RMS: ALLOW THE BALANCING OF WPIUAS, TO DECIDE IF AN ANTICOMP UA MAY BE ALLOWED.
RM TYPES: ALBANY, EP, LOAD, CA, IMRR, SGEI [P.215], ETC….
diff:
a. concentrations:
a.merger between 2 undertakings
b.the acquisition of control over an undertaking, by another undertaking
c.the creation of an independent joint venture
b. mergers: Mergers involve two or more equals, and are agreed by mutual consent. the merged companies use a new name.
c. tos: (takeovers=acquisitions) involve one larger company that takes over a smaller company. acquisitions may or may not be friendly (unlike mergers, they are not mutually agreed). acquired companies often use the parent company’s name.
ec can only enforce eucl , not national laws. ec has 2 parts:
- dgcomp
- college of commissioners: takes the most important decisions.
cas [competition authorities]: have the power to impose fines, unlike civil courts.
-CL’s wpi goals; CP’s wpi goals, and non-CP wpi goals….can conflict. …these conflicts are resolved by using RMs…..RMS ARE CASELAW OR LAWS THAT , DE FACTO, OVERRIDE CL PROHIBITIONS…
-CL = [ 3 PROHIBITIONS] + [STATE ACTIONS TO FOSTER COMPETITION [EG THE LIBERALISATION OF UNDERTAKINGS]]
-this Book does not cover potential conflicts between wpis and CP, but only between wpis and CL.
-REGULATION AND RMs are both good, in the sense that they de-activate CL, when this is needed for the public welfare:
-eg: Publicly commenting on how individual firms apply CL, is not allowed by CL….so, Not even the banks association may comment on how certain banks apply the banking code….such comments (aimed at promoting compliance to the code) , would serve the wpi, so it makes no sense that CL bans these comments….i think this is a case where CL needs to be de-activated, via regulation and/or RMs.
UAs
cl is governed by substance [reality and economic concepts], over form….UAs may be written, oral, formal, informal… The form is irrelevant; what matters is a concurrence of wills between uas.
UA is an entity/ies engaged in an EA(economic activity), regardless of its legal status or legal form…EA is the offering of gs in a given market….buying products is not necessarily EA
The cartel prohibition can be enforced by:
a. public enforcement: cas (competition authorities). may impose sanctions, such as heavy fines.
b. private enforcement: civil courts. cannot iimpose sanctions, but may award compensation/restitution.
if several (legal) persons, form a single economic unit, is regarded as one single UA….eg parent/subsidiaries, are one UA. thus, their agreements fall outside the cartel prohibition.
governments and SOEs = POCs (publicly owned companies), are UAs when they offer products on a market. However, when governments exercise public powers that are essential to the state, they are not regarded as offering products/services on a market…The same applies for a private co that , pursuant to a delegation act (unlike formal law) ,[offers products/services on a market ] = economic activity
The 3 UA Types = the 3 CL prohibitions:
A/ 102 TFEU UAs = ADPUA (ABUSE OF [DOMINANT POSITION =map] UA)
unlike the other uas, adpuas dont have the EP (101.3), thus, adpuas may be banned, even if the EP could have applied.
ADPUAS are very rare in banking.
B/ 101 TEFEU UAs = THE CARTEL* PROHIBITION.
A cartel* is a UA where the undertakings (firms) face the cost of negotiation, bargaining and lack of legal enforcement…3 types:
- CPUA
- DAUA
- CRUA: 2 types: a. cruas whose object is a cr; b. cruas whose effect is a cr.
C/ EUMR UAS = MERGER* CONTROL
A *merger is an UA where the undertakings (firms) have the option to internalise the transaction cost but it involves organizational costs and agency problems. 3 Types: concentration; merger; takeover.
A/ 102 TFEU UA = ADPUA (ABUSE OF [DOMINANT POSITION =map] UA) :
unlike the other uas, adpuas dont have the EP (101.3), thus, adpuas may be banned, even if they make buyers better off overall.
unlike the other UA types (where the conduct cannot be unilateral), adpuas may be either bilateral, or unilateral conduct
adpua is any abuse by one or more undertakings of a dominant position they hold within the internal market or in a substantial part of it, which may affect trade between member states
unlike the other UA types, the adpua is prohibited, only in so far as it affects trade between member states.
unlike the other UA types, adpuas are not always void.
egs of adpuas: exploiting customers; excluding competitors; charing unfairly high prices to customers; refusal to supply; exclusive dealing agreements; price discrimination; predatory pricing.
The adpua behaves independently of its competitors and customers, because it has substantial market power (map) over a longer time.
a market share over 50% casts the assumption of dominance.
defining the boundaries of a market is very relevant, because the larger the market, the lower the chance of dominance
different uas that act together as a single entity in a market, may be, collectively, dominant, thus, adpuas.
the finding of a adpua’s dominance in a market, bans the adpua not only in that market, but also in markets where it is not dominant.
B/ art 101 tfeu UAs = the cartel prohibition
101 (tfeu) UAs that violate the cartel prohibition, are void….… parts of the ua contract only survive if the violation (eg a rc), is not crucial for those parts…An 101 UA may be assumed to exist, even if a firm’s unilateral action/proposal, is tacitly accepted by another.
<> cocoo: claim to hold the entire contract (or parts of it) void/valid
RMS :
- EP IS APPROPRIATE AND PRACTICABLE
- LOAD: IS NOT APPROPRIATE, BUT IS PRACTICABLE
There are 2 available RMs (reconciliation mechanisms) to solve the conflict between wpis, and the cartel prohibition:
A/ the Wouters doctrine [=LOAD = The legitimate objective ancillarity doctrine]: resolves conflicts between the cartel prohibition, and wpi benefits, but that are also, prima facie, within the scope of the cartel prohibition. It is advised that LOAD should not be used since is not appropriate.
B/ art.106.2 tfeu.
C/ the EP (exemption possibility) : can only be used where economic benefits are concerned….EP (101.3): ‘contribute to the production or distribution, or promotion of progress, while allowing consumers a fair share of the resulting benefit.
EP is only for conflicts between the cartel prohibition, and economic wpiuas. (wpiuas increase in economic welfare).
EP is NOT for conflicts between the cartel prohibition, and non-economic wpiuas (newpiuas do no increase in economic welfare)… why? because, although the internalisation of negative externalities, increases AE (allocated efficiency) and therefore societal welfare increases , but his welfare increase is not eligible for EP, because the economic welfare of the buyers affected, is reduced….and they must be fully compensated…. But,….. there is a fine line between newpiuas, and ewpiuas, is not clear in the law… thus, the courts will have to clarify it, which is a political question, and the courts lack democratic legitimacy to clarify it. Thus, EAF (the exemption analytical framework) [page 268 book] is used, in each case, to see whether EP could indeed solve the conflict [between the cartel prohibition, and newpias].
art.106.2 tfeu could be used as a RM [to solve conflicts between the cartel prohibition, and newpias] , if the self-regulated activities, qualify as ‘services of general economic interest’.
Government legislation is not regarded as an economic activity [EA], and is therefore not covered by the cartel prohibition. Thus, government legislation can oblige banks to serve a wpi, even if this limits competition, provided that this legislation does not incorporate the content of an existing UA, nor encourages or requires the conclusion of such UA. Thus, new legislation is possible, and needed, to decide how to solve the conflicts between the cartel prohibition, and newpias, or even ewpias…. Such decisions must be from government, and not from the courts or by regulators….but, instead, government (lazy and fearful), prefers to let regulators self-regulate themselves, so that they do not have to take a stance is such tricky, socially explosive, issues, that can easily destroy political careers.
my proposals:
1- a novel foundation for the EP (and national equivalents), and for the siec test, by application of :
-the onepolicygoaloneinstrument principle,
-the principle of consistency between the application of a rule, and the goal of this rule
-the principle that political choices must be made by government (democratically legitimised)
2- CL’s scope should only be based on the theory of welfare economics. Thus, paternalistic private measures, and welfare improvements due to the internalisation of negative externalities, fall outside of both the EP, and the siec test.
3-an extension of wpis in the mcr (merger control regime), and an extension of the concept of wpi.
a. CPUAs: concerted parties uas
are undertakings where the agreement was merely a meeting of the ‘undertakings’minds’, which result in (direct or indirect) cooperation (even if they did not agree upon the cooperation), which knowingly eschews competition.
Exception: the unilateral adaptation by one firm, to the actions of another, without any direct or indirect contact, is not a CPUA.
b.DAUAs (decisions of associations of uas):
AUs are trade associations, and informal adhoc associations. DAUAs can no longer escape prohibition, by use of their usual past trick of creating a separate AUs to coordinate….. however, if DAUAs do not create the AUs, but use an existing AU (eg. a popular trade union), then they can escape prohibition.
c. CRUAs (Competition Restriction UAs)
there is no clear definition. but there are egs: the fixing of prices; information sharing on future prices; the sharing of markets or customers; collective boycotts; plain export bans; resale price maintenance. 2 types:
a. cruas whose object is a cr. the harm (caused by cruas) needs not be assessed. eg price cartels. There is an assumption that this type of cruas always appreciably affect competition.
b. cruas whose effect is a cr. the harm (caused by cruas) must be proven to be able to distort, actual or potential, competition. this type of crua is not assumed to appreciably affect competition, so this must be proven for each case.
even agreements between non-competitors, can be cruas. eg an agreement between supplier and reseller may be a crua.
c/ eumr uas = [merger control regime] = MRC
The eumr prohibit mergers or tos, that could significantly impede effective competition. The SUBSTANTIVE TEST, identifies if this is the case.
RMs for MCR:
1-the failing firm defence: IS NOT APPROPRIATE NOR PRACTICABLE.
2- the balancing act in the siec test: [ = the substantive merger control test],.
IS APPROPRIATE BUT NOT PRACTICABLE
when balancing, the only the mergerbenefits [ increases in economic welfare brought by the merger] that can be considere, are the ones not realised in the [counterfactual situation = what would/should have happened].
-types of mergerbenefits :
a. improvements that with the affected firm’s customers
b. all other improvements
Since the siec test is a consumer welfare test, the benefits for society at large, or for unaffected consumers, cannot be considered. Thus, when applying the efficiency defence [ED], the siec test only allows a limited type of mergerbenefits. Thus, the siec test is unlikely to clear anticompetitive emergency tos.
3. art 21.4 eumr: IS APPROPRIATE, BUT NOT PRACTICABLE
is used by member states that want to trump the siec test. it allows , [for prudential reasons – in banks, ]member states to:
- block mergers that have passed the siec test…if they are harmful to the national financial stability.or
- clear mergers that have failed the siec test, if they are beneficial to the national financial stability.
Thus, mergers that harm economic prosperity for the affected consumers, but that are advantageous for society at large, cannot be cleared, because an appropriate RM is lacking to allow their possible clearance. this is a RM gap/loophole.
emur jurisdiction: the turnover tests
Requirements for emur to apply :
a. the combined worldwide turnover of all undertakings, is over 5000m euros, and
b. the aggregate euwide turnover of each of, at least, 2 of the undertakings, is over 250m euros.
or
a.the combined worldwide turnover of all the undertakings is over 2500m
b.in each of at least 3 member states the combined turnover is over 100m euros.
c.in each of at least 3 member states of b. , the aggregate turnover of each of at least 2 of the undertakings, is over 25m euros, AND
d. the aggregate euwide turnover of each of at least 2 of the undertakings, is over 100m euros.
procedure:
mandatory notification, to ec, or to cma, of ‘notifiable’ mergers : where a merger passes the eu turnover test (above), so that the standstill requirement commences: phase 1, and if needed, a phase 2.
if the parties expect a prohibition, the parties themselves will offer remedies, to secure clearance.
if the standtill requirement is violated, they can be fined, and the reversal of a merger may be ordered, if the deal should have been notifed, but was not, and the ec prohibits it, the merger agreement would be VOID.