Competition Law Concepts + Cases | Quizlet

Metro v Commission Market Analysis

Structure of the Market:

- The market relevant here is the market of colored televisions in Germany

- SABA is NOT a dominant undertaking as it has a small share of the market (5-10%) and its products are interchangeable with that of other similar competitors

Conduct:

- Metro argues that Selective distribution systems are anti-competitive → refusal to supply

- Commission replies that selective distribution is part of competition IF resellers are chosen based on objective criteria and is not discriminatory

Performance:

- Contribution to innovation/economic progress: Yes improvements in distribution and production as it increases the availability of products overall ↑ for economic progress

- Consumer Benefits: yes, benefits consumers because of the increase in supply

- Does it eliminate Competition or push out competitors? No, because it does not push competitors out but merely raises barriers to entry, we can't say that the conduct has anti-competitive effects on the market

Metro v. Commission: Facts+ Application

Metro, a self-service wholesaler, claimed that SABA's selective distribution system unjustly excluded it from the market.

The system imposed restrictive conditions, such as prohibitions on direct sales to institutional consumers and turnover requirements for wholesalers, which Metro argued were incompatible with its business model.

The Commission, however, considered that SABA's system was open to self-service wholesalers provided they met objective criteria, and thus, the restrictions were justified under Article 85(3).

The Court evaluated whether the conditions imposed by SABA were indispensable to achieving the goals of improved distribution and technical progress. It found that while selective distribution can restrict intra-brand competition, it may still foster inter-brand competition and protect product quality, which could justify an exemption.

The Court emphasized that restrictions on competition must be proportionate and necessary to achieve these objectives

GlaxoSmithKline v Commission: Application and Facts:

GSK implemented a dual pricing scheme for pharmaceuticals: lower prices for drugs sold domestically within Spain and higher prices for those intended for export to other EU Member States.

The Commission found this agreement restrictive as it aimed to curtail parallel trade, thereby limiting intra-EU competition​. GSK argued that its agreement did not harm final consumers, as the price regulation mechanisms in place within Member States meant that parallel trade did not necessarily benefit consumers through lower prices.

The Court of First Instance supported GSK's position to some extent, stating that the legal and economic context did not automatically imply an anti-competitive effect and that the Commission had failed to sufficiently consider whether the agreement actually restricted competition to the detriment of consumers​.

However, the Court of Justice overruled parts of this reasoning, emphasizing that Article 81(1) EC protects the competitive structure of the market, not just consumer welfare. Therefore, agreements that aim to limit parallel trade can be inherently restrictive of competition, even without direct consumer harm​.

GlaxoSmithKline v Commission: Market Analysis:

Market Analysis: analyze whether the agreement, which is affecting trade, is doing so with the object or effect of distorting competition

Market Structure: → analysis not carried out of the dominance, cuz that's not rly the point its about article 101

- Geographic Market: national market - spanish market + national markets of the EU outside of spain

- Product market:

Regulated market: consisting of the medicines intended to be resold and reimbursed in Spain

Free market: consisting of the medicines intended to be resold and reimbursed in any other Member State

Conduct: Dual pricing scheme, lower domestically and higher outside of Spain

Performance: → This examination entails a comparison of the competitive situation resulting from the agreement and the situation that would exist in its absence

→ competitive effects go PAST consumer welfare so its important to look at the fabric of the market itself and the effects of the agreement on aspects of that.

Litmus Test

Preliminary Observations: GlaxoSmithKline v Commission

1. The Burden of Proof lies with the undertaking seeking the Exemption

2. The Commission must examine the factual + economic context

Test: Metro v Commission

To establish whether the agreement RESTRICTS competition, we look at:

1. Innovation → whether the agreement contributes to the distribution, manufacturing or value of the product

2. Consumer Welfare → whether it allows consumers to benefit fairly

3. Indispensability → weather it imposes unnecessary restrictions

4. Elimination of Competition → Whether it eliminates competition OR pushes competitors out

Groupement des cartes bancaires (CB) v European Commission:

The European Commission found that CB's measures restricted competition by object because they penalized new entrants, limited card issuance, and protected established members from competitive pressure. The General Court upheld this view, relying heavily on the internal objectives behind CB's rules and the intentions of its main members.

However, the Court of Justice (CJEU) overturned this decision, stating that:

The General Court failed to apply the correct legal standard for determining a restriction "by object."

Not all practices that restrict competition automatically qualify as restrictions by object. For this label to apply, the measures must reveal a sufficient degree of harm to competition, which was not adequately demonstrated in this case.

The General Court improperly equated CB's measures with cases like BIDS, where the anti-competitive harm was clear-cut (e.g., agreements to reduce market capacity).

The Court criticized the lack of analysis on how CB's pricing mechanisms were inherently harmful, beyond simply disadvantageing new market players​.

How to establish a restricition by Object?

The Court criticized the General Court for not properly applying this litmus test. It stressed that determining a restriction "by object" requires:

1. An assessment of the content of the agreement,

2. Its objectives, and

3. The legal and economic context in which it operates​.

Simply put, the Court emphasized that the analysis must go beyond the mere wording of the agreement and consider the real-world impact of the measures.

How to Identify Dominance:

Dominant Position: The first step is to check if a company has significant control over the market (dominance). This means it can act without worrying too much about competitors, customers, or consumers.

Market Share: A company with over 40% market share might be dominant, but context matters.

Competition Threat: Even if competitors exist, if they can't challenge the dominant company effectively, dominance still applies.

Customer Power: Strong customers can sometimes counteract a company's dominance if they can easily switch suppliers or influence the market.

Anticompetitive Foreclosure:

What It Means: This happens when a dominant company blocks competitors in a way that harms consumers (e.g., higher prices, less choice, or lower quality).

How It's Identified: The Commission looks at:

1. The company's strength in the market.

2. Market conditions like barriers to entry.

3. The status of competitors (even small ones can matter).

4. The behavior of customers and suppliers.

5. How widespread and long-lasting the harmful conduct is.

6. Evidence showing the company's intent to harm competition.

Price-Based Exclusionary Conduct:

Focus on Pricing: The Commission checks if a dominant company is using unfair pricing to push out competitors, especially if those competitors are just as efficient.

Below-Cost Pricing: If the company is selling products below cost to harm competitors, that's a red flag.

Cost Measures: The Commission uses cost data to judge if competitors could survive under the same pricing

Justifications for Conduct:

When It's Allowed: A dominant company can defend its actions by showing:

1. the conduct was objectively necessary (e.g., for health or safety reasons).

2. The conduct created efficiencies (like better products or lower costs) that benefit consumers more than they harm competition.

3. Conditions for Justification: The company must prove:

The benefits are real and significant.

4. Subsidiarity → There's no less harmful way to achieve these benefits.

5. Proportionality → The benefits outweigh the negative effects on competition.

Exclusive Purchasing:

When a dominant company requires customers to buy only from them, limiting competition. This can also happen indirectly through stocking requirements. While customers might get compensated for agreeing to this, it can harm the market if competitors struggle to enter or grow.

Conditional Rebates:

These are discounts given to customers for meeting certain buying targets. Though common and sometimes beneficial, if a dominant company uses them, it can unfairly keep competitors out. This happens if customers fear losing big discounts by buying from competitors, making it hard for even efficient rivals to compete.

Tying:

When customers must buy a secondary product along with the main one. This can happen through contracts or technical setups. It limits choice if customers wouldn't normally buy both products together.

Bundling:

Selling products together at a discount, which can be fine unless it harms competitors who can't match the bundle. It's worse if the bundle is hard to copy or if one product dominates its market.

Multi-Product Rebates:

Discounts on bundles can hurt competitors if they can't offer all the products. The Commission checks if competitors can still profit when competing against such bundles

Predation: (types of)

The Commission steps in when a powerful company (dominant undertaking) intentionally takes short-term losses (called "sacrifice") to push out competitors and strengthen its control over the market, which can harm consumers.

1. Sacrifice: A company is making a sacrifice if it sells products at very low prices, causing losses that could have been avoided. If prices are below the cost of producing the goods (called AAC), this is clear evidence of sacrifice → Sacrifice can also involve other actions, like expanding production beyond profitable levels. The Commission may also look at company documents for proof of a plan to hurt competitors.

2.Anti-competitive Foreclosure: The Commission checks if the company's actions could prevent equally efficient competitors from competing effectively. The company might manipulate the market to scare off new competitors or weaken existing ones, even without forcing them out completely. Consumers are harmed if the company can later raise prices or reduce options because competitors have been weakened

3. Efficiencies: Predatory actions rarely create benefits like cost savings. However, companies can argue that their low prices help them grow or improve efficiency, and the Commission will consider this if certain conditions are met.

4. Refusal to Supply & Margin Squeeze: Normally, companies can choose who they do business with. But if a dominant company refuses to supply an important product/service, this can raise competition concerns.

False Positive (Type I Error)

Definition: A false positive occurs when a pro-competitive or neutral business practice is incorrectly classified as anti-competitive.

Example: A new pricing strategy that actually benefits consumers is mistakenly seen as price-fixing and prohibited.

Impact: False positives discourage innovation and efficiency because companies fear legal action even when their practices are legal and beneficial.

False Negative (Type II Error):

Definition: A false negative happens when an anti-competitive practice is mistakenly considered legal or harmless.

Example: A dominant platform engages in self-preferencing (promoting its own products over competitors) but authorities fail to act.

Impact: False negatives allow monopolistic behavior, harming competition and consumers by reducing choices and increasing prices.

Pierre Fabre Case IRAC:

Issue: Did Pierre Fabre's absolute ban on online sales in its selective distribution agreements violate Article 101(1) TFEU (which prohibits anti-competitive agreements)?

Rule: Article 101(1) TFEU prohibits agreements that restrict competition → a restriction is considered to be anti-competitive "by object" if it eliminates an entire distribution channel without objective justification

Application:

Pierre Fabre, a manufacturer of dermo-cosmetic products, prohibited online sales by its authorized distributors

The company argued that the restriction was justified to maintain brand image and ensure consumer safety through in-person advice

The Court of Justice of the European Union (CJEU) found that the restriction prevented effective competition in the online market and was not justified

→ They first looked at whether it was a restriction by object by looking at the content of the provision, the aim and the economic and legal context

Contents of the Provision: products must be sold physically with a licensed pharmacist present - de facto prohibiting online sale (selective distribution system), they do so through an objective criteria (offline vs online) but..

Aim: maintaining a prestigious image is NOT a legitimate aim

→ Yes restriction by OBJECT

Possible exemption? The Vertical Block Exemption Regulation amendments have softened Online Sales Restrictions so that selective marketplace bans (for ex: prohibiting third-party platforms like Amazon) are now allowed if they do not completely hinder online sales BUT here Pierre Fabre wanted to ban ALL internet sales de facto → Direct bans on using the internet as a sales channel remain a hardcore restriction

Coty Germany GmbH v Parfümerie Akzente GmbH:

Issue: Can a luxury goods manufacturer (Coty) prohibit its authorized distributors from selling products via third-party online marketplaces (like Amazon or eBay) under EU competition law?

Rule:

Selective distribution systems for luxury goods are allowed under Article 101(3) TFEU if they protect brand image and maintain quality

The Pierre Fabre case (C-439/09) ruled that a total online ban is unlawful, but restrictions may be justified in specific cases

Application:

Coty, a luxury cosmetics company, banned its authorized distributors from selling on third-party marketplaces to protect its brand image → A distributor (Parfümerie Akzente) challenged this restriction as anti-competitive

The CJEU ruled that marketplace bans are permissible in selective distribution systems if they are proportionate and necessary to protect brand prestige, because luxury goods depend on their "aura of luxury" to make sales and impinge upon the actual quality of the goods, selective distribution is allowed as long as there is a → " basis of objective criteria of a qualitative nature that are laid down uniformly for all potential resellers and applied in a non-discriminatory fashion and that the criteria laid down do not go beyond what is necessary."

→ in general selective distribution systems ALWAYS affect competition

ISU Case IRAC:

Issue: Did the International Skating Union (ISU) violate EU competition law by restricting athletes from participating in third-party events?

Rule:

Article 101 TFEU prohibits agreements that restrict competition

Article 102 TFEU prohibits abuse of dominant position, which includes unfair restrictions on competitors or market access.

Application:

ISU, the governing body for figure skating and speed skating, threatened lifetime bans on athletes who competed in non-ISU-sanctioned events

The European Commission ruled that ISU's eligibility rules restricted competition by preventing rival event organizers from entering the market

The CJEU upheld this view, stating that ISU's rules unfairly restricted athletes' freedom and protected ISU's monopoly.

Conclusion:

The ISU's exclusionary rules were anti-competitive and violated EU competition law

This case reinforced that sports governing bodies cannot abuse their dominant position to block competitors.

Booking.com Case IRAC:

Issue: Are narrow price parity clauses (which prevent hotels from offering cheaper prices on their own websites than on Booking.com) anti-competitive under EU law?\

Rule:

Wide parity clauses (restricting prices across all platforms) are anti-competitive and banned under EU law

Narrow parity clauses (restricting only a hotel's own website) are debated in EU competition law

Application:

Booking.com required hotels to offer the same or better prices on its platform compared to their own websites

German courts ruled that even narrow parity clauses reduce competition by limiting hotels' ability to set independent prices

The case was referred to the CJEU for a final ruling

Conclusion:

The final judgment is pending, but the case could set a precedent on whether narrow price parity clauses are anti-competitive

If ruled unlawful, online travel agencies like Booking.com may have to allow hotels to offer lower prices on their own sites

The Value Game

The Value Game in competition law refers to the strategic interaction between different market players—such as producers, distributors, and consumers—who work together to create and distribute value while also competing for a larger share of that value. It highlights how businesses structure their relationships to maximize their own benefits while staying within legal competition boundaries.

- What about the digital market? In traditional markets, value was shared between producers, distributors, and consumers through physical distribution channels. In digital markets, platforms, algorithms, and data control much of the value exchange, leading to new competition concerns.

Vertical Online Distribution:

Vertical Agreements generally make sense because producers and distributors need each other - In verticals, the parties are selling complementary (as opposed to substitute) goods

The Value Game: Maybe they are not always equal, sometimes the value for the importer/producer is higher or lower than the value for the distributor a.k.a. Retailer → But cooperation will add value for both

Offline: adding value by providing an attractive purchasing environment (pre-sales service advice) - Reduced price competition as seen in Metro I → Greater reliance on interbrand competition and less on intrabrand competition

Online: Online does a couple of things:

- Increased market transparency

- Increased consumer knowledge (and emancipation)

- Price arbitration (at the retail level)

- Reduced Barriers to entry for producers that are not as limited by distributors so it has CHANGED the value game

→ The importer/producer is still incentivised to compete on quality and added value - The retailer is incentivised to compete on price/output

Ex: foreclosure is a barrier to entry because they decide only some retailers can get the products → if the prices are lower on the downstream market they will also be lower on the upstream market so to avoid that we include exclusivity

Horizontals or profit maximization and the creation of market power:

101 and horizontal cooperation the creation of market power

In horizontals, the parties sell substitute goods → Parties will try to create market power to exploit the value-game is symmetrical for all parties involved in the creation of market power:

- Creating market power cartels

- Maintaining market power

- Foreclosing competitors

Digital Cartels: Cartels require communication (is everyone actually implementing the price increase?)

What if we use AI to set prices? It is already happening - for example, airlines use profit maximization software (software that detects how eager we are to buy an airline tickets( specific tickets will be more popular at certain times- aka i go on an airline website to look for tickets for a specific time in a specific place a lot of times - that means that i have a higher willingness to pay for that and the next time i go on the website the prices will be higher) → The cartels use that but what if one airline raises their price by less - in the internet i can immediately find out → this leads to a price war where both companies keep lowering their prices)

Microsft Case Market Definition:

Market Definition: 2 distinct markets, the first market constituted by that product or service and on which the undertaking refusing to supply holds a dominant position and a neighbouring market on which the product or service is used in the manufacture of another product or for the supply of another service →

Identify two distinct levels of production: an upstream market (where the essential input is produced) and a downstream market (where the final product or service is provided)

Microsoft's interoperability information (upstream) was indispensable for competing operating systems (downstream)

Work Group server operating systems market =/ from Client PC operating systems market

Interoperability:

the capacity for two software products to exchange information and to use that information mutually in order to allow each of those software products to function in all the ways envisaged - necessary degree of interoperability for systems to work together (ecosystem prevention) → The degree of interoperability thus required by the Commission enables competing operating systems to interoperate with the dominant undertaking's domain architecture on an equal footing in order to be able to compete viably with the latter's operating systems

Indispensability:

the interoperable information must be regarded as being indispensable to qualify for protection, as in to not have it would completely prevent a competitor from accessing that market

Special Responsibility:

dominant undertakings have a special responsibility irrespective of the causes of that position, not to allow its conduct to impair genuine undistorted competition on the common market.

Step by step Market Definition Anaylsis for Market Definition (abuse of domnance in the digital market)

STEP 1:Define the Relevant Market (Structure)

- Identify the Competitive Landscape: What is the product or service in question? + Who are the competitors? (Look at direct and indirect competition).

- Define the Geographic Market --> Where does the company operate? Consider: National (limited to one country), EU-wide (operates in multiple EU member states), Worldwide (global reach), Worldwide minus China (important for digital markets, where China operates differently).

- Define the Product Market (Substitutability Test): Are the products interchangeable? Use the SSNIP Test (Small but Significant Non-transitory Increase in Price): If the company increases prices by 5-10%, do consumers switch to alternatives?

If yes → same market

If no → separate markets

STEP 2: Challenges in Defining Digital Markets: One-Sided vs Multi-Sided Market:

- One-sided market: Traditional markets (e.g., BMW sells cars to consumers).

- Multi-sided market: Platforms that serve multiple user groups (e.g., Google serves both users and advertisers).

📌 Key Question: Do both sides depend on each other?

- US Supreme Court (Ohio v AmEx): Market definition must consider both sides if they are mutually interdependent.

- ECJ (Cartes Bancaires): Both sides must be considered if they are essential to the business model

STEP 3: Is the Traditional Market Definition Even Relevant?

- Zero-Price Markets: Many digital services are free for users, making SSNIP tests difficult.

- Data-Driven Markets: The competition may not be about price but about data, attention, or network effects.

📌 Example: What is Google's market?

❓ Is it a search market (competing with Bing)?

❓ Is it an ecosystem market (Google Search, Chrome, YouTube, Android all combined)?

❓ Is it a market for user attention (competing with social media)?

Market Power Answer Structure:

Step 1: Defining Dominance: A company is dominant if it can set prices and policies independently, without significant competitive pressure from rivals or consumers.

- Akzo Chemie Case (Presumption of Dominance):

50%+ market share for 3+ years → Presumption of dominance (burden of proof shifts to the company).

40-50% → Further analysis required.

Under 40% → Unlikely dominant but still possible with additional factors.

- Example: United Brands (Banana Case): Chiquita controlled 64% of the banana market in the EU → Found dominant.

Step 2: Market Share Analysis: Is It Enough?

Traditional markets: Market share is the main indicator.

Digital markets: Market share alone is not enough (because of zero-price markets, rapid innovation, network effects).

Google Search Case: Market Share by volume: Google had 90%+ of all search queries → Dominant position confirmed.

7 Factors that may indicater market power (digitial competutors)

1. Size of Competitors → Are there strong rivals? If no, dominance is more likely - ex: Google has no serious rival in search.

2. Control Over Essential Inputs → If a company controls a key resource needed for market entry, it strengthens dominance - ex:Google forces Android manufacturers to pre-install its apps.

3. Barriers to Entry → high barriers make it harder for new entrants to challenge dominance - ex: Tech investment, IP, regulation.

4. Switching Costs → If users face difficulties switching to a competitor, dominance is reinforced - ex: Apple locks users into its ecosystem.

5. Network Effects → More users attract more users → Creates a dominant cycle - ex: Dating apps: A bigger user base = more attractive platform.

6. Access to Data→ More data = better services + stronger market power - ex: Facebook & Google use vast user data for targeted ads.

7. Lock-In Effects → Users become "stuck" in the ecosystem due to service integration- ex: Google ties services (Gmail, Drive, YouTube, etc.).

ypes of Abusive Conduct (Exploitative vs. Exclusionary):

Exploitative Abuse: A dominant company unfairly exploits consumers or suppliers - Excessive pricing, unfair contract term → United Brands (excessive banana prices).

Exclusionary Abuse: A dominant firm excludes competitors from the market - Predatory pricing, refusal to supply, tying & bundling, self-preferencing → Google Shopping (self-preferencing search results).

5 Key Forms of Abusive Conduct:

1. Predatory Pricing: Selling below cost to drive out competitors, then raising prices later.

Case Law:

Akzo Chemie: Prices below average variable cost = presumed predatory.

Post Danmark: Prices below average total cost may also be abusive if anti-competitive intent is proven.

2. Refusal to Supply & Essential Facilities: A dominant firm refuses access to an essential input that competitors need.

Case Law:

Bronner: Refusal is abusive only if access is indispensable.

Microsoft (2007): Microsoft withheld interoperability information from competitors.

3. Tying & Bundling: Forcing customers to buy one product with another (even if they don't need it)

Case Law:

Microsoft (2004): Tying Windows Media Player to Windows OS harmed competition.

Google Android (2018): Google forced phone manufacturers to pre-install Google Search & Chrome.

4. Self-Preferencing: A platform favors its own services over competitors.

Case Law: Google Shopping (2017): Google ranked its shopping service higher in search results while demoting rivals.

5. Exclusivity Agreements: Forcing customers/suppliers to buy only from the dominant firm.

Case Law: Intel (2017): Intel gave loyalty rebates to retailers who only bought Intel chips.