Competition Policy and the Single Market

Uchenna Iloka (10/04/2009)

1.0 Introduction

Economics and Law, are two vital genres of discipline embedded in

long-windedness, which makes the understanding of the terminologies
involved cumbersome and that is to say the least; for when a trio is
made of the two by adding Politics to it, the sum of one and one can
never just be two. This is the exact fabric with which competition
policy is made. Ordinarily, one should not bother with it, but
unfortunately, can we afford not to?
What makes it interestingly germane is the pivotal role competition
policy plays in the economies of the world, and particularly in the
European Union (EU) and in the accomplishment of the major goal of
the EU; which is perfecting the integration of the Single market.
The whole idea of competition is the centre and the heart of
Community law and economy.1
Competition is supposed2 to result in efficiency by giving the greatest
awards to the keenest in the market place and at the same time
providing a benefit to all in that it improves living standards; creating
employment and allowing a consumer to benefit from a competitive
market.3 These benefits are some of the social goals of the EU. Herr
von der Groben4 believed that Competition should encourage the
expansion of efficient firms and sectors of the economy at the expense
of those less efficient at supplying what people want to pay for.5

1
N.Foster, ‘Foster on EU Law’ (Oxford University Press 2006) p. 298
2
This is ideal result of perfect competition, where the consumer benefits immensely and sometimes the
most efficient seller/producer is crowned by the consumer with a monopolistic status.
3
N.Foster Foster on EU Law (Oxford University Press 2006) p. 298
4
The first member of the Commission responsible for Competition policy
5
V. Korah, ‘An introductory guide to EC Competition Law and Practice’ (9th Edition, Hart Publishing
2007) p.53

1
There have been concerns however about the absoluteness of this
view, whether competition policy merely serves to protect the weaker
firms at the expense of stronger firms irrespective of efficiency6. When
competition policy is focused on hampering the strong to protect the
weak for the pursuit of other goals such as the integration of the
market-as is sometimes the case of the EU, one cannot be sure its
exact objective.
The question that comes to mind is whether it can be balanced,
attaining both the goals of economic efficiency and the integration of
the Single market. Agreed, when Competition is unbridled it then
becomes counter productive as the most efficient undertakings will
thin out the weaker and less efficient undertakings, thereby creating a
monopoly which can exploit the market to the detriment of the
consumers and the economy generally.7 So there should be some
regulation of competition and its enforcement for a balanced
achievement of the various social goals of the EU in order to prevent a
state of survival of the fittest in the market place, wherein the
strongest survives and gathers the entire spoil of the market whilst the
weakest is stripped and made extinct.
Hence for a clear understanding and appreciation of the complexities
(yet simplicities) of the competition policy as well as its inherent
objectives and its achievements in the European Community(EC), this
work will delve into at its development overtime, the discharge of its
objectives by the institutions of the EC, analytically focus on the
pivotal role of the Commission and the European Judiciary(European
Court of Justice-the ECJ and the Court of First Instance- the CFI) in the
pursuit of its objectives .

6
Ibid, p.53
7
N.Foster, ‘ Foster on EU Law’ (Oxford University Press 2006), p.299

2
2.0 Development of Competition Policy in the EC

2.1 Rationale

The invention of policy or law becomes requisite either by reason of

prior ills or mischief in the society which the existence of the proposed
policy or law seeks to remedy or an idea of a better status quo which
the proposed policy or law seeks to concoct. This is on all fours with
competition policy and its objectives.
Competition policy was introduced to provide and sustain the aims of
the EU i.e. the idea of the perfectly integrated EU and its single market
as well as ensure the advent of the EU socio-economic giant and
political stalwart, it is necessary for the building of the Community and
the Union.8
The foreword by Neelie Kroes9 to the Report on Competition Policy
2006, particularly in the second paragraph stated that;

“‘Free competition’ is not an end in itself- it is a means to an end. When we

strive to get markets working better, it is because competitive markets
provide citizens with better goods and better services, at better prices.
Competitive markets provide the right conditions for undertakings to
innovate and prosper, and so to increase overall European wealth. More
wealth means more money for government to use to sustain the fabric of our
societies and to guarantee social justice10 and a high-quality environment for
generations to come.”11

This encapsulates the underlining socio-economic and political

objective of the competition policy.
8
Ibid, p.299; this was the view confirmed by the Court of justice in Case C-127/97 Eco Swiss China time
ltd. Also Foster in Foster and EU had stated in p.299 that the establishment of the EU is premised on the
desire to promote integration and create a single unified market; to establish and maintain European-wide
competition to stimulate the entire economy of the Community for both the domestic and the world markets
9
EU Competition Commissioner
10
Emphasis are mine
11
Available at http://ec.europa.eu/comm/competition/annual_reports/2006/en.pdf

3
2.2 The Legislative Framework
The instrument largely related to competition policy was the Treaty of
Rome 195712; which established the European Economic Community
(EEC) now called the European Community (EC) treaty13. One of the
main reasons for the establishment of the EEC was to prevent the re-
occurrence of war in Europe, therefore it was established to unite
Europe economically at least.14 Although the treaty may have been
politically motivated, the focus was specifically economic.
The Preamble of the EC Treaty refers to the removal of existing
obstacles calls for concerted action in order to guarantee steady
expansion, balanced trade and fair competition.
It then made provisions for the central tasks of the Community,
providing in Article 215 which is establishing the common market
amongst other things.
The common market16 was intended to create interdependence
between the states of Europe, an accelerated rise in standard of living
and a continuous expansion of economic activity in the entire
Community. It is logical to think that the Common Market is the
vehicle by which the expansion, stability and so forth can be reached,
but the Common market is an aim in itself which can only be reached

12
The earliest European Community competition controls were introduced in the Treaty of Paris 1951; it
established the European Coal and Steel Community which were specialized rules that pertained only to
limited markets
13
The European Economic Community (EEC) is now known as the European Community (EC) following
the adoption of the Treaty of European Union in 1992, which established the European Community by
simply changing the name European Economic Community to the European Community
14
Ibid. p. 23
15
“The Community shall have as its task, by establishing a Common Market and an economic and
monetary union and by implementing the common policies or activities referred to in Article 3 and 4, to
promote through out the Community a harmonious development of economic activities, sustainable and
non-inflationary growth respecting the environment, a high degree of convergence of economic
performance, a high level of employment and of social protection, the raising of standard of living and
quality of life and economic and social cohesion and solidarity among Member States.”
16
This is known as the internal market since 1992

4
if an equivalent competitive environment existed through out the
community.
Article 3 of the EC treaty provides for how the central aims of the
Community shall be achieved. One of which is as provided in
Paragraph (1) (g):

“…the institution of a system ensuring that competition in the internal market

is not distorted.”

The treaty also included in it, competition rules to assist the pursuit of
the goal of the Common market. The Competition rules and the
regulations that implement them must be read in the light of the
objectives of the treaty.
The principal substantive rules dealing with undertakings and anti-
competitive agreements and the activities of the powerful subject to
remote competitive pressures are provided for in Articles 81 and 82 of
the EC Treaty17 respectively18. Article 83 then enables implementing
regulations such as Regulation 17/62 and later the introduction of
Regulation 1/2003.19 Article 86 contains specialized provisions relating
to undertakings where there is some form of State regulation or
involvement. State aids are provided for in Articles 87-89.20 However
there was a modernization of the enforcement of the rules by including
private enforcement of the competition law in national courts. This was
introduced by Regulation 1/2003 on the implementation of the rules on
competition laid down in Articles 81 and 82.21 It revised the powers
available to the European Commission (the Commission) and provided

17
they were renumbered from Articles 85 and 86 by the treaty of Amsterdam, but not amended
18
B. J Rodger and A.Macculloch Competition law and policy in the EC and UK (Fouth edition
Routledge.Cavendish 2009) p.23
19
Ibid, p.23
20
Ibid p. 24
21
Ibid p.24

5
for a decentralized network involving National Competition Authorities
(NCA’s) and the National Courts to assist the Commission in its
regulatory tasks.22

3.0 Implementing Competition Rules and the EU Institutions

The Commission and the European Court of Justice (ECJ) are intrinsic
to the discharge of competition law in the European Community (the
Community).
Recently, the Commission has been largely assisted by a network of
National Competition Authorities (NCA’s) at the National levels across
the community. The combination of the Commission and the network
of NCAs at the National level make up the European Competition
Network (ECN)23.
It has often been regarded as the Guardian of the Treaty, with its main
task being to ensure the proper functioning and development of the
common market, as provided for in Article 211 of the Treaty.24 So it
has the responsibility to see to it that Community Law is applied. It is
endowed with general supervisory powers under the treaty for dealing
with competition law enforcement, and more specific powers, under
Regulation 1/2003, in relation to the enforcement of Article 81 and
82.25

22
Ibid p.24
23
Ibid. p.39
24
B. J Rodger and A.Macculloch, ‘Competition law and policy in the EC and UK’ (Fourth Edition
Routledge.Cavendish 2009) p.46
25
Ibid p. 46; Also, Community competition rules can now be enforced on both the community and national
level, but on what ever level, the day-to-day enforcement takes place; the Commission is still required to
supervise and enforce Community competition law under its general duty provided in Article 211 of the
treaty. The Commission therefore, handles cases which, because of their nature, are better suited to direct
enforcement by the Commission, as after the Commission has been released from the responsibility for
Article 81(3) notifications that it bore under Regulation 17/62, it now has more resources available to
investigate serious competition problems which may span different member states, such as secret pan-
European cartels.

6
After gathering information through various means that could hold an
undertaking liable for a breach of competition rules, it may institute
infringement proceedings26, the parties will be given a fair hearing, and
then the Commission will adopt a Decision, which is mostly a fine27 or
a restraint from the continuation of the breach. The largest fines
imposed have tended to be for price-fixing agreements and
agreements which divide up the single market in the Community. One
of the highest total fine imposed for an infringement, on a group of
undertaking was €855.2m28 and the highest fine imposed on a single
undertaking for an infringement remains €497m29.
This reflects the colossal powers of the commission and its influence in
Competition policy.30

The legality of a Commission’s Decision can be reviewed by the Courts

pursuant to Article 230 of the EC Treaty and a Commission’s decision
may be annulled with appropriate reasons. Article 229 of the Treaty
empowers the Courts with unlimited powers to annul, vary or increase
the fine imposed by the Commission. The Court of First Instance (CFI)
and the European Court of Justice (ECJ) make up the Judiciary of the
Community.
The task of the court is to ‘ensure that in the interpretation and
application of the treaty the law is observed’31. The Court is the
ultimate authority on Community law issues, including competition
law. The court is renowned for its creative techniques of interpretation,
26
See Article 7 of Regulation 1/2003
27
See Article 23 of Regulation 1/2003
28
See Commission Press Release, IP/01/1625 and the Commission’s Decision 2003/2/EC Vitamins OJ
2003, L6/1
29
Commission decision 2007/53/EC, Microsoft, OJ 2007, L32/23, on appeal Case T-201/04 Microsoft v
Commission, Judgments of 17 September, 2007
30
Practical examples in the carrying on of these powers in discharge of competition rules will be discussed
subsequently.
31
Under Article 220 of the EC Treaty

7
this is because the treaty may be worded insufficiently and thus
cannot buttress the clear intent of its drafters, so the court often finds
the need to ‘fill in the gaps’ in the Treaty.
It has often been criticized for its judicial activism, which has been
obvious in the development of competition law principles from the
limited text of the Treaty. Matters for preliminary rulings32 from the
domestic courts and tribunals seeking authoritative rulings may also
be referred to the ECJ.
In 1989, the CFI was established33 in order to reduce the increasing
workload of the ECJ. The work load of the CFI is significant because it
have powers to first review the Commissions decision on points of law
and fact34. After its judgment, an appeal may be made to the ECJ on
points of law.

3.1 The Regulation 1/2003

The Commission35 was solely responsible for the enforcement of the
community competition rule under the previous regime.36 This central
role of the Commission was useful in the embryonic European
community of the 1960s which had only 6 Member states.37 In the late
1990s, it became more apparent that the administrative arrangements
of the community were increasingly unable to deal with the pressures

32
In order to ensure the uniform application of community law through out the legal system of the various
Member States, the Treaty makes provision in Article 234 which empowers the Courts with the final
interpretative jurisdiction over references from national courts concerning the application and meaning of
community law; this is known as preliminary rulings.
33
As provided for by the Single European Act 1986
34
Article230 of the EC Treaty
35
This was the direct responsibility of Directorate General for Competition (DG Comp formerly Directorate
General IV ‘DGIV’)
36
Regulation 17/62
37
B. J Rodger and A.Macculloch, ‘Competition law and policy in the EC and UK’ (Fourth Edition
Routledge. & Cavendish 2009) p. 37

8
of a much larger and more integrated community of 15 Member
states.38 The new regime came into force on May 1, 200439.
The core of this new Regulation 1/2003 was the institution of a
decentralized network of the National Competition Authorities
enforcing Community competition law.40
This regulation provides that Article 81 and 82 have direct effect in the
laws of member states and give rise to actions in tort in the national
courts; National courts are therefore required to give effect to them.41
In Leclerc,42 the CFI stated that according to consistent case law,
national courts could apply Article 81(1) as a result of its direct effect.
In Courage v Crehan,43 a pub tenant was pact in an agreement to buy
beer from a particular brewery, Courage plc. He claimed that this was
a breach of Article 81 and claimed damages. The UK court referred it
to the Court of Justice. The Court held that Competition rules were
fundamental rules in the community, and if the agreement was in
breach of article 81, and not able to be exempted, it was void and
could not be relied on by anyone, including a party to the agreement.
However, the Commission retains its central role by virtue of the way
the Regulation was couched. Article 11 of regulation 1/2003 sets out
situations in which the National Competition Authorities must inform
the Commission of their activities. Article 11(3) requires the National
Competition Authorities to inform the Commission as soon as they
commence an investigation. They are also required to inform the
Commission, at least 30 days in advance, of any decision made.44

38
Ibid p.38
39
The same day as the day the community was enlarged to 25 Member States
40
Ibid p.39
41
V. Korah,, ‘An introductory guide to EC Competition Law and Practice’ (Ninth Edition, Hart Publishing
2007) p 33
42
Leclerc v Commission T-19/92, [1996] ECR II-995
43
Courage V Crehan C-453/99
44
B. J Rodger & A.Macculloch, ‘Competition law and policy in the EC and UK’ (Fourth Edition Routledge
& Cavendish 2009) p. 41

9
These procedures keep the Commission central to enforcement,
ensuring its awareness of the ongoing investigations across the
European Competition Network and will be able to intervene to ensure
consistency.

4.0 Survival of the Fittest vs. Protection of the Weak: The

Commission & Courts as Fair45 Umpires

The term ‘Undertaking’ is a common thread in fabrics of Article 81 and

82 of the EC Treaty and the courts have held that the term has
basically the same meaning in both context.46 There is a gap in the EC
Treaty with respect to the meaning of the term ‘Undertaking’, so in the
teleological spirit of the Court of filling up the gaps in the Treaty, the
Court have developed and established the content and the realm of
the term ‘Undertaking’.47 An undertaking has been defined by the
courts very broadly, thereby maximizing the range of competition rule.
‘It is defined as all natural or legal persons as independent or
complementary economic actors’48. It has also been defined as any
entity engaged in economic or commercial activity49.
The Court’s definition of an Undertaking implies the relativity of the
concept. The focus of the court is not necessarily the form of the entity
but the activity of the entity.50

45
The question of fairness is not objective but relative. Which is more abusive; the community regulations
or private power of firms or group of firms poses a very potent argument
46
K. Middleton, B.J Rodger & A. MacCulloch, ‘ Cases and Material on UK & EC Competition Law
’(Oxford University Press 2007) p. 165
47
A. Ezrachi, ‘ EC Competition Law- An analytical guide to leading case’s (Hart Publishing 2008) p.1
48
N.Foster, ‘ Foster on EU Law’ (Oxford University Press 2006), p. 304
49
See Polypropylene Cartel Community V ICA, Commission Decision [1988] 4 CMLR 347
50
A. Ezrachi EC Competition Law- An analytical guide to leading cases (Hart Publishing 2008) p. 1; For
instance non profit organizations or public bodies may be acting in their charitable or public capacity but
may be considered as undertakings when they engage in commercial activities.

10
4.1 Article 81
Article 81(1) prohibits as incompatible with the Common Market
collusion of Undertakings that may affect trade between Member
States and that has the object or effect of restricting competition.51
The form of an agreement is not so much of importance to the
Commission and the Court, but the effect of the agreement on
Competition; it includes anti-competitive gentleman agreements52
which are oral or tacit agreements53 with nothing committed to
writing54. This applies to both horizontal55 and vertical56 agreements.
The Court’s have held that ‘the concept of agreement’ within the
meaning of Article 81 (1) of the EC Treaty centers around the
existence of the concurrence of wills between at least two parties, the
form in which it is manifested being unimportant so long as it
constitutes the faithful expression of the parties intention.57 If concept
of agreement anticipated in Article 81(1) was restricted to just legally
binding agreement, then undertakings would easily evade the
prohibition, as the anti-competitive agreements that are prohibited in
the Article are by their very nature clandestine58. So the Court and the
Commission have not given the opportunity for Undertakings to slip

51
V. Korah, ,‘ An introductory guide to EC Competition Law and Practice’ (Ninth Edition, Hart Publishing
2007) p.44
52
ACF Chemifarma v Commission Case 41,44 and 45/69 ECR 661; [1970] CMLR 8083, Where the Court
held that and unsigned ‘gentleman’s agreement’ fell within the prohibition.
53
In BAI and Commission V Bayer Case C-2 and 3/01 [2004] ECR 4 CMLR 13, where the Court held that
for an agreement to be concluded by ‘tacit acceptance’ it is necessary that the ‘manifestation of the wish of
one of the contacting parties to achieve an anti-competitive goal constitute an invitation to the other party,
to fulfill that goal jointly’
54
N.Foster, ‘ Foster on EU Law’ (Oxford University Press 2006), p. 304
55
Agreement between parties on the same level of the economic process
56
Agreement between parties at different levels of economic process
57
Volkswagen AG v Commission Case T-209/1 CFI [2003] ECR 11-5141, [2004] 4 CMLR; See also A.
Ezrachi , ‘EC Competition Law- An analytical guide to leading case’s (Hart Publishing 2008) p. 45; See
also BP Kemi (41/69) [1970] ecr, 661, paras 110-114 & 163-169 Where the Commission held that an
unsigned agreement fell within the prohibition of Article 81(1) since it had been acted upon by the parties.
58
B. J Rodger and A.Macculloch, ‘ Competition law and policy in the EC and UK’ (Fourth Edition
Routledge & Cavendish 2009) p. 173

11
through the provisions of Article 81 scot-free with arguments of dark-
witted agreements.
Article 81(1) also includes as prohibited decisions by Association of
Undertakings that are not compatible with the Common Market.
The ECJ has held that the words ‘decisions by association of
undertakings’ include recommendations by a trade association to its
members, even if they are not binding.59 So associations cannot
escape liability for their recommendations. This was further affirmed in
Daimler Chrysler AG v Commission60, the association’s argument that
it did not have the authority to take decisions binding its member, but
only to formulate recommendations was not upheld. The Court held
that it is settled case law that a measure may be categorized a
decision of an association of undertakings for the purpose of Article 81
(1) of the EC Treaty, even if it is not binding on the members
concerned, at least to the extent that the members to whom the
decision applies comply with its terms.
Because of the nocturnal nature of these agreements anticipated in
Article 81, the term concerted practices makes up for extremely
informal forms of co-operation61. In Dyestuffs62, the ECJ defined
concerted practices as a form of co-ordination between undertakings
which, without having reached the stage where an agreement properly
so-called has been concluded, knowingly substitute practical co-
operation between them for the risks of competition63. In the case, the
Commission had found that the price increases on three occasions
were ‘concerted’ partly because the producers had met and discussed
price. The ECJ pointed out that the three increases showed
59
Vereeniging van Cementhandelaren v Commission Case 8/71, [1972] ECR 977; [1973] CMLR 7
60
Case T-325/01 CFI (2005), ECR 11-3319, [2007] 4 CMLR
61
K. Middleton, B.J Rodger & A. MacCulloch , ‘ Cases and Material on Uk & EC Competition Law
’(Oxford University Press 2007) p. 173
62
ICI v Commission (Case 48/69) [1972] CMLR 557
63
Ibid p. 173

12
progressive co-ordination, which consisted mainly of the leader
announcing its intended price rise for a particular country further in
advance.
There is also the requirement that the practice complained about must
be such that has the capacity to affecting community trade64.
For an agreement to be at risk of infringing Article 81, it must bear
within it the purpose to distort competition, and whether the
agreement has the potential to distort competition65. This could also be
referred to as the object and effect of the agreement.
The court have established that one should first see whether an
agreement has the object of restricting competition, only when it does
not, is it necessary to consider, in detail the effects or the potential of
the agreement.66
Well known cartel activities such as price-fixing, market sharing has
been considered to always have the object of restricting competition.

Finally, Article 81(2) provides for that consequence of breaching the

provisions of Article 81(1) will be the agreement becoming
automatically void67. But this sanction of nullity becomes of non effect
when it involves market sharing or price-fixing, as it is not expected
that parties to such agreements will seek its enforcement by the rule

64
N.Foster Foster on EU Law (Oxford University Press 2006), p. 309-310; In Consten and Grundig, (56
and 58/64) [1966] ECR 299, The test question derived was whether it is probable in law or in fact that the
agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade
between member states as to hinder the attainment of a single market.
65
B. J Rodger and A.Macculloch, ‘ Competition law and policy in the EC and UK’ (Fourth Edition
Routledge & Cavendish 2009) p.180
66
Ibid p. 181; Also in Polypropylene Commission decision 86/398/EEC, OJ 1986, L230/1; [1988] 4 CMLR
347, There was considerable evidence of the cartel members’ intention of co-operating across the market
(i.e. the agreement had the object or aim of distorting competition) but there was little evidence of any anti-
competitive effects or potential. Nonetheless the Commission imposed a large fine that was upheld on
appeal.
67
B. J Rodger and A.Macculloch, ‘ Competition law and policy in the EC and UK’ (Fourth Edition
Routledge & Cavendish 2009) p. 190

13
of law68. In contrast, parties would rather deny the existence of such
agreements.

4.2 Article 82
Article 82 of the Treaty was designed to deal with the activities of
undertakings, which have powerful market positions similar to the
economists’ concept of monopoly; it is directed at the activities of a
powerful single business which is not pressured by effective
competition.69 An undertaking that have attained dominance in the
market may abuse such a dominant position.70
Dominance was defined by the Court as:
‘the dominant position referred to [by Art82] is a position of economic
strength enjoyed by an Undertaking which enables it to prevent effective
competition being maintained in the relevant market by affording it the
power to behave to an appreciable extent independently of its competitors,
customers and ultimately its consumers’71

Before dominance can be established, the relevant market72 must be

identified as it will be impossible to gauge how much power an
undertaking has over its competitors and consumers, without
delineating the products or services that are in competition. 73 The
importance of market definition was emphasized in Continental Can,74

68
Ibid o. 190
69
Ibid p.101
70
Ibid p.102; Also abuse of dominant position may be in several ways: to exploit consumers by restricting
output and increasing prices, to perpetuate its own position, perhaps through unfair discounting; or, to
extend its position in another market, perhaps by tying the sale of one product to another.
71
United Brands Continental BV v the Commission (Case 27/76) [1978] ECR 207; [1978] 1 CMLR 429
72
See the Commission Notice on the definition of the relevant market for the purposes of Community
competition law, OJ 1997, C372/3; See also Baker, S and Wu, L, Applying the Market definition guidelines
of the European Commission [1998] 5 ECLR 273
73
B. J Rodger and A.Macculloch, ‘ Competition law and policy in the EC and UK’ (Fourth Edition
Routledge & Cavendish 2009) p. 104
74
Case 6/72 Continental Can v Commission [1973] ECR 215; [1978] 1 CMLR 199

14
where the Commission’s decision was annulled by the Court because of
the Commission’s failure to properly demarcate the relevant market.

There are no penalties for simply being dominant as long as the

dominant undertaking does not abuse its position.
The ECJ said in Hoffmann-la Roche held that:
“….the concept of abuse is an objective concept relating to the behavior of an
undertaking in a dominant position which is such as to influence the
structure of a market where, as a result of the very presence of the
undertaking in question, the degree of competition is weakened and which,
through recourse to methods different from those which condition normal
competition in products or services based on the basis of commercial
operators has the effect of hindering the maintenance of the degree of
competition still existing on the market or the growth of that competition.”
The Court has confirmed that it is an abuse of dominant position to
charge excessive prices.75
Also another form of abuse can be found where an Undertaking
because of its dominant position, is not subject to competitive
pressure to innovate.76 In Port di Genova SpA,77 the Court held that a
port operator’s refusal to utilize modern technology in its unloading
operations constituted an abuse, as the user of older methods meant

75
General Motors V Commission Case 26/75 [1975] ECR 1367; [1976] 1 CMLR 248; A price will be
excessive where they do not reflect the ‘economic value’ of the goods or services and when taken in the
context of the larger market, the price is prima facie excessive. This can be referred to as an Exploitative
abuse; when an Undertaking which is unconstrained by competitive pressures no longer takes a price from
the market but can maximize profits by reducing output and charging an excessive price. However,
different markets have different cost structure as there are variations in taxation, marketing strategy, and
consumer behavior may result in different price levels. In United Brands Continental BV v Commission
(Case 27/76) [1978] ECR 207; [1978] 1 CMLR 429, the Commission used various factors to support its
findings of excessive pricing in branded banana; it compared prices between Member states of branded and
unbranded bananas, and between different brands of banana, and concluded that the prices charged on the
relevant market was unjustifiably high. The Court quashed the Commission’s findings as it had failed to
examine UBC’s cost before coming to its Decision
76
This is also an Exploitative abuse, but it is sometimes referred to as x-inefficiency.
77
Case C-179/90 Merci Convenzionali Porto di Genova SpA v Sideerurgica Gabrielli [1991] ECR; [1994]
4 CMLR 422

15
that the unloading of vessels took much longer and was consequently
more expensive.
These are situations where the dominant Undertakings protect their
market power, usually by discouraging or making it more difficult for
new entrants to challenge them on the market78. Easy entry and
voluntary exit from markets are very germane to the achievement of
the goal of the single market.
In Microsoft79 it was Cleary shown that Article 82 focuses on the
structure of the Market, the CFI confirmed the Commissions Decision,
which required Microsoft to provide interoperability information, which
allows network clients and servers to communicate with each other, to
allow competitors to develop products that would compete with its own
work group server operating system. The absence of proper
interoperability reinforced Microsoft’s position and risked the
elimination of competition in the market.
Some other form of abuse will be the in abusive pricing strategies.80
Sometimes, a dominant Undertaking may reduce prices to the level of
cost or even below cost and because of its economic strength, it will be
able to sustain its losses for a limited time but its weaker competitor,
being less prosperous will be driven from the market.81

78
B. J Rodger and A.Macculloch , ‘Competition law and policy in the EC and UK’ (Fourth Edition
Routledge.Cavendish 2009) p 121; This is know as Exclusionary abuse
79
Case T-201/04 Microsoft V Commission[2007] 5 CMLR 11
80
They may be discounts, rebates or predatory pricing, they are abusive because tend to foreclose the
Markets from new entrants. For instance For instance, an undertaking may lower prices of its goods, and
the customer may benefit in the short term, but in the in long term the undertaking would have benefited by
reducing the level of competition they would have faced in the market if they had not employed the pricing
strategy in In Michelin, the Court found that annual discounts awarded by Michelin, on the basis of sales
target for dealers, amounted to an abuse, as dealers could not deal with another supplier without fear of
heavy economic loss.
81
B. J Rodger & A.Macculloch, ‘ Competition law and policy in the EC and UK’ (Fourth Edition
Routledge & Cavendish 2009) p 126; This is know as predatory pricing. In Case T- 340/03 France
Telecom V Commission [2007] 4 CMLR 21 The CFI have made it clear that dominant undertakings had no
‘absolute right’ to align their prices with those of a competitor, especially where they are potentially
abusive, being below cost.

16
4.3 Article 87-89
States can potentially distort competition in the market by the grant of
state aids. Valentine Korah clearly explained the temptation to grant
state aid stating:
“Politicians are subject to strong temptation to be seen to decrease
unemployment in marginal constituency by subsidizing failing firms, even if
the inefficiency leads in the longer run to greater unemployment through the
need to raise taxes to pay for the aid and the loss of work to international
competitors once the aid is reduced’82
One of the shortcoming of state aids is that firms in the same industry
who are not benefiting from the aid have to meet subsidized
competition, also profitable firms in the same industry have to pay
higher taxes than they might have in order to provide the state
resources, it is like paying taxes to empower you rival competitors in
the industry.83
Article 87 does not have direct effect, so the National Competition
Authorities cannot arbitrary authorize State aids; that power lies
exclusively with the Commission84.

82
V. Korah,, ‘ An introductory guide to EC Competition Law and Practice’ (Ninth Edition, Hart
Publishing 2007) p 236; see the resent French state aid to Renault
83
Ibid p 236
84
Ibid p 237

17
4.4 Protection of the weak and pursuit of social goals:
Protecting the aims of the competition and not the competitors;
a comparison of the EU Competition Law and the Us Anti-Trust
Law.

All contracts concerning trade involve restraint in one way or the other
‘… [T]o bind, to restrain is of their very essence…’
Yet it will be absurd if every contract were caught by Competition
law85.
Some agreements do have the features that restrict competition, but
at times the mischief caused by such agreements may be
overwhelmed by the resultant good to the society.
Even though Section 1 of the Sherman Act86 provides that every
contract, combination or conspiracy in restraint of trade is illegal the
courts started that only undue or unreasonable restraint should be
condemned.87 This was the development of the US doctrine of rule of
reason.88
In the EC Competition law, there are some anti-competitive
agreements which allow the consumers a fair share of the resulting
benefits; hence they are exempted from prohibition Under Article 81
(3).89

85
P.Craig & G.D. Burca , ‘EU Law, Text, Cases and Materials’ (Fourth Edition Oxford University Press
2008) p. 963
86
It is identical to the Section 81 (1) of the EC Treaty
87
Standard oil v US White CJ 221 US1 (1911) cited in P.Craig & G.D. Burca EU Law, Text, Cases and
Materials (Fourth Edition Oxford University Press 2008) p 964
88
This entails an inquiry into the pro- and anti- competitive effects of an agreement, to determine whether it
suppresses or promotes competition. Although, there are certain types of agreement that are blatantly
without redeeming virtue and which have a pernicious effect on competition, which the court have
condemned without the need for an elaborate inquiry into whether they have a positive or negative impact
on the market. Agreements such as horizontal pricing and market division, they are also referred to as per
se offences.
89
The standard for the prohibition, unlike in the US is codified so discretion of the court will be within the
confines of the provision of law. Under Article 81(3), agreements that contribute to the improvement of the
production and distribution of goods, or promote technical or economic progress are absolved from the
prohibitions of Article 81(1).

18
The scope of US anti-trust law derives historically from anxieties and
ideals quite different from those that have shaped the European
Union.90 It was not conceived as an instrument to create and maintain
a single market unlike in the EC which needed to abolish a wide variety
of regulatory and technical obstacles and custom barriers; rather it
was framed to protect the already existing single market from
unnatural distortions.91
The primary concern of the Commission during the early years of EU
antitrust enforcement was not the promotion of legal certainty or
economic efficiency, but rather the creation of the single market, an
establishing of the social model as shown in the preamble, Article 2
and 3 of the EC Treaty; the arch-goals of European integration.92
The difference between U.S. law and original EU antitrust model is akin
to a difference between ‘efficiency law’ which promotes efficiency as
measured by aggregate consumer welfare and ‘fairness law’ which
uses law to advance goals such as preserving a society of small
business, protecting small firms from abuse of dominance by larger
firms, providing fair access to markets, and setting fair rules of the
game.93 Following the reform of EU Competition law of 2004, the fluid
and efficiency-focused “rule of reason” approach of the US seemed
more enticing in contrast to the too formulaic excessive compliance

90
The US was the first jurisdiction to imbibe a coherent competition system, known as ‘anti-trust’. And
most of the origins of the EC Treaty competition rules have been traced by some to equivalent provisions in
U.S. antitrust law
91
G. Caciato, Subsidies, Competition Laws and Politics: ‘A Comparison of the EU and The USA’ (1996)
92
G. S Georgiev Contagious Efficiency: The growing reliance on US style antitrust settlemet in EU law
utah law review [no. 4.] Page 979; Also In early 1990s, the then Commissioner for competition noted that
the ‘Chicago school’ approach currently in favour in the USA is not directly relevant to the EC
Competition policy. It stated that Chicago does not need to worry about creating a single market. Rather, it
presupposes the existence of an integrated market
93
Eleanor M. Fox, ‘Antitrust and Regulatory Federalism’: Races Up, Down and Sideways, 75 N.Y.U.L
REV, 1782,1782 (2000) see also Eleanor M. Fox, the end of Antitrsut Isolationism: The Vision of One
World, 1992 U. Chi. Legal F. 221,225-28(1992) cited in Contagious Efficiency: The Growing Reliance on
US Style Antitrust Settlemet In Eu Law George Stephanov Georgiev Utah Law Review [No. 4. page 977)

19
approach of the Commission in the application of Article 8194 and the
goal of Efficiency, both in the process of competition enforcement and
as a goal of EU economic policy, became more apparent as a goal of
the community.95

5.0 Conclusion
Firstly I align my argument with Korah and suggest that careful
consideration is given to Competition rules when embarking on any
form of business venture, as infringements, whether intentionally or
negligently do have consequences; which may be fines of up to 10% of
the turn over of the Undertaking’s previous year96.
Secondly I find it equally disturbing; Community regulation as well as
private power of an undertaking. Competition policy which aims at
dispersal of power as a matter of ideology may favour weaker
businesses and seek to protect them from stronger businesses could
be using the rules to protect the competitors instead of protecting the
competition.97

As I had said earlier, the single market is not really a tool for achieving
the integration of the EU but rather it is an aim in itself, not only for it
to be free from trade barriers but also for it to be vibrant and result in
a very strong economy for the Community as a whole, that why the
emphasis should also be on market efficiency.

Notwithstanding the importance of competition controls, market

94
Ibid ; For instance, the Merger regulation changed the substantive test for enjoining merger from the
creation or strengthening of a dominant position test to a standard that examines whether the transaction
would significantly impede competition, in the common market or in a substantial part of it, in particular as
a result f the creation or strengthening of a dominant position. (This test was first introduced in the US
before it moved to other jurisdictions whereas the old test was based strictly upon the rigid concept of
dominance.
95
ibid
96
V. Korah,, ‘ An introductory guide to EC Competition Law and Practice’ (Ninth Edition, Hart
Publishing 2007) p 37; The Commission has recently issued two sets of guidelines on its fining policy.
They have both been revised recently and yield far higher fines than before
97
Ibid p. 16

20
efficiency is at risk when the competition rules are used against
Undertakings in dominant positions who got it by sheer codes of
perseverance, innovative competition and efficiency.

BIBLIOGRAPHY

21
Books
1. N.Foster Foster on EU Law (Oxford University Press 2006)
2. V. Korah, An introductory guide to EC Competition Law and
Practice (9th Edition, Hart Publishing 2007)
3. B. J Rodger and A.MacCulloch Competition law and policy in the
EC and UK (Fourth edition Routledge & Cavendish 2009)
4. K. Middleton, B.J Rodger & A. MacCulloch Cases and Material on
Uk & EC Competition Law (Oxford University Press 2007)
5. A. Ezrachi EC Competition Law- An analytical guide to leading
cases (Hart Publshing 2008)
6. P.Craig & G.D. Burca EU Law, Text, Cases and Materials (Fourth
Edition Oxford University Press 2008)
7. A. Jones & B. Sufrin, Text, Cases and Materials EC Competition
Law (2nd Edition 2004)

Reports/Articles/Journals
1. http://ec.europa.eu/comm/competition/annual_reports/2006/en.
pdf
2. Commission Press Release, IP/01/1625 and the Commission’s
Decision 2003/2/EC Vitamins OJ 2003, L6/1
3. G. Caciato, Subsidies, Competition Laws and Politics: A
Comparison of the EU and The USA (1996)
4. G. S Georgiev Contagious Efficiency: The growing reliance on US
style antitrust settlement in EU law utah law review [no. 4.]
5. Sarah A. Turnbull European Competition Law Review 1996
Barriers to entry, Article 86 EC and the abuse of a dominant
position: an economic critique of European Community
competition law
Cases

22
1. Case T-201/04 Microsoft V Commission[2007] 5 CMLR 11
2. Case C-179/90 Merci Convenzionali Porto di Genova SpA v
Sideerurgica Gabrielli [1991] ECR; [1994] 4 CMLR 422
3. United Brands Continental BV v Commission (Case 27/76)
[1978] ECR 207; [1978] 1 CMLR 429
4. General Motors V Commission Case 26/75 [1975] ECR 1367;
[1976] 1 CMLR 248
5. Case 6/72 Continental Can v Commission [1973] ECR 215;
[1978] 1 CMLR 199
6. Polypropylene Commission decision 86/398/EEC, OJ 1986,
L230/1; [1988] 4 CMLR 347
7. Vereeniging van Cementhandelaren v Commission Case 8/71,
[1972] ECR 977; [1973] CMLR 7
8. Daimler Chrysler AG v Commission Case T-325/01 CFI (2005),
ECR 11-3319, [2007] 4 CMLR
9. ICI v Commission (Case 48/69) [1972] CMLR 557
10. Polypropylene Cartel Community V ICA, Commission Decision
[1988] 4 CMLR 347
11. Leclerc v Commission T-19/92, [1996] ECR II-995
12. Courage V Crehan C-453/99

23