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EU Competition Law

By: Staff Editor
Date: July 07, 2009

European Union Competition Law regulates the exercise of market power by large companies, governments or other economic entities. In the EU, it is an important part of ensuring the free flow of working people, goods, services and capital in a borderless Europe.

The four main policy areas of the EU Competition Law include

Cartels, or control of collusion and other anti-competitive practices that affects the EU.
Monopolies or preventing the abuse of firms' dominant market positions.
Mergers, control of proposed mergers, acquisitions and joint ventures involving companies that have a certain, defined amount of turnover in the EU/EEA.
State aid, control of direct and indirect aid given by Member States of the European Union to companies.

Provisions of the Law
The main provisions of EU Competition law are contained in Articles 81 and 82 of the Amsterdam Treaty.

Article	Provision
Article 81(1)	Prohibits ‘all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States. It also prohibits agreements which may lead to the prevention, restriction or distortion of competition within the common market’.
Article 81(2)	Provides that, agreements that are likely to affect trade between Member States or adversely affect competition within the common market will be rendered void.
Article 81(3)	Overrules the provisions of Article 81(1), in case of arrangements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit.
Article 82	Prohibits ‘any abuse by one or more undertakings of a dominant position in trade for any goods or services in a substantial part of the Community’.
Articles 81 and 82	Have the twin objectives of promoting greater market integration and prohibiting anti-competitive behaviour.

Power and Penalties
Primary authority for applying EU competition law rests with European Commission and its Directorate General for Competition, although state aids in some sectors, such as transport, are handled by other Directorates General. On 1 May 2004, a decentralized regime for antitrust came into force to increase application of EU competition law by national competition authorities and national courts.

Commission officers have powers to enter premises and to inspect and copy documents.
The Commission has the power to impose fines of up to 10% of turnover on undertakings where it finds that they have infringed Article 81 or 82.
The Commission may also order undertakings to cease such behaviour.
The Commission has the power to grant block exemptions to the category of agreements that satisfy the requirements of Article 81(3). For example, there are block exemptions for vertical agreements; motor vehicle distribution; technology transfer etc.

Reform in EU Competition Law

1. Regulation 1/2003: The objective of this regulation is to decentralize the system of application of competition rules authorizing national authorities to monitor compliance with EC competition rules; to simplify administrative formalities for firms; and to enable the Commission to be more effective and to focus on the most significant infringements. Under the previous regime much of the Commission's time was absorbed in considering requests for exemption under Article 81(3). This regulation is designed primarily to allow for greater deployment of resources:

It provides that all national competition authorities are empowered to apply EU competition law.
It also provides that the provisions of Article 81(3) may be directly applied by national courts and competition authorities. (Previously only the Commission could declare that an agreement satisfied the requirements of Article 81(3)).
Under the Regulation a new regime has been established to enable the Commission and na-tional competition authorities to cooperate with one another in conducting investigations.

2. Regulation No. 139/2004 (revoking Regulation 4064/89/EEC or the Merger Regulation): This regulation brought about three main changes in the work of the Commission and the role of national authorities:

Substantive: scope of application; the wording of the test “dominant position” changed; “Com-munity dimension” test clarified.
Jurisdictional: mergers should be investigated by the authority that is best placed to do so (Commission can relocate its cases to MS).
Procedural: Two phases in investigation - the examination of notification (25+10 extra working days) and investigation (normally no more than 90 working days - in no case longer than 105 days).

Objectives of EU Competition Policy and Law