Competition Law EU & UK

EU Competition Law

Competition policy has been a central element of the European Union Treaties since the outset. The completion of the customs union, common market and later the single market required a system of competition control to ensure that competition in the single market was not disturbed.

The Treaty on the Functioning of the European Union restates the basic prohibition on anti-competitive agreements and practices and on abuses of a dominant position.

There could be anti-competitive behaviours, such as price-fixing and collusion, in the absence of competition law controls.  Abuse of a dominant position poses a risk where the market is controlled by a dominant participant so that there is no effective competition. The prohibition on anti-competitive agreements and practices is in very wide terms.  In effect, any such agreement practice or arrangement is invalid unless it can be objectively justified.

In addition, the Treaty prohibits state aid.  State aid has the potential to distort markets.  As with the competition rules, state aid may be permitted provided there is a good objective reason in effect.  The EU Commission sets detailed rules on permissible state aid and exceptions.

EU Rules Development

EU law applies to anti-competitive practices and arrangements which affect trade between member states.  There is parallel domestic legislation in most jurisdictions, including Ireland and the United Kingdom expressing the anti-competitive and abuse of dominant position prohibitions in identical terms.

EU competition law applies concentrations, which are mergers with an EU multi-state element of a certain scale.

National competition rules are applied concurrently with EU rules.  The EU rules are preeminent under the principle of supremacy.

This EU legislation was modernised in 2003 at the relationship between the EU, and member state competition law was clarified. Agreements, practices and arrangements in breach of competition law are void.  Breaches are criminal and subject to very high administrative fines.

The EU Commission has played a central role in the development of EU competition law and policy.  It takes enforcement actions and has significant powers to fine.

The EU issues block exemptions which may exempt categories of agreements and arrangements from the general prohibition where there are countervailing economic benefits which outweigh their anticompetitive effects.

EU and National Law

The Commission also publishes a range of communications guidelines and notices on EU competition law and practice. They also influence the way in which national competition law is interpreted. The guidelines may clarify substantive competition law. Ultimately the matter of interpretation of competition law is one for the courts.

The European Competition Network has been developed since 2003 and provides for cooperation between the EU Commission competition directorate and the member states’ regulatory authorities.

There are obligations and duties on national competent authorities and courts in applying EU competition law. Member states may not enact or maintain in force provisions contrary to EU completion law.

The EU Commission’s enforcement role was greater in the period before 2004.  It issued many exemptions for individual agreements following notification.  However, the 2003 reforms, which became effective in 2004, removed the Commission\’s exclusive competence and enabled greater enforcement of competition laws at the national level.  The Commission retains ultimate, but not exclusive, responsibility for developing competition law and safeguarding consistency.

Under the modernisation system, the case should be dealt with by the national competition authority with the closest involvement itself or in parallel or by the EU Commission where it is best placed to do so.

Some EU Actions

The EU has undertaken several prominent competition investigations and enforcement actions.  In 2004 it determined that Microsoft abused its dominant position in relation to its Windows operating system by refusing to supply competitors with information necessary for interoperability.

It was ordered to change its actions and fined €497 million. It did not fully cooperate,  and ultimately fines totalling €1.1 billion followed.

In May 2009, the EU Commission found that Intel had abused its dominant position and had made secret agreements with major manufacturers on condition that they bought all their chips from Intel.  Intel also made payments to Europe’s largest PC retailer on the condition it stocked only computers with Intel chips.  Ultimately for this and other anticompetitive actions, the EU Commission fined Intel over €1 billion.

Four glass manufacturers who controlled 90 percent of the EU market ran a cartel involving sharing market and other commercially sensitive information.  The EU Commission imposed a fine of €890 billion.  It was reduced to €750 million on appeal.

Mergers

Mergers with an EU dimension over (a very large) threshold must be notified to the EU Commission, where they have an EU element cross-border element.  They may be allotted to the most appropriate national competition authority where appropriate.

The commission may block a merger which is incompatible with the single market if it would significantly impede effective competition. It may permit the merger and apply conditions.

Below the EU, level national provisions apply.  The substantive assessment of mergers at the national level is broadly similar to that at EU level.

UK Approach Mirrors EU

UK competition legislation places a duty on UK courts and the Competition and Markets Authority to deal with questions of national competition law consistently with the European Union approach. UK competition legislation is in line with and is modelled on the EU legislation.

In principle, UK competition law may diverge from EU competition law after Brexit.  If the UK joins the European Economic Area, the UK would be required to accept EU competition law.

An arrangement equivalent to that between the EU and Switzerland would require competition arrangements equivalent to those in the European Union.

It is unlikely that the UK would be enabled to have access to the single market in goods and services while maintaining a significantly divergent competition law.  Otherwise, there may not be a level playing pitch and UK companies would have an unfair advantage.  Any radical change in UK competition law would itself create uncertainty which would be undesirable.