution in trade between Member States:

In the past everything was with an impact on trade between MS. A MS could not defend itself
by saying this measure was purely local. Because EC used to say that even the smallest local
measure has some impact on trade between MS.
This has recently changed a bit. For some activities like a local hospital, a local museum, a
local nature park,… we are willing to say there is no impact on trade between MS.
In this large field of application there are two evolutions in the case law which dent that large
field of application.
Two sets of cases have limited the field of application.
Stardust Marine: It is about imputablility4. It is as if the case law has added a new cumulative
condition to art. 107(1) and that is that the aid has to be imputable to the MS.
Stardust Marine was a company building yachts in the US. It got credit from a daughter
company from Credit Lyonnais (French bank). The company was in very bad financial
situation, the bank’s credits were transformed into shares and so the bank, a bit against its
will, became SH and owner of the company. Then Credit Lyonnais itself went broke and the
French state had to take over credit Lyonnais, with its assets. One of these assets was the
yacht company. The French made a bad bank. They put all the undesirable assets in the bad
4 Toerekenbaarheid
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bank and sold them off. They put into Stardust Marine EUR 450.000.000 and then sold it for
2.000.000. EC went to France and said that was not logic, the EC said it was state aid and
that France had to pay it back (450.000.000 – 2.000.000). France didn’t agree, because it
was not the decision of France, it was the decision of Credit Lyonnais and of the bad bank, it
was not my decision. It was not imputable to me. The court accepted it. It was really a shock.
Since that judgement, we now have to show that a state aid decision is imputable to that
state, because otherwise you cannot ask the state to recover the money.
Exemptions (3rd line after) SAM
How do we apply exemptions in state aid?

Principle of compensatory justification: If you get an exemption, it means that you have to
a certain extent falsified competition and the EC will inflict some pain upon you as a
compensation for having hindered free competition.
Ex. Banking crisis - Banks had to be saved overnight. People were wondering: where is the
EC? We are giving billions of euros of state aid, MS simply do this without asking the EC. The
EC was absent during those long nights, but a few months later, they came back and said:
‘Dear bank, you have received so many billions of state aid and for us it is fine. We think you
should have an exemption and so you can have it. But the very lucrative business you have in
eastern Europe, can you please sell it off now?’ The bank was shocked as it was the only
profitable thing it had left. The EC said it was compensatory justification as the bank had hurt
free competition, it had to pay.
Ex. 2: Dear insurer, you got into financial trouble. This was because you were always a price
leader, but it brought you nothing than misery. Can you now please put on paper you will
never have the lowest price in the market.
Companies were furious, but in fact it was just applying this principle of compensatory
justification.
Intensity of the aid: For each aid measure, the EC will determine what are your eligible
costs. What are your eligible costs?
I want to build a new facility for R&D, and I want state aid from my MS. OK said the EC, but
your MS cannot compensate the wining and dining with local authorities – that is not an
eligible cost. Maybe they will pay for infrastructure, training, research, but not for everything.
Only for eligible costs. EC can say that they will allow the government to pay up to 70% of
the eligible costs. That is the intensity of the aid. The intensity is always in percentage.
For a subsidy that is easy, for other measures it can be more difficult. You will work with ‘grant
equivalent’, or ‘cash grant equivalent’ ,as it is sometimes called: this means you will try to
quantify these advantages. Gross or net, before or after tax.
Intensity is always a percentage of eligible cost.
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Development aid v operating aid:

- Operating aid: aid you need to survive. The EC hates it, because their reasoning is
that if you need operating aid, you shouldn’t be on the market.
- Development aid: is more structural, it will bring you a structural advantage, like
infrastructure and there the EC will say it is OK.
Horizontal aid v industry specific aid:

- Horizontal aid: everything that is cross-sectorial. Like aid for employment, regional
aid, aid for training, aid for disabled people…
- Industry specific aid: this ever less.
Regional aid: the EC works with maps. The EC will determine where in Europe is it ideal to
invest? They calculate the regional handicap of each place compared to the ideal place. They
will say if you invest in this region, that is a regional handicap of 60% and of that 60% we will
allow you to compensate half.
There are two kinds of regional aid:
- To regions which are pour compared to the EU average: NL will not get anything,
maybe Bulgaria, Romania, Greece (107(3) a)
- Comparison on a national level and we check within the NL, which regions are
relatively more poor than other regions, then every MS can give aid (107(3) c)
Automatic exemptions
Automatic exemptions art. 107 (2)

The following SHALL be compatible with the internal market. In other words, the EC has no
discretion; if you fulfill the conditions, you get the aid.
(a) Aid having a social character, granted to individual consumers. To individual consumers?!?
The article is in the treaty, because you may give aid to the company providing the social
services.
Ex. You may say: telephone incumbents, you are the one responsible to make sure everyone
has a telephone line and we give you a bulk of money for it. (the bulk of money is the state
aid). You can do this, but under conditions. It doesn’t come under the notion of aid to
individual consumers but to the aid to the provider of the service having a social character.
(b) Aid to make good the damage caused by natural disasters or exceptional circumstances.
Natural disasters are caused by nature. If you feed your animals oil as happened in Belgium,
and then you have to withdraw all the eggs from the supermarket, because they are
contaminated, it is NOT a natural disaster.
(c) Aid linked to the division of Germany - The Lisbon treaty allows us to withdraw this
provision from the Treaty.
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The last part of the slide is not in the state aid provision of the treaty, but in the transport
provisions of the treaty. It is also an automatic exemption.
As a concept it is the same. - The provision tells us that if you engage in transport, inherent in
the concept of a public service, meaning you want to establish transport to a region where we
cannot profitably establish transport to, like for example the Azores, no one wants to go there
as it always rains, but we want an airline. If you need it as a public service you can give
money for it.
Coordination of transport has to do with coordination of transport modes. How do we favor rail
transport? By making sure that we get trucks easily on trains.
Facultative exemptions
(a) the first type of regional aid, so regions which are poor in comparison to the EU average.
(b) aid to promote execution of important common European interest: ex high speed railway
links, the Galileo satellite project… Nobody wants to pay for it ==> you will allow MS to give
state aid. - To remedy serious disturbance in economy of a MS: this provision was never used
until the 2008 crisis.
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(c) Is the largest category, because it includes most of the horizontal aid measures, like
training, research & development,… + the second type of regional aid: aid to regions which
are poor compared to other regions of that MS
Aid for rescuing and restructuring firms in difficulty: this is something the EC doesn’t like.
(d) Is new since the Maastricht treaty. It says aid to promote culture and heritage
conservation, but it was meant to compensate for the effects of the Bosman judgement.
Politicians wanted an alternative; they feared that Bosman would kill off soccer clubs, and the
youth players, so they put this in. Unfortunately for them, sports is not considered culture
under EU law, so we cannot use it to support our soccer clubs.
(e) Other categories, was for instance used for aid to ship building
This is much more important than automatic exemptions.
What is new? Modernization in state aid. Modernization with decentralization. We have seen
that the EC does not want to decentralize in the same way as under 101, they don’t trust the
NCA’s. Nevertheless, they have reached the exact same result. How have they done it?
They have doubled the scope of the block exemption regulation. The vast majority of aid
measures today, is no longer visible to the EC, because it comes under the scope of the
revised block exemption regulation.
When do we get an exemption?
We know that from 101, we do have aid, we do have a restrictive agreement, but we have a
noble cause. You don’t have to notify, just as under the block exemption on vertical restraints.
The EC does not see it.
Many extra categories of aid are included, and the ones that were already in the regulation
have been extended with higher notification thresholds.
The EC is not naïve. They have given the MS much more freedom, but the MS pay a price.
That is, they have to keep records, they have to allow the commission to monitor (EC will
check whether what you have done was correct and if not correct, they will order you to
recover) and there may be ex post evaluation, this is: the EC orders the MS to pay
independent people whether the aid actually reached its objectives – this is only for the
largest projects.
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Modernization is always two things:

- Decentralization: we reach this by broadening the scope of the block exemption
regulation
- More economic thinking: the balancing test.
The problem with this test is that it is so refined that you cannot predict it.
See different steps of the balancing test in above slide. They are not so innocent.
- The first step is that you have to show that there is a market failure. That is not
innocent. You will have to prove to the EC that you grant aid because the market is
incapable of fulfilling that service that you want to grant aid to.
So far, the EC interprets this rather broadly. It says it is enough that you show that the
market cannot provide that service with the same quality.
Maybe eventually the commission will change this.
- Step 2: does your aid measure address this market failure? This is like the
proportionality test as you know it from internal market law and from 101 (3). You
have to show that your aid measure does not go further than needed and you have to
show that your aid measure is actually able to reach the noble goal (employment,
research & development…)
- Step 3: the actually balancing: noble goal v negative effects on competition. This step
is impossible to predict. But you are allowed as a MS to make the assessment. You
are not under the heavy sanction threat as under 101 (3). The EC doesn’t see 80% of
the aid anymore.
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Modernization has doubled the scope in two ways. First, we have added new categories and
then we have created higher thresholds for notification.
System of the block exemption regulation

There are 12 general articles and the rest is per sector.
Art. 1 is the scope and everything in red on above slide, are new areas of aid under the block
exemption regulation.
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How do you work with these state aid block exemption regulations? Example: State aid and
disability.
One of the new elements is: under the state aid block exemption I am able as a MS to support
employment of disabled and disadvantaged persons. If somebody comes to you with the
question: Can I have this aid measure for disabled persons? What do you do?
1. You check the block exemption to see whether this category is actually covered. So
you go to the scope, art. 1 and yes, disabled persons is in there.
a. You will see there what is called notification threshold, you always look first at
this threshold, because it will tell you up to what amount of aid in absolute
terms, you can use the exemptions. If you as a MS, stay below this threshold,
you will not notify the aid, you will do it yourself.
2. Check what are the eligible costs according to the EC and what is the aid intensity.
So what percentage of these eligible costs can I actually pay to the company
involved?
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Procedure after SAM (state aid measures)
Procedure in state aid measures is very similar to the procedure in merger cases, that means
that it is a two-stages procedures.
In the first stage the EC will check whether it has serious doubts about the compatibility of
your measure. If it has serious doubts, it will open second stage procedure, that is a more
formal procedure, which is more public and takes longer.
Incompatibility v illegality
Illegality: everything that has to do with procedure.
Ex. I, as a MS forget to notify aid to training. ==> this makes my aid illegal.
Illegality in itself can be a reason for the EC to order recovery.
But then when the EC gets to know about the aid and checks all the documents, and they see
that what I am doing is ok, under the block exemption. Then I will have a case of illegal
(because I didn’t apply the procedure), but compatible (because substantively what I am
doing is ok) aid.
Will the EC still order to recover? They have the right to do so, but in practice, they will not. It
would be very impractical to say: ‘Give me all the aid back, and then later oh yes it is
compatible, so now you can again grant it.’
The EU knows only the MS, not the undertakings, nor the regions.
It is possible that a region is not applying the state aid rules and then the MS has to send in
the lawyers to defend the region before the general court.
EU procedures occur before the general court. Advantage is that all the cases are before one
court.
Existing aid = aid which pre-existed the treaty, but also aid for instance within an already
granted aid scheme. Ex. The EC says you can grant aid to the Mezzo Giorgio region in Italy, if
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you then have 1 individual measure to 1 individual company in the Mezzo Giorgio, that is
existing aid, if the scheme was already allowed.
For this aid, we are lenient, constant review. If the commission has a problem, they will tell
you and they will ask you to stop granting the aid, but as long as you listen to them at that
state you don’t have to recover.
Completely different for new aid.

Notification and suspension, strict regime, fortunately without the high fines.
Two extra elements:

- The EC has a two months period to make up its mind as to whether there are serious
doubts or not. They cannot say at the end of the period: sorry it is a very complex
case, I don’t have enough time. Whatever decision the EC takes here, always
someone will be unhappy and may take them to court. Ex if the commission after two
months says they have no serious doubt, you can grant it. But the competitor has
heard about the aid and is unhappy with the aid being granted then the competitor
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can take the EC to court. If on the other hand, the EC says: I have serious doubts, I
want the second phase, then the MS and the company recipient may take the EC to
court to challenge that decision. Do they have the right to challenge the decision to
open the open the formal procedure? YES, in principle they have the right. Because
the decision to open the formal procedure, changes your position as a company. You
would then be subject to a more public and a longer procedure.
The mentioned case here is an exception to this principle and is only logical
application of general EU law.
If you have granted aid, and then the EC finds out about it and starts a formal
procedure, then the court says: ‘now you cannot fight the decision to open the formal
procedure, because that decision on itself doesn’t change your legal position. You
have already granted the aid, everything remains the same and therefor the EC can
go ahead with a second stage. That is disorder of inadmissibility in a Dutch case.
There are not many differences between the previous and the new regulation. The EC has
now made it harder for you to file a complaint. - Why?
Because they want go after the really difficult cases and not as many as possible.
Recovery of state aid
Recovery of state aid can be very aggressive. In a Dutch case state aid was granted to all the
fuel stations at the border, because the Dutch government realized that fuel was more
expensive in NL then it used to be in DE. Afterwards the EC found out that the aid was
incompatible and they had to give back the money. Some of them went broke.
The MS has to recover. They do everything to delay the recovery. It is only the MS who can
recover. The EC said: MS, if you don’t recover aid that is incompatible or illegal, we will simply
not allow you to ask any new aid. This was efficient. MS are indeed forced to recover.
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You have a limited scope for defense. What you would normally say under your national legal
system is: ‘Government, you made me believe that I could accept that aid, now it turns out to
be so that I cannot accept that aid. You have violated my legitimate expectations – Damages’.
You can do that under EU law as well, but not in state aid.
That is logical, because if this would be allowed, there would be loopholes again.
There is no defense, as a MS the only defense you can raise is that it is absolutely impossible
for me to recover. But nothing in the view of the EC is absolutely impossible!
Maribel case:
Belgian government made a rule saying: If you are a company engaged in export, you have to
pay less social security. This is a selective measure. When the EC found out, it ordered
Belgium to recover. Belgium said that it was impossible, because it never kept books. The EC
rejected this.
Belgian made up a new rule: Everyone who is not engaged in export has to pay less social
security.
The first rule will be offset by the second one and everyone will have had advantage
==> it was ok for the commission.
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Lecture 7: Fifth branch – Public undertakings & SGEI art. 106

Internal law and competition law meet here.
Public undertakings, privatization
What do we mean when we talk about privatization?

A public undertaking in this area of the law really refers to shareholding. Does the state own
the majority of the shares?
Privatization is going from this public ownership to private ownership or from a majority of
public ownership to a majority of public ownership.
Liberalization is bringing more competition into a sector of the economy.
An extreme form of liberalization is de-monopolization. You bring competition where there
was none.
Deregulation: less rules for market operators, but usually it is not only less rules, it is also
more freedom of action, less regulation. It can go together with privatization and liberalization,
but it is not necessarily so. You might argue in favor of the opposite. You might say: if
government withdraws as an actor from the market, then perhaps it is time for government to
strengthen its position as supervisor and therefor to reregulate rather than to deregulate.
Corporatization: We take assets of the state or we take an agency of the state and we bring
that into a private law corporate form. We may do so because of efficiency concerns.
Contracting out: We have a task of governments which government will no longer perform
itself, but which it will subject to strict control, assign to a private entity. With a contract and
temporary.
All these notions refer somehow to the same reality, but they are not the same.
Our starting point is: EU law is neutral when it comes to private or public ownership. It is for
the states to make the choice whether to nationalize, privatize or keep the status quo. Art. 345
TFEU Treaties shall not prejudice the rules governing the system of property ownership.
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Is that correct, or has this article become a fiction? The court said that art 345 has a limited
scope and has nothing to do with intellectual property. The court also stated that even though
you are free to choose where you end up with public or private ownership, the whole process
towards this all, is subject to EU law. So you can say you are going to privatize the company,
but you cannot give it away to your friends. So in the process of privatization or
nationalization, you will be fully bound by the rules of internal market, the freedoms and
competition law.
If we look at practice, we see EU law is not neutral.

The EU imposes strict budgetary norms on MS. The easiest way for MS to attain these norms
is by selling off the crown jewels, and many of them have.
The EU is not saying to privatize, but by imposing these budgetary norms, we come close.
Economic and monetary union: already in the past there would be guidance for MS. And
now the ESM (= stability mechanisms - international institution) intervenes to help individual
MS, but does so on the basis of conditionality. MS, I will help you, but you will have to do
something in return, like cutting pensions or cutting the number of civil servants…
In these programs, you find MS, do privatize.
The ESM is not an EU institution (it is international), but it works with the ECB (European
Central Bank) and with the EC as borrowed institutions ==> the question is: Can we really do
this?
Private funding of infrastructure: the EU and the European investment bank actively
promote private funding of infrastructure. What does it lead to, to privately owned, privately
operated, privately built, infrastructure public, private finance projects.
We see that in some of the state aid cases the EC has actually imposed on MS: yes, you can
grant the state aid on condition that you bring the assets to the stock exchange. This is
already more under an obligation. You should privatize.
Preemptive liberalization or privatization: we have liberalized entire sectors of the
economy: telecom, energy, utilities, transport …
Technical regularization: For instance, the EU imposes on the MS to separate in your
sewage system rainwater from other water. But MS say: ‘Dear union, thank you but we don’t
have the money, so if we do it, it will have to be with private financing’.
All these factors lead to the conclusion that even though we still have art. 345 in the books,
the margin of maneuver for MS has become smaller. A new high point in this evolution is the
Essent case (see above slide), where for the first time the court has ruled that you are not
free to decide whether you privatize, nationalize or keep private or public your assets. And so
that is new, because so far we said you are free, but you are under the strict conditions in the
process and now we say, even your decision to privatize or nationalize will be subject to EU
law. Because the court says, if you NL, say that certain networks will always be public, then
you make it impossible for private companies to invest in these assets and you hinder their
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free movement to invest ==> you hinder their free movement of capital and if you want to do
this, you will need to justify.
The mere fact that your decision itself now is subject to the four freedoms is really interesting.
There is not so much anymore you can decide for yourself as a MS. Maybe this is not bad,
maybe this is just a logical consequence of us evolving towards an economic and not just a
monetary Union.
If you really want to live together in an economic union, maybe this kind of policy choices also
should be subject to EU law?
If neutrality has become a fiction, then we should no longer present it as a reality. Today we
use art. 345 still as an excuse for not having any EU policy on privatization. Prof thinks this
should stop.
Prof has always wondered why, if national MS privatize entities, civil servants, from one day
to another become private employees. That is bizarre because we have this directive which
protects your rights in case you change from one undertaking to another. Why don’t we apply
it to privatization? Because we are neutral?!? We are NOT!
Monopolies
What can we do against monopolies if we don’t like it?

There are three ways to go after a monopoly:
- Act through internal market law
- Act through competition law
- Act through harmonization
You may choose.
There is no hierarchy. The two, especially internal market and competition law interact. But
realize how different they are.
Ex. If I have a harmonization I say, we are going to liberalize the railway sector. How do we do
that?
We adopt directives, we take the third route. These directives tell us, as MS, we have 10
years to go from monopolies to liberalized market. If you use the other two routes, we can get
there overnight. Because all of the articles mentioned above, are directly effective.
If you find a national judge who is willing to apply one of the articles mentioned, you can get to
liberalization overnight. And this has happened. You just need to find 1 judge on national level
(may even be low judge), saying: this monopoly is against free movement, please abolish it,
then it is abolished the next day.
 These routes have very different consequences
Politicians don’t always like it when judges interfere in their decision making and of course the
EU doesn’t like it when you go through a national judge to interfere with their decision making.
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Have a look at the different routes

First route: the internal market route
There you combine the general provision on anti-discrimination on the basis of nationality and
you join the 4 freedoms to it.
So, you will say: Government, by granting this monopoly to this particular entity, you force that
entity to breach the free movement rules.
We have one specific provision, art 37
Art 37 is written with a view to limiting state monopolies. Art 37, which is not a competition law
art, but has a direct impact on free competition. Under art 37 you have to distinguish under
three types of monopolies:
- Production monopoly: Ex. I give you an exclusive right to this mine. The court of
justice traditionally said: here we are going to apply an anti-discrimination test; As
long as you don’t discriminate on the basis of nationality, you can have these
production monopolies.
- Trade monopolies: I am going to grant an exclusive right to this company to trade for
instance alcohol or pharmaceutical. I give you an exclusive right to sell this product.
People can only buy alcohol from this monopoly, people can only buy
pharmaceuticals from this company. The court again said traditionally we apply the
anti-discrimination test. That is not a strict test.
- Services monopolies: We applied a stricter test when it came to service monopoly,
like a national lottery. You can have your national lottery monopoly but only if you
don’t discriminate on the basis of nationality plus you don’t restrict free movement.
This article didn’t cause much problems for MS, it was fairly easy to keep your monopolies.
But the world has changed since the judgement Hanner.
The judgement concerned a trade monopoly: a monopoly where you say: ‘buy all your over
the counter or pharmaceutical products from this provider’.
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Somebody didn’t respect the monopoly and was criminally prosecuted. In the prosecution and
in defense, the defendant says the monopoly is contrary to EU law. And here the court gives
an interpretation to art. 37 and the anti-discrimination test that is so strict that now it really
becomes difficult to keep your national monopoly.
Because what the courts says is that art. 37 doesn’t require total abolition of state
monopolies, but there should be no discrimination in law or in fact.
- First condition: This means that the products you are selling should be selected on
the basis of objective criteria and if your product is not selected, you should be able to
fight the decision not to select your product and in order for you to be able to do so,
there should be reasons stated. (Why did we not choose your product)
- Second condition: You can only keep this trading monopoly if you make sure that
people have access to your product, so the number of sales outlet should be
sufficient.
- Third condition: The marketing of the product should also be completely
independent of the origin of the product
Which trade monopoly do you know that fulfills all these conditions?
In casu it was very easy to find that the monopoly did not fulfill one of the conditions, namely
there were no reasons stated if your product was not selected and there was no possibility for
you to find the decision.
So the world has changed. It has become much more difficult to keep your monopolies under
free movement conditions.
Most important part of the judgement is yet to come:

The court says if one of the conditions is not fulfilled under free movement rules, then you are
automatically barred from defending your monopoly under competition rules.
We said there are three rules:
- Internal market
- Competition
- Harmonization
And here for the first time, you find a bridge between internal market and competition. If you
don’t fulfill the conditions under internal market law, we will prohibit you from defending your
monopoly on the basis of competition law.
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 Now it really becomes difficult to defend your monopolies.
Second route: Competition law route

You can attack monopolies under free movement rules, but you can also attack them under
competition rules. Art. 106
See art. 106(1) above. If you are a public undertaking (to be seen in the light of ownership) or
you hold special or exclusive rights (exclusive rights = monopoly) then all the rules of the
treaty apply to you.
What does the article add to what we already know?
It does add something. You will always apply this with another article. It bridges law written for
undertakings with the behavior of governments. (like the doctrine of combined application)
Art. 106(1) tells you the rules in the treaty apply to undertakings, but MS must also respect
these rules.
The article says all the normal rules apply to you, in particular the competition law rules and
art 18. The ‘in particular’ means that you can use 106(1) with everything in the treaty, but it is
mainly used with competition law provisions.
This is art. 106(1), we call it a reference provision: you use it with something else; you don’t
use it on its own.
106(1) is a principle and in 106(2) you get an exception to this principle and then an exception
to the exception.
106(2) brings us the exception to the principle.

So the principle tells us to public undertakings and undertakings with exclusive or special
rights, all the normal rules apply.
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106(2) tells us you can get a waiver from the normally applicable rules. When? If you are
entrusted with a service of general economic interest and you cannot provide that service
without a waiver.
The exception to the exception: you can get a waiver from the normally applicable rules, but
that waiver should never go so far that it excludes all competition, goes contrary to the
interest of the union.
Let’s see what we combine the principle (art. 106(1)) with. Normally we will combine it with
art. 102 (when we attack monopolies). The reasoning will be: MS, by granting this monopoly
to this particular undertaking you incentivize or you force this undertaking to abuse its
dominant position. All the abuses from 102 can be used here against state monopolies. State,
you force the monopolist to abuse its dominant position by asking unreasonable tariffs, by not
providing services to us that we should reasonably be able to expect, by discriminating on
us…
If your monopoly is a national monopoly, then, by definition, this will be a substantial part of
the internal market and we can use 102 now against the government. What we often have is
a case where you apply 102 directly against the monopolist and you apply 106(1) in
combination with 102 against the MS and you can do other things like state aid provisions…
Like under article 345, the same question under competition law:
How much freedom do MS still have to keep their monopolies?
Four possible approaches:
- Absolute sovereignty approach: that is art 345, neutrality, MS decides, EU stay out!
- Absolute competition approach: monopolies are wrong, we don’t want dictatorship,
we don’t accept monopolies
- Limited sovereignty approach: monopolies, in principle it is the freedom of the MS to
decide on it, but EU you can prove them wrong, you can prove there was a violation of
EU law
- Limited competition approach: (is the opposite of the previous) it says monopolies in
principle are wrong, but if you have a monopoly, you can defend it under the rule of
reason in internal market law or under 106(2) in competition law.
Prof thinks we are currently under limited competition approach where because of art 37,
because of art 106, we have come to a position where monopolies in principle are wrong, but
you can defend them.
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When we speak about art 106(2), we speak about the third line of defense.
I have a justification for my behavior and my justification is that I am providing a service of
general economic interest and I cannot provide it without a waiver of the normally applicable
rules.
Notions:
- ‘entrusted’ = very important. It means you can never say as an undertaking, what I
am doing is so important that I can get a waiver. It is the government that has to
believe that what you are doing is so important that you need a waiver. You have to
be entrusted, you cannot entrust yourself with a service of general economic interest.
- Revenue-producing monopoly: lottery is a revenue producing monopoly
- In particular: you can also use 106(2) with all the other rules
The test is:
I need the waiver, if without the waiver I would be obstructed in the performance in law or in
fact of this service of general economic interest.
Here there has been an evolution in the case law. In the beginning, it really was like: we will
only give you a waiver when without the waiver you go broke.
Now it is: Life should be more difficult for you.
The court is willing to accept more easily that 106(2) is needed.
Case at the bottom of the slide illustrates very well what we are talking about and how art;
106(2) operates in practice.
Ambulance – Gluckner is a German case where you had two connected markets. One is the
market for urgent transport, ambulance transport, and the other is the market for non-urgent
transport. One of the German lenders Reinwhal fals had granted a monopoly for urgent
transport in ambulances to the Red Cross.
For the non-urgent transport, in the past, private undertakings could engage in the non-urgent
transport of people to hospitals. But they changed the rule and said: from now on, we will first
ask the Red Cross whether they have capacity for the non-urgent transport and if they have
capacity, we won’t give the license to a private operator. Because otherwise all the
ambulances of the Red Cross are just waiting there.
So we give them monopoly for urgent transport and we will not allow anyone on the market
for non-urgent transport unless the RC tells us they don’t have capacity to do it.
One of the private undertakings, already active in that market, lost its license, because
systematically the RC was saying they didn’t need competitors, they have enough capacity.
That private undertaking fights the law and it leads to a preliminary question.
Read the case, the analysis the court makes is as we should also do it!
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They go through all the conditions like:

- Is the RC an undertaking?
- Is the RC providing, in this situation, an economic activity?
- Can you provide urgent transport to hospitals on a market according to market
principles? Yes you can ==> we see them as an undertaking.
- If they are an undertaking, is there an impact on trade between MS? The court goes
over all these conditions and sometimes leaves something to the national judge.
- Second line: Which branch?
- Is it an abuse of dominance? We check
o What is the market? EC says there are two product markets
o What is the geographic market? Is it just the land, is it the entire MS?
o Is there an abuse? It is very well possible that the RC is abusing its dominant
position on the market for urgent transport to foreclose the market for non-
urgent transport.
Regardless of whether there is an abuse, we believe that there may be a
justification (third line) under 106(2). Because the RC has to guarantee that
24/7 people have access to an ambulance if they are in need ==> the court
says it is a service of general economic interest. And if it would be the case
that they need the non-urgent transport to pay for the urgent transport which is
the service of general economic interest they are providing, then we will allow
this national regime. Unless the private operators can show that the monopoly
is manifestly unable to satisfy demand. But that will be left to the national court
to check. They leave a lot to national courts to check.
This case shows that the court is willing to apply 106(2) as a defense if you can show that a
monopoly is needed to provide a service 24/7 that everyone needs access to.
The court doesn’t define a service of general economic interest.
Think back of Christer Hanner case and the link between art 37 and 106(2). If you have no
right to an exception under internal market law, you will lose the exception under 106(2). (This
is new.)
106(3) is a special legal basis, it says that the EC will ensure the application of art 106 and
they will have to do so through directive and decisions. So here we give the EC the right to
issue directives on its own (not with parliament or counsel, just the EC). = A lot of power for
the EC.
With this legal basis 106(3), the EC is capable of liberalizing entire sectors of the economy on
its own!
The EC has tried it once, in the telecom sector. The telecom sector has been liberalized
largely on the basis of 106(3), by the EC.
The MS told the EC: If you ever think to act like this again, imposing upon us liberalization, we
will simply delete 106(3) from the treaty. Since then the EC has never done it again.
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Direct effect of art 106 TFEU

If you are granting a lot of direct effect to art 106, you give a lot of power to national judges, to
apply this article and that may not always be a wise idea.
Nevertheless, art 106(1) is shell, you don’t use it on its own, you use it together with
something else and it takes the direct effect of that something else. So if you use it together
with 102, you have direct effect, if you use it together with 49, you have direct effect etc.
More sensitive even: Can a national judge apply the exception to the principle? Can a
national judge say: Yes, you are providing a service of general economic interest and yes, you
need a waiver from the normally applicable rules? Yes, a national judge can do this.
Finally, the exception to the exception. Do we grant the national judge the right to decide what
is and what is not in the interest of the Union? No, that goes too far.
What happens if you have a monopoly analyzed under both internal market and competition
law rules?
The best case to illustrate this is the Becu case.
This case is about dockworkers in the port of Antwerp.
The BE government granted a monopoly by law to dockworkers in the port of Antwerp. That
was extremely clever to do. As we know, it is very hard to get rid of this monopoly. You don’t
break up the monopoly without feeling the consequences.
What happens when I give the monopoly to dockworkers who are employees of companies,
but I don’t give the monopoly to companies?
If they would have granted the monopoly to the companies performing dock work in the port
of Antwerp, we could go after these companies with all the tools discussed.
But the monopoly was granted to the employees!
What happened, it was a case of criminal prosecution. Somebody entered by ship the port of
Antwerp and had people on board to unload the ship, but he was not allowed to do it due to
the monopoly. The dockworkers from Antwerp had to do it (and this is of course more
expensive than when you do it yourself).
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Once the goods are on the quays, then they use the services of an interim office to move
these goods from the quays to the silos, where it has to be stored. The trade union found out
and says the monopoly is valid all over the port, not just on the quay, but also in the silo.
And therefore we go after you and it is a criminal prosecution.
The court starts its analysis: The monopoly is for dockworkers, they are employees, they are
not undertakings, I cannot help you. It finished already there – first line of defense.
This is very frustrating.
Couldn’t we say that there is some kind of collective bargaining process between these
employees and their employers and that collective bargaining is a restrictive agreement? It
restricts competition in the port of Antwerp and that we can catch it? No we cannot catch it,
because we have a labor exemption, collective bargaining is not subject to competition law.
We don’t want that.
At the very end of the judgement, you will see something very bizarre, because the court says
something for which wasn’t asked. The whole case was defended on the basis of competition
law. But at the end the court says: you are relatively untouchable, but you know there is also
internal market law? If you give a monopoly to employees, it means that you don’t allow
independent people to work under that monopoly, if you don’t allow independent people to
work under that monopoly, you don’t allow independent people from Germany to come to
Antwerp.
So what appears to be untouchable under competition law, may be in violation with internal
market law. They don’t say it explicitly because it was not asked, but the mere fact that they
point it out to help the reader, is significant.
So, from now on, use all these tools together in the combination that you chose.
The third route: the route of harmonization

This is the route, which is gradual, this is the route which is democratically legitimized, this is
the route where you use the European parliament.
This is the route we use today. We use directives to liberalize economic sectors and these
directives have always something in common. We have journals for air transport, and we
have journals for railway law and for energy law. All these directives work on the basis of
similar principles. You see them in above slide.
One of the principles is: the infrastructure is a natural monopoly, we don’t want to touch that,
but the services provided on the infrastructure, railway services provided on rail tracks; We
are not going to liberalize the railway tracks, but we are going to liberalize the service
provided on the tracks.
Second, we want full transparency of accounts because some of your economic activities
may be services of general economic interest like moving people within one MS, from place A
to place B at a reasonable price, but not all of your services will be services of general
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economic interests. And we don’t want the subsidies you get to provide the SGEI’s to be
used/abused for other services, commercial services where you should be in competition with
other operators on the market. We don’t want cross-subsidizations and in order for it not to be
cross-subsidizations, we must see where your money is spent.
Gradual approach:
The attention for universal service: European model of society - We want to liberalize, but
we will not allow liberalization to lead to social exclusion. That is why we must guarantee that
everyone has access and continues to have access to these services. The services should be
of reasonable quality at a reasonable price.
That is perhaps the best definition of a universal service:
It is a service that we, as a society deem to be so important that everyone should have
access to it at a reasonable price and reasonable quality.
The EC defines SGEIs as:

SGEIs are economic activities which deliver outcomes in the overall public good that would
not be supplied by the market without public intervention.
This is not an innocent definition in two regards:

- It seems to suggest that a SGEI requires public intervention and that you cannot have
SGEI without public intervention
- More importantly, they require a market failure. This is like state aid modernization: it
also requires market failure.
But can we only have SGEIs when there is market failure and where there is public
intervention? Prof is not convinced.
The market failure can be that there would not be a supply of the service or that the service
would be applied under different conditions in terms of objective quality, safety, affordability,
equal treatment or universal access.
As seen before, there is a new evolution as regards: what is ‘economic’?

As a MS you could somehow exclude certain service from being economic services by
saying: I will provide the services on my own.
Prof finds both elements worrying and proposes since none of this is binding, we have the
right to our own view. Prof’s view is that we should give more weight to the notion of universal
service. In the treaty for the moment, we have so many different notions, meaning the same.
We have public service, this is at this moment a positive law notion (see art 93 below), the
concept of a public service ==> = treaty notion; service of general interest = treaty notion,
SGEI = treaty notion; Universal service is NOT a treaty notion, but is in binding secondary
legislation (being in the telecom and postal sector).
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So we have so many notions meaning more or less the same. Couldn’t we replace them with
one notion? Being the notion of universal service? This would require that we require an SGEI
not the way the EC does it, but as a universal service.
Why would we be allowed to do so? Because in the case law, we see that if the court is asked
to interpret the notion of SGEI, it comes down to granting 24/7, access, making sure that
service is available to everyone, even those who cannot afford it. This is universal service! So,
if we see that the court is already interpreting SGEIs as universal services and if we then
would come to the conclusion that the notion of universal service has certain qualitative
advantages over the notion of public services, then maybe it is time to replace all the notions
by one.
Qualitative advantages notion Universal services:

- It is an EU notion
- Universal service doesn’t have the organic connotation that public service should
be provided by the state
The main advantage of universal service: Public intervention is not required.
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SGEI and state aid – Altmark

In state aid we work with the EU law approach, very large field of applications, but now there
are two evolutions which eat on that large field of applications.
One of them was Stardust Marine and the second one is the Altmark case.
The question here is if I, as a MS, give money to my public transportation system or to any
other SGEI, is that then state aid or not?
If it is state aid, I have to notify to the commission, and I will be subject to very strict control. If
it is not state aid, I don’t have to notify it to the EC and I can do as I like. ==> It is kind of an
important question.
Just as Stardust Marine came as a shock to the state aid community, Altmark was perhaps
even a bigger shock. Because the court of justice said, if you compensate a public service,
universal service, SGEI, if you compensate the provision of that service, it is may be not state
aid and it doesn’t have to be exempted.
The court listed four conditions, (if these 4 conditions are fulfilled, it is not state aid):
- First condition: The recipient undertaking is actually required to discharge public
service obligations (= the word entrusted in art 106(2) ). You cannot claim that you are
providing a SGEI if it was not imposed upon you. You are required to provide that
service. The MS tells you, you have to make sure that even the old lady, living in the
woods has access to telecom and transportation. We know you won’t have any profit,
but you still have to do it. We will give you some money for it
- Second condition: the parameters on the basis of which we will determine how much
money you will get, have to be objective and we have to know them in advance.
- Third condition: proportionality test – we should not give you more than what is really
necessary. There should not be a less restrictive alternative available to have that
public service provided.
- Fourth condition: we very much prefer a public procurement process. We want you to
designate the provider of that service on the basis of a public procurement procedure
because we know that is the most transparent and is leading to the most efficient and
objective result. But if you really don’t want this, we will also accept that you look at a
benchmark – you look at a typical undertaking providing that service and you compare
the behavior of the company you demand to provide the service with that typical well-
run undertaking and how much would it cost the typical well-run undertaking to provide
that service? And on the basis thereof you can grant compensation.
If you, MS fulfill these 4 conditions, what you give, what you pay out, will not be considered
state aid.
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The EC sees this as a loophole for state aid law ==> They have devised a strategy to regain
control of Altmark. The strategy is that they have adopted a so called Altmark package.
The court said, MS I give you the right not to consider as state aid, if you fulfill the 4
conditions.
The EC now explains the four conditions. They have thus adopted the package with 4
documents.
- The first document is an innocent communication saying, I will explain the 4
conditions to you. If you fulfill the 4 conditions, as the court has stated, there will be
no aid and you don’t have to notify anything to me.
- The second document is a regulation on de minimis aid under Altmark. (De minimis
under state aid is EUR 200.000 over 3 years) – here de minimis is EUR 500.000, if
you stay below 500.000, there will be no aid and you don’t have to notify to me. But
we will impose all the conditions that we impose under the regular state aid de
minimis, like transparent aid, the monitoring, the keeping of registers
- The third document is called an EC decision on the application of art. 106(2), but it
is a fake decision, it is a block exemption regulation. So why don’t we call it this way?
Because there is no legal basis! Look at art. 106(3) the EC shall ensure the
application through directives or decisions (not regulations).
This ‘block exemption regulation’ tells us that up to 15 Mio EUR per year, you can be
exempted under certain conditions. What does block exemption regulation mean? It
means that there is aid, but you still don’t have to notify it. Here you need to report
every 2 years: I apply this block exemption regulation (decision) to these cases (to
grant money to the zoo, to grant money to child care, to schools etc)
- Fourth document: A do it yourself kind communication. This communication tells
you, if you don’t have the right to a block exemption, we can still help you, but the
conditions will be even stricter and you will have to notify.
The most tricky thing is that 2-yearly report. In that report you make visible to the EC what you
consider to be the SGEI that you as a MS, support. Should I really report everything?
Since we don’t know what a SGEI is, no one has a binding definition.
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If you list an activity, you give up so much.

If you say that the money you granted to this nature park, was money paid in return for a
SGEI, you are saying that you have paid out state aid, but for a noble cause. I don’t want to
confess that I paid out state aid, because maybe I feel that it was no state aid…
If you have notified the state aid, you cannot afterwards claim it is not state aid.
Do not automatically think that with a SGEI you will be safe, because all the power is in the
hands of the EC.
We have seen how the EC defines SGEI.
What is the relationship between Altmark and 106(2)?

106(2) is primary law, Altmark is secondary law at best, but often only a communication.
Nevertheless through this communication, the EC is now interpreting 106(2) and says: In my
communications, the conditions of 106(2) are applied by me in these communications.
So what is the relation between both?
If you don’t fulfill the EC’s conditions under Altmark, you won’t get 106(2) as a waiver.
Conclusions
Is the pendulum swinging back?

In the eighties, it was the time of liberalization and the EC using 106(3). We don’t see that
anymore. We use 114 today.
The approach to deregulation is, according to some, way too slow.
When the ECJ interprets economic activities, it is more ready than in the past to say that it is
a typical action of a public activity and should thus not be under the scope of competition law.
When the ECJ interprets 106(2), they don’t require you anymore to go broke before you get
your waiver, it is enough for you to show that life is less easy.
Altmark judgement: for MS it was great! A whole deal of state aid was no longer applicable.
We have universal service and we have in every new revision of the treaty less words about
free competition.
Are we going back to flower power? Are we going back to more freedom for MS?
- Hanner makes it hard to maintain your monopoly under 37.

- Altmark package is not innocent.
- The definition of SGEI
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 No we are not going back to flower power, on the contrary the pendulum is not
swinging back. It gets harder for MS to make their own choices and not to liberalize.
Challenges for competition law
- Economics v the law: How much economic analysis do we want to introduce into
competition law. At first it seems a good idea to introduce as much as possible
economic analysis, but it always comes with a price.
The price is that we become by-standers, but the real price is legal certainty. Can you
still predict outcome of cases?
- Policy v law: To what extend will you introduce policy consideration into your legal
setting. This is a general question in EU law. There have been areas in EU law which
have been pretty invisible to the outside world and where you could do more or less
what you wanted. Monetary policy is one of them and competition law is one of them.
But sooner or later these areas will be discovered by civil society and academic
writers. That has already happened in monetary area and it will happen in competition
law.
The question is then: Can we have competition law where there is no involvement of
the parliament? Can we have competition law where under 101(3) we look at
economic efficiency but not at non-economic factors? Shouldn’t we broaden that up
to public debate? It will happen, and the answers will be we need more democratic
legitimacy and we should stop looking only at monetary and efficiency aspects.
This will come at a price and the price is the tremendous efficiency of the current
system. The whole question about the position of the EC, doesn't the EC have too
much power, is also present there. Of course it has too much power. But the system
kind of works.
- Technology: all the abuse cases, merger control. How to introduce technology into
existing competition law?
- Effects of more EMU: EMU increases price transparency, but also has
disadvantages. The scale of collusion also increases. The relative weight of state aid
also increased now that we have lost the evaluation as a policy instrument etc.
- Keeping up with new forms of collusion and abuse: think of the hybrid cartels
- The lack of a larger scale of supervisors: The scale of the operators on the market
is tremendous but the scale of the supervisors has never followed.
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- Modernization is a major challenge, we have digested it in 101, 102 and now we are
learning to live with the consequences in state aid.
- Ever increasing sanctions: whether we want limits to it
- Negotiated solutions: the unethical dimensions to leniency, the risks they pose to
third parties. All of this will continue to haunt us.
Is BREXIT an issue for competition law?

Prof doesn’t think so. Many articles, written after BREXIT are warning us for all kinds of
difficulties. But these are not real difficulties. Ex. the article say: watch out, after BREXIT if you
want leniency, you will have to ask it, not only to the EC, but also with UK authorities. So
what? That is exactly what we are doing today. We don’t only ask the EC, but we also ask
with Brazil or China, so if we can ask it there, we can also ask it in the UK.
Or the articles say: We should lower the thresholds for a community dimension in a merger
case, because it will be more difficult for you to get to this threshold in the EU now the EU is
smaller. No, we should not change anything! Already today, you have the possibility, if you
don’t meet the thresholds to nevertheless go to the EC. That is the revised Dutch clause.
For prof, public enforcement and BREXIT is not an issue.
Is private enforcement and BREXIT an issue?
It could be, but it probably won’t.
Prof doesn’t see the UK (most populated jurisdiction for all these private enforcement cases)
lose that position. Because it is a position built up thanks to quality and efficiency of their court
legal system and thanks to their arbitration system.
But it could be a problem if they do what they planned to do and that is to translate the
Brussels international private law provisions that are currently in treaties. If they would simply
translate these into national law without any element of reciprocity, then there might be an
issue. But prof doesn’t think they will do so.
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European Competition Law final

European Competition Law (Maastricht University)

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European Competition Law

Written exam – open book

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Why rules against State aid?

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Model of rule of reason

Sources of EU competition law

Where to find EU competition law? Transparency?

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Institutional: legal instruments

Laboratory function for the rest of EU law.

In competition law, the EC can come directly after me (fines).

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Link with the internal market

Restrictive practices: Cartel agreement

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II. Field of application of EU competition law

Ratione personae = ‘undertaking’

Ex. Parker pen case

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Undertakings in the sharing economy

Is an Uber driver an employee, or an independent person? 1

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Is an Uber driver under the direction of his employer?

Second debate: What is the economic activity?

There are no excluded sectors. Some exceptions for defense.

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Difficult question: Can we apply our law with extraterritorial effect?

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Lecture 2: Restrictive practices (Art. 101 TFEU) - substance

Doctrine of combined application: Rules written for undertakings will be applied to MS

We go back to the first paragraph and cut it in pieces.

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Restriction by object v restriction by effect

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Maxima Latvija case

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Art. 101 is not very clear.

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Third line of defense (second circle)

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The third circle, the do it yourself zone

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Rule of reason in competition law?

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Lecture 3: The procedural dimension of EU competition law:

An older video about a cartel was shown during the lecture.

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