Cecily Zamora
The European Union has antitrust legislation, which is codified under Articles 101 to 109 of the Treaty on the Functioning of the European Union (TFEU). The treaty covers prohibitions on agreements that restrict competition, abuse of dominance, and state aid. The primary enforcer of these rules is the European Commission, which has powers to investigate, take action against infringements, and impose penalties. The EU has taken an aggressive stance in enforcing its competition rules, particularly in the digital economy and against big tech companies. The EU's antitrust regulatory framework has inspired other jurisdictions, such as China, which adopted its first Anti-Monopoly Law in 2007.
| Characteristics | Values |
|---|---|
| Antitrust rules | Prohibit agreements between market operators that restrict competition and the abuse of dominance |
| Treaty | Treaty on the Functioning of the European Union |
| Treaty Articles | Articles 101 and 102 |
| Article 101 | Prohibits agreements between two or more independent market operators that restrict competition |
| Article 102 | Prohibits firms that hold a dominant position on a given market from abusing that position, e.g. by charging unfair prices, limiting production, or refusing to innovate |
| Enforcement | The European Commission is responsible for functions including fact-finding, taking action against infringements, and imposing penalties |
| Fines | Fines are imposed on undertakings that violate European Antitrust rules |
| Leniency | The Commission's leniency programme encourages companies to hand over inside evidence of cartels in exchange for immunity from fines or a substantial reduction of fines |
| Investigations | The Commission carries out investigations to detect cartels |
| Whistleblowing | Individuals may report inside knowledge or suspicion of a cartel through a "whistleblower" tool |
| Settlement | Cartel participants can settle their case by acknowledging involvement, receiving a 10% reduction in any eventual fine |
| Comparison with other jurisdictions | EU regulators are seen as taking a more aggressive stance than other authorities when reviewing similar matters |
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What You'll Learn
Agreements restricting competition
The EU's antitrust policy is developed from two central rules set out in the Treaty on the Functioning of the European Union (TFEU). Article 101 of the TFEU prohibits agreements between two or more independent market operators that restrict competition. This includes both horizontal (e.g. between retailers) and vertical (e.g. between retailers and suppliers) agreements, effectively banning cartels within the EU.
Article 101 has been interpreted broadly to include both informal agreements and concerted practices where firms tend to raise or lower prices simultaneously without having physically agreed to do so. It covers a wide range of behaviours, from strong handshakes and written or verbal agreements to a supplier sending invoices with directions to the retailer.
The most flagrant example of illegal conduct infringing Article 101 is the creation of a cartel, which may involve price-fixing and/or market sharing. Distribution agreements between suppliers and resellers, where the supplier imposes a price on the customer, are also prohibited. All agreements and exchanges of information between competitors that reduce strategic uncertainty in the market (e.g. regarding production costs, turnover, capacity, marketing plans) are considered anti-competitive.
Some agreements are not prohibited if they can be justified as benefiting consumers and the economy as a whole. For example, agreements on research and development and technology transfer are covered by the Block Exemption Regulations.
Article 102 of the TFEU prohibits firms that hold a dominant position in a market from abusing that position, such as by charging unfair prices, limiting production, or refusing to innovate to the prejudice of consumers.
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Abuse of dominance
The European Union's antitrust policy is developed from two central rules set out in the Treaty on the Functioning of the European Union: Article 101 and Article 102. While holding or acquiring a dominant position is not unlawful under EU competition law, Article 102 prohibits firms that hold a dominant position on a given market from abusing that position to restrict competition.
Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits abusive conduct by companies that have a dominant position on a particular market. A dominant company has a special responsibility to ensure that its conduct does not distort competition. Market shares are a useful first indication of the importance of each firm on the market in comparison to the others. The Commission's view is that the higher the market share, and the longer the period of time over which it is held, the more likely it is to be a preliminary indication of dominance.
Examples of behaviour that may amount to an abuse of a dominant position include: requiring buyers to purchase all units of a particular product only from the dominant company (exclusive purchasing); setting prices at a loss-making level (predation or predatory pricing); refusing to supply input indispensable for competition in an ancillary market, and charging excessive prices. Certain forms of rebates may also constitute an abuse if applied by a dominant company. The concern is that the dominant company exploits its larger base of sales to offer discounts in ways that preclude smaller (but equally efficient) rivals from competing for the contestable portion of a customer’s demand.
The challenge for agencies and undertakings in abuse of dominance cases is therefore to distinguish between abusive conduct and vigorous competition on the merits. Case law qualifies certain categories of conduct as ‘by nature’ abuses (such as exclusive dealing). There is also case law suggesting that it is unnecessary to show a causal connection between dominance and the abuse. However, it is generally expected today that the Commission must demonstrate a connection between the dominant position and the abusive conduct.
A company that has participated in an anti-competitive agreement and therefore infringed competition law may have to pay a fine. The Commission may also impose fines on undertakings that violate the European Antitrust rules.
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Anti-competitive mergers
The European Union does have antitrust laws, which prohibit agreements between market operators that restrict competition and the abuse of dominance. The primary authority for applying these laws rests with the European Commission and its Directorate-General for Competition.
Antitrust rules apply to mergers, with the objective of preventing harmful effects on competition. A merger is defined as when two separate entities merge into a new entity, or when one entity acquires a majority of another entity's shares, thereby gaining control. The EU's Merger Regulation (EC) No.139/2004 governs mergers that have a "community dimension", and all "concentrations" between undertakings are subject to approval by the European Commission.
The Commission's role is to assess whether a proposed merger is expected to significantly impede effective competition in the EU. If it does not, the merger is approved unconditionally. If it is found that a merger could distort competition, companies have the opportunity to propose and negotiate solutions. For example, they may commit to selling part of the combined business or licensing technology to another market player. If the Commission is satisfied that such commitments would maintain or restore competition, thereby protecting consumer interests, it grants conditional clearance for the merger.
Horizontal concentrations, or mergers between competitors in the same product and geographical markets, may impede effective competition by producing "non-coordinated" and "coordinated" anticompetitive effects. "Non-coordinated" effects may occur if the loss of competition between the parties allows the post-merger entity to reduce output and increase prices. "Coordinated" effects may occur when suppliers respond to each other's price increases or output decreases by following the leader instead of competing aggressively.
The Commission may impose fines on undertakings that violate European Antitrust rules, and it also carries out investigations to detect cartels, which are highly secretive and hard to detect. Companies may receive immunity or substantial reductions in fines if they provide inside evidence of cartels.
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Cartel agreements
The European Union has antitrust laws that prohibit agreements between market operators that restrict competition and the abuse of dominance. These policies are derived from the Treaty on the Functioning of the European Union, specifically Article 101 and Article 102.
Article 101 prohibits agreements between two or more independent market operators that restrict competition. The creation of a cartel between competitors is considered the most flagrant example of infringing this article. Cartels may engage in price-fixing and/or market sharing, which are highly secretive and challenging to detect. To violate Article 101, undertakings must form an agreement, develop a "concerted practice", or make a decision within an association.
The European Commission has implemented a leniency programme to encourage companies to provide insider evidence of cartels in exchange for immunity from fines or substantial reductions. The first company to apply for leniency and provide sufficient information for an investigation may receive full immunity. Individuals can also report any suspicions or inside knowledge of cartels through a "whistleblower" tool.
Article 102 prohibits firms with a dominant market position from abusing their power, such as by charging unfair prices, limiting production, or refusing to innovate to the detriment of consumers.
The European Commission has the authority to enforce these rules and conduct investigations, including inspections and requesting information. They may impose fines on undertakings that violate European antitrust rules. However, victims of European Union competition law infringements often do not receive reparation, leading to discussions on facilitating antitrust damages actions.
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Enforcement methods
The EU has strict rules protecting free competition. European Antitrust policy is developed from two central rules set out in the Treaty on the Functioning of the European Union: Article 101 and Article 102. Article 101 prohibits agreements between two or more independent market operators that restrict competition, such as the creation of a cartel, which may involve price-fixing and/or market sharing. Article 102 prohibits firms that hold a dominant market position from abusing that position, for example, by charging unfair prices, limiting production, or refusing to innovate to the detriment of consumers.
The Commission is empowered by the Treaty to enforce these rules and has a range of investigative powers, including inspections of business and non-business premises and written requests for information. The Commission may impose fines on undertakings that violate European Antitrust rules, with a potential fine of up to 10% of a company's annual worldwide turnover. In addition, individuals may face serious penalties, including prison sentences, in some EU countries.
The Commission also has a leniency programme that encourages companies to provide insider evidence of cartels in exchange for immunity from fines or substantial reductions. The first company to apply for leniency and provide sufficient information for an investigation may receive full immunity. Alternatively, cartel participants can settle their cases by acknowledging their involvement, receiving a 10% reduction in fines, and expediting the investigation and decision-making process.
The EU's competition rules apply directly in all EU countries, and the courts in each country are responsible for upholding these rules.
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Frequently asked questions
Yes, the EU has antitrust laws.
Antitrust laws prohibit agreements between market operators that restrict competition and the abuse of dominance.
The primary enforcer of EU antitrust laws is the European Commission, which is responsible for functions including fact-finding, taking action against infringements, and imposing penalties. The EU has an administrative system that imposes fines on firms that violate the law.
In December 2021, the Italian competition regulator fined Amazon €1.128 billion for discriminating against sellers who did not use its logistics service. In October 2017, the European Commission announced that it would take Ireland to the Court of Justice of the European Union for failing to recover €13 billion owed to it by Apple.
