Friday, 27 June 2008

Competition Law in the UK

While it is true that undertakings with monopoly power can act anti-competitively and harm markets and consumer interests, and that NCAs should actively recognize and prosecute such behaviour, an undertaking’s size alone does not reveal damage to competition or an infringement of the competition laws. The appropriate aim of competition law enforcement needs to be focused against anti-competitive behaviour and consequence, not just size or market share.

Council Regulation (EC) No 1/2003 was adopted in the Council of Ministers on the 16th of December 2002 and came into effect from the 1st May 2004. Additionally, the Commission also published various guidelines and notices designed to aid in the interpretation and application of Regulation 1/2003. These guidelines also formulate the formal rules the dealing with procedural matters. Replacing Regulation 17/62[1], the Modernisation Package (as Regulation 1/2003 its associated guidelines are also known), established the procedures to implement the European Community [EC] competition law contained in Articles 81 and 82 of the EC treaty.

The growing delays associated with the formerly centralised enforcement of EC competition law and the ensuing growth of the community with the addition of 10 additional member states paved the way for the introduction of the Modernisation Package. The goals of this package included empowering the competition authorities[2] to enforce Articles 81 and 82 together with the European Commission. Further, Article 81(3) is no longer founded on a notification to the European Commission.

Modernisation has been described by the Commission “an ambitious and fundamental overhaul of the antitrust rules implementing Articles 81 and 82 of the Treaty”[3]. Four years on, have the goals been met? Regulation 1/2003 has sought to increase the efficiency of enforcing EC competition law through simplified administration and by creating a greater level of certainty through a uniform application of EC competition law within the European Community. It was hoped that this would lead to lower administrative costs and a greater level of competition.

In order to determine whether Regulation 1/2003 (EC) has achieved the lofty objectives associated with implementing a completely new competition law enforcement framework, it is necessary to look both to developments which led to these changes and to evaluate their effectiveness.

What came before and where are we going?
In order to effectively evaluate the objectives achieved by the implementation of Regulation 1/ 2003/EC, it is necessary to first look to both the origins of the act and the associated preceding legislation. Regulation 1 was enacted in parallel with the enlargement of the community. Further, moves were already taking place away from the formalistic and prescriptive to a process based in economic reality.

The introduction in 1999 of updated block exemptions and new guidelines for vertical agreements was in itself a radical shift from the previous approach to competition law enforcement.

Competition Act 1998
The enactment of the 1998 competition act introduced both a “carrot and stick”[4] into the enforcement of competition law within the UK. This act set to prohibit business practices, behaviour, and any associated agreements, which could result in diminishing open competition within the market.
This act jointly prohibits anti-competitive agreements, which have “an appreciable effect on competition” (in Chapter I of the Act), and further prohibits the abuse of a dominant market position through either discriminatory or predatory pricing structures. This in effect mirrors the provisions of articles 81 and 82 of the European Council competition legislation.

The “stick” consists of fines designed to make anti-competitive behaviour uneconomic. This has been implemented by means of the burden of fines, which can amount to 10% of the organisations UK turnover for a period of three years.

Alternatively, the carrot is defined by the leniency policy. Provisions have been made for organisations and whistleblowers who cooperate openly with the competition authorities. In some instances, fines may be reduced by as much as 100%[5].

Enterprise Act 2002
Shortly later, it was decided that a “bigger stick” was needed.
In 2003, the enterprise act introduced further measures to grapple with the perceived anti-competitive behaviour in the market. This act introduced an offence with a sentence of up to five years imprisonment and/or an unlimited fine directed at individuals within an organisation criminalising cartel activities. Additionally, the act introduced a process to disqualify company directors who have been found in breach of either UK or EU competition law.
These measures were further coupled with an increased range of investigative powers[6] allowing the Competition Commission to compel people to provide evidence[7] and to enter the private premises of company directors or officers in order to search for supporting evidence. These additional powers are in addition to the ones granted previously under the Competition Act.

One goal of this act was to limit behaviour, which, although not illegal, could influence the market by preventing, restricting or distorting competition. The act also fashioned the apparatus for appeals to a specialist competition court for organisations impacted by merger or market investigations.

The bigger Picture
European Commission articles 81 and 82 which correspondingly prohibit the application of anti-competitive agreements and any abuse other firms dominance within a market continue to shape the form of UK competition law. The enlargement of the member states from 15 to 25 and the reform of the EC merger regulations[8] resulted in a need to (again) change competition law and policy within the UK.

The Modernisation Regulation[9] decentralised the application of European Competition Law. The EC has produced an expectation where competition authorities and national courts are to become more involved in the enforcement of articles 81 and 82. The removal of the ability to notify agreements to the European Commission in order to seek exemption has also been removed. As such, individual organisations have to assume more responsibility have in not breaching EU competition law.

The goal of these changes is to allow the European Commission to concentrate on the most serious breaches. Serious abuses, which could lead to the subversion of market power such as pan-European cartels, are their primary target.

This restructuring of the EC Merger Regulation includes a change to the substantive test. This is now a test of whether a merger “significantly impedes effective competition”. However, as will be explored later, this test is often not clear.

Why a need for change?
Changes to competition law brought about by the modernisation legislation have brought about much disorder and uncertainty. It has been stated that these reforms were necessary due to both the imminent enlargement of the EU and existing administrative overload. This overload was said to be a result of the system of notifications. The European Commission’s Press Release of November 2002 declared that the system of notifications could not remain workable following the expansion of the EU.

However, it should be noted that the European Commission had initially referred to the obstacles to effective protection of competition presented by the Commission's monopoly over article 85(3)[10] and the Commission’s lack of ability to put into effect competition rules throughout the enlarged community in their original justification to the Council.

It was argued that the notification system effectively consumed resources that should be assigned to anti-cartel enforcement. Further, the notification system was stated to increase compliance costs and create uncertainty within the economy. This was stated to have a direct adverse economic impact on the EC.
It would seem that the years of the national competition authority would hold that modernisation was necessary to fill the need to enforce EC competition law. The European commission rarely referred to national competition law and when it did so these references were mostly restricted to noting the absence of harmonisation.
It was noted by Lord Fletcher[11] “NCAs were seen as partners, or future partners, in the shared task of applying the E.C. rules rather than as enforcers of national competition law.” The drive for change was to foster a “common competition culture throughout the Community”. This, it was said, would provide significant benefits in the form of greater resources. It was additionally the case that competition laws were either not prominent or nonexistent in many EC countries that where to be in the expanded Union. Empowerment through the EC rules was a powerful instrument. The intent was to use this to align these countries with those (such as the UK) with a strong tradition in competition law.

The effect conversely on countries such as the UK and Germany with a strong history of Competition Law enforcement was more challenging.

Articles 81 and 82
Articles 81 and 82 of the EC Treaty fundamentally define the competition rules for the European Community. These rules cover both coordinated and cooperative behaviour[12] and unilateral behaviour by undertakings[13]. Both Articles 81 and 82 may be imposed either by public or private enforcement and both are a piece of an enforcement system that seeks to discourage anti-competitive behaviours prohibited by competition law and to protect undertakings and consumers from adverse practices and any costs caused by them.

Article 81(1) prohibits agreements[14], which, either through purpose or consequence, confine, prevent, or distort competition or trade between the member states. The exemptions provided in Article 81(3) allows for agreements that are deemed to provide objective economic benefits or otherwise benefit consumers. The four requisite conditions that need to be met by an agreement such as it is excluded from the provisions of article 81(1) include provisions for:

  • efficiency gains (in that the agreement contributes to promoting technical or economic progress, an improvement in production or more efficient distribution of goods);
  • fair share for consumers (in that the consumer receives a “fair[15]” share of the consequential benefits derived from the agreement);
  • indispensability of the restrictions (that the anti-competitive effects of the agreement are a necessary part of providing competitive benefits to the market);
  • no elimination of competition (that competition is not substantially impacted across the products or services in question).
Block exemption regulations were introduced to increase certainty associated with the application of these exemptions. These regulations automatically exempted agreements from the prohibition in article 81(1) if they satisfy the conditions set out in the regulations. An agreement, which did not satisfy the conditions the block exemption, would need to be separately assessed in order to resolve whether they were exempt pursuant to article 81(3). If an agreement is prohibited under article 81(1) and did not meet the requirements to be covered by a block exemption, it is deemed both as void[16] and to be prohibited. Unlike Article 81, Article 82 has no specific exemption. It may however be possible to justify the allegedly abusive behaviour in some objective manner[17].

However, whereas the Community law “demands an effective system for damages claims for infringements of antitrust rules, this area of the law in the 25 Member States presents a picture of “total underdevelopment”[18]”.

The introduction of the Modernisation Package
Regulation 1/2003 has resulted in a more decentralised system. Articles 81 and 82 apply involuntarily without allowing for the individual notifications intended to obtain an exemption. This more decentralised system will naturally mean that the Competition Commission [CC] and UK courts will have a larger role to play in the enforcement of competition law.

As any agreement or conduct which violates either Articles 81(1)[19] or 82 is now automatically restricted, the administrative load would be expected to decrease allowing for NCAs and the commission to concentrate on more severe forms of anti-competitive behaviour and illegal cartels. Likewise, any agreement, which fulfils the requirements to be exempted under article 81(3), is deemed valid without any interaction of the NCAs or commission.

The requirement for the CC to apply articles 81 and 82 to all behaviour and agreements that “may affect trade between member states”[20], coupled with the requirement to give the commission at least 30 Days prior notice before opting to end an infringement, allow commitments, or eliminate the benefit of a block exemption; would be expected to draw the member states closer together and increase uniformity. Further, the commission is able to decide on matters relating to Articles 81 and 82 with the result of producing decisions that are binding on both the CC and the national courts.

Close cooperation has developed between the various NCAs and the Commission[21]. This cooperation has extended to the national courts as is required in Regulation 1/2003, art. 11(1). As a result, the CC must inform the commission of all active investigations involving EC competition law. Regulation 1/2003 allows that two or more NCAs may establish their own enforcement priorities[22].

Regulation 1/2003 further expands the scope of information exchanges between NCAs over that provided for in regulation 17/62. For instance, the modernisation package provides for exchanges of information that the national courts. Regulation 17/62 had no such provision.

The commission has maintained its investigation privilege in regards to Articles 81 and 82 following the implementation of the modernisation package. Regulation 1/2003 sets out the investigative powers of the Commission, but has left the prescription of the powers of the NCA and national courts to national law.
The process of assessing market dominance is problematic. To be in a position of dominance and undertaking must have the ability to act independently of its competitors and consumers. This complex assessment of data across various market definitions of market share, the condition of competition, entry and exit barriers, buyer power, and relative business strength is beyond the capabilities of many undertakings. 40% of and undertakings market share could be held to be a rough presumption of dominance.

There is little given in the way of guidance to aid in the complex economic calculations needed to produce these figures. These additional costs have to be borne by the undertakings themselves.

The Commission will grant immunity[23] to an undertaking where one of the following two conditions are met[24]:
(a) ‘the undertaking is the first to submit evidence which in the Commission’s view may enable it to adopt a decision to carry out an [inspection in the sense of Article 20(4) of Regulation 1/2003]’ and ‘the Commission did not have, at the time of submission, sufficient evidence to adopt [such] a decision …’,
(b) ‘the undertaking is the first to submit evidence which in the Commission’s view may enable it to find an infringement of Article 81 EC’, while ‘the Commission did not have, at the time of submission, sufficient evidence to find [such] an infringement …’ and ‘no undertaking had been granted … immunity’ under (a).
It is further noted that even where an undertaking does not fulfil the stipulations for the granting of full immunity, it could be permitted a lessening in fines[25].
What is overlooked is that the undertaking may still be subject to civil proceedings[26]. In these proceedings, the evidence may be available through the process of the former investigations.

The European Court of Justice (ECJ) has held that EC law allows the Commission to compel interim measures[27] against an undertaking. This power was confirmed under article 8(1) of Regulation 1/2003[28].
Regulation 1/2003 assures the dicta of the ECJ in that it explicitly allows the Commission to issue interim orders. The circumstances that need to be in place before the Commission can impose such orders are consistent with those decided in Camera Care Ltd. v. Commission[29]. It is stated in Article 8(1) of Regulation 1/2003 that: ‘[i]n cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures.’ The requirement here is that there is a risk of “damage to competition”.

The new rules have provided the competition authorities with significant powers to investigate suspected behaviours that are adverse to an efficient competitive market. Powers to enter and search business premises with a warrant and even to search the premises of directors have significantly increased the reach of the competition authority.

There has been a growing recognition[30] that a more explicitly economics based approach to competition law enforcement is needed. Current thought amongst the majority of economic theorists is that form-based rules are not generally appropriate[31] as a deterrent to anti-competitive behaviour. In fact, it is arguable that there are both pro and anti competitive motivations, the most of the relevant forms of behaviour noted within the Modernisation package.

The overlaps that exist between pro-and anti-competitive behaviour make form based “lines in the sand” difficult to enforce and to justify on economic basis. It can lead to a danger of inconsistent treatment of different parties of similar facts. Often, conduct with equivalent effects on the market may be treated in opposing manners.
Markets are dynamic, as a result, the impact of an overzealous competition authority may result in mistaken interventions and false precedents that are difficult to assuage. The economic cost of these decisions may easily outweigh the effects of non-intervention.

It is often forgotten by the competition authorities that they are open freedom to intervene creates uncertainty[32]. It has been stated that the foundation of commerce in the UK was built on the pillars of contracting and common law. It has been further argued, that these pillars provided the necessary environment and freedoms to promote growth within business and create certainty. This idea of certainty is fragile.

Concerns around price increases, output reductions, and quality deterioration are critical to decisions about monopoly. It is true that conduct which allows nothing other than price raising and output reduction decidedly wounds competition, the free market and thus consumers. Economics theory supplies the deadweight loss triangle[33] as a representation of this premise.

However, it needs to be remembered that the economic value of enforcement needs to be weighed against the full opportunity costs and value in non-intervention commitments. It should be remembered that even if some detrimental behaviour escapes detection, it is the overall strength of competition within the market that is of primary concern.

Economist John Hicks noted that “[I]t seems not at all unlikely that people in monopolistic positions ... are likely to exploit their advantage much more by not bothering to get very near the position of maximum profit, than by straining themselves to get very close to it. The best of all monopoly profits is a quiet life.”[34]
In the USA, Judge Easterbrook noted, "[t]he gale of creative destruction produces victims before it produces economic theories and proof of what is beneficial.[35]" It is imperative to consider both current business practice and the related principles that may be applied to innovative progress in the commercial realm.

Risks of not complying
An undertaking faces serious consequences where it is found either to be party to an anti-competitive agreement or to have abused a dominant position. The potential consequences include serious fines (of up to 10% of the undertakings worldwide turnover), threats of criminal prosecution against individuals, disqualification for directors of up to 15 years and the voiding of key provisions in agreements.

Arguably, it could be said that the disruption to a business end the ensuing damage to a corporation’s reputation ensuing from competition investigations are potentially worse for the undertaking then be aforementioned possible consequences. Additionally, the undertaking could face subsequent litigation from its consumers or competitors.
Lengthy investigations by the competition authorities, whether conducted by the ECJ or an NCA, are both time-consuming and costly. It is in an undertakings interest to avoid such costs and delays due to the associated economic losses.

The introduction of self-assessment through Modernisation has placed the risk of non-compliance squarely on the shoulders of the undertaking. By removing the formal process were an undertaking could notify an agreement to the European commission or the office of fair trading, the Modernisation Regulations have significantly reduced legal certainty for businesses.

It is often forgotten by regulators that: “The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices - at least for a short period-is what attracts "business acumen" in the first place; it induces risk taking that produces innovation and economic growth.”[36]

The effects of Modernisation on Competition
“The system of EU merger control which was in force before May 2004 failed to explicitly endorse efficiency considerations”[37].

Harvard economist Joseph Schumpeter's examinations[38] of monopoly found that that superior profit provides "baits that lure capital on to untried trails," thereby fabricating a "perennial gale of creative destruction" with the result that the needs and desires of the market and consumers are better served. NCAs often miscomprehend how the existence of undertakings with large market shares does not reveal competitive harm. In fact, undertakings characteristically attain large market shares through tendering products and services that the market favours over the offerings of other less successful undertakings.

In the US, it has been recognised that the "costs" of "antitrust intervention" must be evaluated against the "benefits."[39] The difficulties in demonstrating conduct alleged as anti-competitive and the "cost of false positives" factor in the decisions of the court. Wide-ranging and effective tests, which provide an accurate assessments of any alleged anti-competitive conduct need to be introduced if the Modernisation Package is not to hurt competition.

The business world is characterised by a continually increasing and intense globalisation. Undertakings must by nature respond with mergers and acquisitions not only to shield and strengthen their competitive position in the market, but also to survive in it. Economies of scale, workforce rationalisation or managerial efficiencies[40] all add too help an undertaking remain competitive.

On occasion, the commission has relied on an undertaking’s efficiencies in order to prove the anti-competitive nature of the transaction[41]. This welfare approach to competition law has changed the nature of competition in the EU. Because of these changes within the UK and EU in general, is a “great gap separating the EU approach from the US system”[42].

There is a wide agreement that the aim of competition law is to promote efficiency in markets.
While it is true that undertakings with monopoly power can act anti-competitively and harm markets and consumer interests, and that NCAs should actively recognize and prosecute such behaviour, an undertaking’s size alone does not reveal damage to competition or an infringement of the competition laws. The appropriate aim of competition law enforcement needs to be focused against anti-competitive behaviour and consequence, not just size or market share[43].

Both in the UK and abroad, NCAs need to balance cost of false positive and false negatives. Value may be found in non-intervention even if some harmful conduct escapes. Market growth and finding the right balance is what is important.

The competition authorities have to remember that the goal of the Modernisation Regulations is to protect competition, not competitors. Moreover, undertakings and the market as a whole are advantaged by providing certainty in apparent, administrable, and purposeful legislation that permits undertakings concurrently calculate the legitimacy of their conduct prior to acting and simultaneously enable the competition authorities and courts to arbitrate disputed behaviour as expected and precisely.

Professor Carlton, has noted, “[e]fficiencies are hard to measure, and the benefit of the doubt should go to defendants, not to plaintiffs; otherwise, the continued generation of the large efficiency benefits responsible for raising our standard of living will be jeopardized”[44]. Competition is wounded by the competition authorities on every occasion that an undertaking is prevented from pursuing an aggressive strategy due to doubts founded in uncertainty caused by a gratuitously unrestrained interpretation of the Modernisation Regime.

Finally, enforcement needs to be effectual and administrable by the courts and competition authorities without constraining competition. Any remedy that troubles competition is inferior to no resolution at all.
The Modernisation Package has reduced processing times, but uncertainty remains.

1. Allen, T. (2005), “Interest in Class Action Grows Outside the U.S.” Securities Litigation Watch.
2. Andreangeli, Arianna (2004) “COURAGE LTD v CREHAN AND THE ENFORCEMENT OF ARTICLE 81 EC BEFORE THE NATIONAL COURTS” Case Comment, E.C.L.R. 2004, 25(12), 758-764 (European Competition Law Review)
3. Barnett, Thomas O. (2006), “The Gales of Creative Destruction: The Need for Clear and Objective Standards for Enforcing Section 2 of the Sherman Act”, Opening Remarks for the Antitrust Division and Federal Trade Commission Hearings Regarding Section 2 of the Sherman Act Washington, D.C.; June 20, 2006
4. Bittlingmayer, G. and T. Hazlett (2000), “DOS Kapital: Has Antitrust Action Against Microsoft Created Value in the Computer Industry?” Journal of Financial Economics 55 (March), pp. 329-35.
5. Buchan, Nancy (2004) “Fairness is in the eyes of the beholder”, University of Wisconsin - Madison
6. Carlton, Dennis W. & Perloff, Jeffrey M. (2005) “Modern Industrial Organization” 4th ed. Addison-Wesley USA
7. Clarke, Christopher (2004), “Competition Policy in the UK and its Implications for Japanese Competition Policy” Japanese Fair Trade Commission seminar, The UK Competition Regime, Recent Changes and Future Challenges. Speech by Deputy Chairman, UK Competition Commission in Tokyo on 6 December 2004
8. Commission Notice on Immunity from Fines: the "whistle blowers charter" 19/02/02 OJ C45/9
9. Commission (1999), “White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty”, Commission Programme No. 99/027, Brussels. April 28, 1999
10. Colley, L (2004), “From “Defence” to “Attack”? Quantifying Efficiency Arguments in Mergers” 25 ECLR 342, 343.
11. Easterbrook, Frank H. (1984) “The Limits of Antitrust”, Tex. L. Rev. 1, 5.
12. European Commission (2005) “Green Paper – Damages actions for breach of EC antitrust rules”, 19 December. 2005, COM (2005) 672 final, available at
13. Freeman, Peter (2005) “Lord Fletcher Lecture: UK Competition Law after Modernization”, Lord Fletcher Lecture; Tuesday 15 Mar 2005
14. Grout, Paul A, & Zalewska (2006) “Profitability Measures and Competition Law”, W. D. Collins (ed.), Issues in Competition Law and Policy, American Bar Association, July 2006
15. Gaughan, P.A. (2002), “Mergers, Acquisitions, and Corporate Restructurings” John Wiley & Sons, Inc.
16. Hemphill, C. Scott (2006) “Paying for Delay: Phamacetical Patent settlement as a regulatory design problem”, NEW YORK UNIVERSITY LAW REVIEW Vol. 81: pp1553-1616
17. Hicks, J.R., (1935) ”Annual Survey of Economic Theory: The Theory of Monopoly”, 3 Econometrica 1, 8.
18. Kirkwood, John B. (2005) “Buyer Power and Exclusionary Conduct”, Antitrust L.J. 625
19. Kocmut, Mitja (2005) “THE ROLE OF EFFICIENCY CONSIDERATIONS UNDER THE EU MERGER CONTROL” The University of Oxford Centre for Competition Law and Policy Working Paper (L) 09/05
20. M de la Mano (2002) “For the Customer’s Sake: The Competitive Effects of Efficiencies in European Merger Control”, Enterprise Papers No 11 European Commission 2002.
21. Mannix, Elizabeth A., Margaret A. Neale and Gregory B. Northcraft (1995), “Equity, Equality, or Need? The Effects of Organizational Culture on the Allocation of Benefit and Burdens”, Organizational Behavior and Human Decision Processes, 63 (September), pp 276-286.
22. Monti, M. (2004a), “The EU Gets New Competition Powers for the 21st Century”, Competition Policy Newsletter Special Edition.
23. Monti, M. (2004b), “Private Litigation as a Key Complement to Public Enforcement of Competition Rules and the First Conclusions on the Implementation of the New Merger Regulation, Speech 04/403”, paper for IBA 8th Annual Competition Conference, Fiesole, 14 September, available at
24. Motta, M. (2004), “Competition Policy: Theory and Practice”, Cambridge: Cambridge University Press
25. OECD “Competition on the Merits”, DAF/COMP(2005)27 Organisation for Economic Co-operation and Development, 30-Mar-2006
26. Rodger, Barry (2001) “Competition law compliance: role for profession” The Journal, January 2001, p 23
27. Röller, L.H. (2005), “Using Economic Analysis to Strengthen Competition Policy Enforcement in Europe” Brussels, March 21: Chief Competition Economists at the European Commission.
28. Schaub, A. (2002), “Antitrust Law Enforcement - A Shared Trans-Atlantic Vision”, paper for Bi-Annual Conference of the Council for the United States and Italy, New York, 25 January 2002.
29. Schumpeter, Joseph A. (1942) “Capitalism, Socialism and Democracy”, Harper Perennial, 1976.
30. Whish, Richard (2003) “Competition Law” Butterworths UK
31. Zwick, Rami and Xiao-Ping Chen (1999), “What Price Fairness? A Bargaining Study,” Management Science, 45 (January), 804-823.

Case 311/84 Centre belge d’études de marché – Télémarketing (BEM) v. SA Compagnie luxembourgeoise de télédiffusion (CLT) Information publicité Benelux (IPB) [1985] E.C.R. 3261 at 26.
Case 56/65, Société La Technique Minière v. Maschinenbau Ulm GmbH, [1966] E.C.R. 235, [1966] C.M.L.R. 357.
Case 792/79R Camera Care Ltd. v. Commission [1980] E.C.R. 119
Case 8/72 Vereeniging van Cementhandelaren v. Commission [1972] E.C.R. 977, at pp 30-31
Coöperatieve Vereniging ‘Suiker Unie’ UA, [1975] E.C.R. 1663, at 173.
Höfner & Elser [1991] E.C.R. I-1979, at 21
Imperial Chemical Industries Ltd. v. Commission, [1972] E.C.R. 619 at 64
Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).

Statues and Regulations
Clayton Act § 7, 15 U.S.C. 18
Commission Notice on Immunity from Fines: the "whistle blowers charter" 19/02/02 OJ C45/9.
Community Merger Regulation (Council Regulation (EC) No. 139/2004, OJ 2004. L24/1) (“ECMR”),
Article 81
Article 82
Council Regulation (EC) No 1/2003 (known as the Modernisation Regulation)
Council Regulation No. 17/62, 13 J.O. 204 (1962)
Council Regulation (EC) No 1216/1999 (OJ L148, 15.6.1999)
Sherman Act, 15 U.S.C. 1 et seq.:
§ 1, 15 U.S.C. 1
§ 2, 15 U.S.C. 2
The Competition Act 1998 (Commencement No. 3) Order. 1999
The Enterprise Act 2002 (Commencement No. 6) Order 2004. 2004 No.1866 (C. 78 )

[1] OJ 1962, 13 204/62, p87, as amended by Council Regulation (EC) No 1216/1999, 1999 OJ (L 148) 5.
[2] Regulation 1/2003, Art. 35 requires member states to designate responsibility for the enforcement of articles 81 and 82 in their respective territory to one or more national competition authorities. It is deemed acceptable to appoint national courts for this purpose.
[3] EUROPEAN COMMISSION, DIRECTORATE-GENERAL FOR COMPETITION, EUROPEAN UNION COMPETITION POLICY – XXXIInd Report on competition policy (2002) (32nd Report), at p.19, available at
[4] Rodger, 2001 notes that the Competition Act effectively sought to introduce a system of punishment and reward to induce compliance with the Act.
[5] The legislation provides for fines of up to 10 per cent of a company’s U.K. turnover for three years. In contrast, the “carrot” (see Rodger, 2001) is a leniency policy for whistleblowers who cooperate with the competition authorities. This provides for their fines to be reduced by as much as 100 per cent in some instances. It needs to be noted that the protection does not extend to civil actions against the party seeking leniency leaving them liable to possible civil claims for damage.
[6] The powers of the Competition Commission are available at their web-site -
[7] The standard protections against self-incrimination in criminal matters remain in force.
[8] As noted by Clarke, 2004, the member states was about to enter a period of significant expansion.
[9] EC Regulation 1/2003, referred to as the Modernisation Regulation
[10] As it was numbered at the time of presentation
[11] Freeman (2005) in the Lord Fletcher Lecture: UK Competition Law after Modernization
[12] Imperial Chemical Industries Ltd. v. Commission, [1972] E.C.R. 619 at 64; and Coöperatieve Vereniging ‘Suiker Unie’ UA, [1975] E.C.R. 1663, at 173.
[13] The term “undertaking” is used in this paper to broadly define “any entity engaged in an economic activity regardless, of its legal status and the way in which it is financed” as in Höfner & Elser [1991] E.C.R. I-1979, at 21. The term “undertaking” may thus consist of natural persons, partnerships, companies and public bodies engaging in an economic activity.
[14] Article 81(1) relates in particular to conduct in the nature of “agreements between undertakings, decisions by associations of undertakings and concerted practices”. All of these categories of conduct are referenced together as “agreements” for the purposes of this paper.
[15] “Fairness is in the eyes of the beholder” [Buchan, 2004]. As a result, it is difficult if not impossible to come up with a logically defensible means of assessing “fairness” for all parties. Mannix et al. (1995) effectively supports this assertion and demonstrates that there is no point of “fairness” in that this is an arbitary point of view with no justification in economic thought. As Buchan states, “the link between what players believed to be fair and what they actually did was somewhat tenuous. Specifically, when what was perceived to be fair coincided with what was in player’s self-interest”.
[16] The European Court of Justice (ECJ) has held that Article 81(2) does not require that agreements be automatically declared void ab initio. It may where suitable separate the infringing provisions where doing does not result in an injustice to the parties’ objectives. The scope and possible availability of any severance is left as a matter of national law at the discretion of a national court to apply. See Société La Technique Minière v. Maschinenbau Ulm GmbH, Case 56/65, [1966] E.C.R. 235, [1966] C.M.L.R. p. 250.
[17] Case 311/84 Centre belge d’études de marché – Télémarketing (BEM) v. SA Compagnie luxembourgeoise de télédiffusion (CLT) Information publicité Benelux (IPB) [1985] E.C.R. 3261 at 26.
[18] As was noted in the European Commission, “Green Paper – Damages actions for breach of EC antitrust rules”, 19 December. 2005, COM (2005) 672 final.
[19] Assuming that the agreement does not satisfy the conditions in Articles 81(3))
[20] Art. 3(1). The test for “affect on trade” has been interpreted expansively. It may consist of agreements amongst parties located in the same member state and which is intended to manage their behaviour in that same member state. See Also: Case 8/72 Vereeniging van Cementhandelaren v. Commission [1972] E.C.R. 977, at pp 30-31.
[21] Freeman, 2005 states that the Commission and the CC have developed close ties and operating efficiencies.
[22] Cooperation Notice, at p 5. Article 13 of Regulation 1/2003 corroborates the power allowing NCAs and the Commission to suspend proceedings or reject a complaint altogether where identical behaviour is being investigated by another NCA. Apart from where the Commission has commenced proceedings the NCAs are not required to suspend proceedings or disallow a complaint where the same conduct is being investigated by a different NCA.
[23] Commission Notice on Immunity from Fines: the "whistle blowers charter" 19/02/02 OJ C45/9
[24] However, the undertaking is required to “cooperate fully, on a continuous basis and expeditiously throughout the Commission’s administrative procedure and must provide the Commission with all evidence that comes into its possession or is available to it relating to the suspected infringement; end its involvement in the suspected infringement no later than the time at which it submits evidence”; and not have taken steps to coerce other undertakings to participate in the infringement”.
[25] See: Leniency Notice, at pp 20-23. To qualify for leniency, an undertaking must supply the Commission with evidence of the suspected infringement that characterizes significant additional value with respect to the evidence previously in the Commission’s control and must conclude its participation in the suspected infringement no later than the time at which it surrenders the evidence.
[26] See: Allen, 2005. It is noted that the numbers of class actions against undertakings outside the US is increasing making the acceptance of the Leniency provisions more risky from the perspective of possible class actions against the undertaking.
[27] 792/79R Camera Care Ltd. v. Commission [1980] E.C.R. 119
[28] “[i]n cases of urgency due to the risk of serious and irreparable damage to competition, the Commission, acting on its own initiative may by decision, on the basis of a prima facie finding of infringement, order interim measures”.
[29] Case 792/79R Camera Care Ltd. v. Commission [1980] E.C.R. 119
[30] See: Easterbrook, 1984 and Gaughan, 2002.
[31] See: Easterbrook, 1984 and OECD “Competition on the Merits”, DAF/COMP(2005)27
[32] Hemphill, 2006
[33] Carlton, 2005
[34] Hicks, 1935 show that the monopolist is more seeking an “easy” position rather than to actively pursue a strategy of crushing their opposition.
[35] Easterbrook, 1984
[36] Verizon Commc'ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004). The reference to “business acumen” comes from United States v. Grinnell Corp., 384 U.S. 563, 571 (1966).
[37] Kocmut, 2005
[38] Schumpeter, 1942
[39] Trinko 540 U.S. at 414.
[40] See, M de la Mano, 2002
[41] AT&T/NCR (Case IV/M050) [1991] OJ C016/1, [30], the Commission responded: “It is not excluded that potential advantages flowing from synergies may create or strengthen a dominant position”.
[42] L Colley ‘From “Defence” to “Attack”? Quantifying Efficiency Arguments in Mergers (2004) 25 ECLR 342, 343.
[43] See: Kirkwood, 2005.
[44] As noted by Professor Carlton in Barnett (2006): “The Gales of Creative Destruction: The Need for Clear and Objective Standards for Enforcing Section 2 of the Sherman Act”

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