European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels

1. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels A PRIMER ON ANTI-TRUST POLICY IN THE EUROPEAN UNION The views and opinions expressed herein are purely personal and do not reflect the position of the European Commission. UCL – Louvain-la-Neuve17th February 2007

2. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels • DEFINING ANTI-TRUST • ° Historically referred to laws and enforcement against flagrant anti-competitive activities of Trusts. • ° Policy of maintaining competition to benefit of economic health. • ° Anti-trust is a portmanteau term for the composite of laws, case law, policy and administrative procedures to maintain competition: • Not just trusts but all private, public undertakings involved in economic activity.

3. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels PLAN OF THE PRESENTATION • LEGAL BASIS OF EU POLICY ° Treaty Provisions ° Case Law Principles ° Secondary Legislation ° Merger Control • Substantive Tests • Enforcers • Enforcement by the Commission and Judicial Review • Specifically: anti-cartel enforcement • Policy evaluation

4. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels TREATY PROVISIONS Article 81 (ex article 85): prohibits agreements between undertakings that affect intra-EU trade and restrict, prevent or distort competition within the Common Market. Article 82 (ex article 86): prohibits unilateral conduct of a dominant (or jointly dominant) undertaking(s) that affects intra-EU trade and amounts to an abuse, exploitative or exclusionary, of the dominant position in the Common Market or a substantial part of it. Article 86 (ex article 90): outlines the competition rules applying to statutory monopolies or undertakings enjoying special or exclusive rights granted by Member States. Articles 87-88: provide the rules for state aid which reflect the objective of competition free from distortions Article 308 (ex article 235): provides a legal base for a European control of concentrations by permitting the Council to adopt any objective of Community action for which the Treaty has not provided the necessary powers.

5. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels PRINCIPLES FROM CASE LAW The principle of direct effect of Treaty provisions and its twin principle of supremacy of EC law plays an important role in giving individuals and national courts a role in the enforcement of Community competition law. One of the main elements to justify the principle of supremacy over the national legal order has been to ensure the effective enforcement of community law. This means:- That articles 81 and 82 are directly applicable by national courts before whom undertakings may attack a restrictive agreement or abusive conduct. - Community competition rules apply side by side with national competition rules and in case of conflict have primacy over national rules. - While parallel actions under Community law by the Commission and under national law by a national competition authority are possible, the parallel application of the national action cannot prejudice the effectiveness of Community application.

6. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels SECONDARY LEGISLATION Previously provided by regulation 17/62, and current regulation 1/2003, both are based on article 83 of the Treaty. The Commission is empowered under regulation 1/2003 to enforce articles 81 and 82 - by having the power to investigate; - obtain market sensitive information from undertakings; - launch “dawn” raids”; - issue a statement of objections; - issue cease and desist orders; - prohibit restrictive agreements; - impose fines and periodic payments; - have exclusive power to issue EU-wide positive decisions on restrictive agreements.

7. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels In enforcing articles 81 and 82, the Commission: - assisted by the Advisory Committee of Member States at important stages of the administrative procedure; - relies on national authorities in organising inspections of undertakings - makes available access to its file to defenders and involved third parties in its case - makes arrangements for a hearing of parties to statement of objections - must respect a limitation period – 5 years for substantive infringements and 3 years for procedural infringements. - must respect “legitimate expectations” - must motivate its decisions.

8. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels EUROPEAN COMMUNITY MERGER REGULATIONS (ECMR) The Treaty does not foresee a specific article relating to the control of mergers and acquisitions. Secondary legislation based on article 83 and 308 entered into force in 1989 and was updated in 2004 by regulation 139/2004. Merger control in the EU is characterised by exclusive Commission competence for mergers of Community dimension. The ECMR foresee a system of two-way referrals. If the effects of a merger of Community dimension are limited to one Member State, it may be referred to that Member State. Referral from the Commission to MS – after initial examination by the Commission. Referral from MS to Commission – pre-notification stage.

9. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels SUBSTANTIVE TESTS • SUBSTANTIVE TESTS: • 1. RESTRICTIVE AGREEMENTS: • “appreciable restriction by object or effect of competition affecting intra-EU trade, and which does not satisfy the cumulative conditions of article 81.3” • ABUSE OF A DOMINANT POSITION: • “unilateral conduct by a dominant undertaking that results in exploitative or exclusionary abuse (harmful to consumers)” • ANTI-COMPETITIVE MERGERS: • “a concentration which would significantly impede effective competition, in particular as a result of the creation or strengthening of a dominant position, shall be declared incompatible”

10. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels ENFORCERS ° THE COMMISSION ° NATIONAL COMPETITION AUTHORITIES ° NATIONAL COURTS

11. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels ENFORCEMENT THROUGH COMMISSION DECISIONS The Commission enforces through the following decisions addressed to undertakings, not to individual persons: - Prohibition decisions addressed to cartel members imposing fines or prohibiting agreements (eg joint ventures) - Periodic penalty decisions on undertakings that fail to provide information, refuse documents, obstruct enquiries - Cease and desist orders against unilateral conduct with or without fines - Decisions ordering mandatory access, supply, licensing decisions requiring structural or behavioural remedies with or without fines - Non-infringement decisions making binding commitments offered by undertaking(s) Final decisions are adopted by the College of Commissioners by majority.Intermediate decisions are delegated to the Commissioner for Competition.

12. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels CONTROL OF CONCENTRATIONS The Commission enforces control of concentrations under the rules of merger control by: - Requiring ex-ante notification if need be through periodic penalties or fines for failure to notify - Authorisation decisions for non-opposed mergers - Authorisation decisions for cases of concentrations where transaction is modified to meet competition concerns - Decision prohibiting a concentration or requiring an implemented concentration to be reversed.

13. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels JUDICIAL REVIEW Commission decisions are subject to review by the European Court of Justice (ECJ). In practice competition cases are reviewed by the Court of First Instance (CFI) (which is attached to the ECJ), subject to appeal on a point of law to the ECJ. The Commission’s application and enforcement of the competition rules can be subject to judicial review in several ways: - in regard to fines and periodic penalty payments the court has “unlimited” jurisdiction under article 224 (ex 172) of the Treaty. The Court substitutes its own assessment for that of the Commission. - The Court can annul a Commission decision under article 230 (ex 173) on the grounds of (a) infringement of an essential procedural requirement, (b) lack of competence, (c) infringement of any rule of law in applying the Treaty (d) misuse of power.- The Court can rule under article 231 (ex 175) on the legality of the Commission’s failure to act.

14. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels ANTI-CARTEL ENFORCEMENT • Assessment:° Clear violation of Article 81 ° Secret agreement/concerted practice between competitors to distort, restrict or eliminate competition. Detection:° Problematic • Economic Approach I – develop collusion markers • Economic Approach II – offer incentives to defect and report • Investigative Approach II – follow-up of complaints, informants, whistleblowers. • Sanctions: • Collective infringement, but individual fines according to contribution to the gravity and severity. • No economic impact quantification.

15. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels

16. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels

17. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels POLICY EVALUATION POSSIBLE CRITERIA: ° DESIRABILITY AND FEASIBILITY OF POLICY OBJECTIVES ° IMPLEMENTATION ° ENFORCEMENT RECORD COMPARED TO BENCHMARKS ° TYPE I AND TYPE II ERRORS ° POLICY ACHIEVEMENTS AND ECONOMIC IMPACT

18. European Commission – Directorate General for Competition Dr. K. Mehta, Director, Cartels AT&T HISTORY