This chapter discusses two types of contracts rendered void by statute: wagering contracts and agreements prohibited by competition law (EU competition rules and UK competition rules).
Chapter
10. Contracts Rendered Void by Statute
M P Furmston
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20. The UK merger control regime and the treatment of joint ventures
This chapter discusses the application of competition law to mergers, focusing on the UK system. Where a relevant merger situation is created, the Competition and Markets Authority (CMA) has the power to review the merger. Unlike in the EU, notification is not compulsory. The CMA may clear the merger, clear it subject to conditions, or refer it for further consideration to an independent Inquiry Group made up of members of the CMA Panel. The Inquiry Group may clear the merger, clear it subject to conditions, or block it. The test of a merger’s acceptance is that of whether it substantially lessens competition. UK merger decisions may be appealed to the Competition Appeals Tribunal.
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21. State intervention: public undertakings and state aid
Competition law in the EU also exerts some degree of control over the actions of the Member States when they intervene in the market in ways which could harm the competitive process. The Member States commit to complying with these and other obligations the moment they agree to be bound by the acquis unionaire, which is a prerequisite for EU membership. There are two main provisions in this regard: Articles 106 and 107 TFEU. This chapter covers the basic principles underlying the application of Articles 106 and 107 TFEU, and explores the interplay between the general prohibitions they contain and their multiple exceptions. Article 106 ensures that undertakings owned, established, or regulated by the State are not protected or advantaged vis-à-vis private competitors, while Article 107 TFEU contains a general prohibition of state aid.
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6. Procedure: penalties and leniency arrangements
This chapter explores the financial penalties imposed for breaches of competition law in the EU and the UK. Broadly speaking, enforcers have three kinds of ‘weapons’ in their arsenal to use against those who attack competition: remedies, imprisonment, and fines. The first of these weapons may be the most powerful, and includes conduct, structural, and third-party remedies. Incarceration — the second weapon — is a well-publicized feature of the US system, and has been an option in the UK in relation to hard-core cartel conduct since the entry into force of the Enterprise Act 2002 (EA). The argument in favour of the efficacy of fines, the third weapon, is a persuasive one: companies take part in anti-competitive conduct in order to boost profits; remove those profits and the incentive for illegal conduct vanishes.
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10. Block exemption regulations under Article 101 TFEU
This chapter focuses on block exemption regulations, which have become crucial in the application of the exception contained in Article 101(3) TFEU to agreements whose pro-competitive effects may outweigh any potential threats to competition. The current block exemptions represent an attempt to reconcile economic considerations and the needs of business. They are therefore less prescriptive than earlier versions, and tend to set a benchmark share of the relevant market within which they are applicable. The chapter fleshes out the details of the principal block exemptions presently in force, and provides a step-by-step guide to their application in the shape of a general flow chart. It covers legal basis and withdrawal, block exemptions for vertical agreements, and horizontal block exemptions.
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11. The Chapter I Prohibition
This chapter deals with Chapter I Prohibition, which is the UK domestic equivalent of Article 101 TFEU. It is to be applied and interpreted in a way that is consistent with the application of Article 101 TFEU, unless there is a ‘relevant difference’. There is no requirement for an effect on trade between Member States, but on trade within the UK. The prohibition has been applied to localized agreements. If Article 101 TFEU is applicable to any practice being examined under Chapter I Prohibition, it must be applied. Chapter I Prohibition may be applied in conjunction with EU law, but the result must not be inconsistent. A breach of Chapter I Prohibition may incur penalties, damages, and a requirement of conduct modification, and also renders void any offending agreement.
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13. The economics of monopoly abuse
This chapter considers the economics of monopoly abuse. A monopolist is a firm which is the sole supplier in a relevant market. Monopolists are able to determine the market price. This will be higher than the competitive price, with the quantity supplied being lower. This situation leads to a loss of welfare to society as a whole, and also a redistribution of income from some of the monopolist’s customers to the monopolist. The monopolist may also engage in wasteful strategic behaviour to protect its privileged position. In both the EU and UK regimes, competition enforcement is largely complaint driven. This forces the courts, and therefore economists as expert witnesses, to consider the (anti-)competitive impact of short-run activity that might be expected to have little in the way of long-run repercussions.
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9. Agreements in the EU: the ELEMENTS of Article 101 TFEU
This chapter considers the general principles of the application of Article 101 TFEU. Article 101 TFEU applies to joint, coordinated conduct understood in a broad sense to catch agreements, decisions by associations of undertakings, and concerted practices. The most important question is that of whether there is in the conduct a prevention, restriction, or distortion of competition within the meaning of Article 101(1) TFEU. Some forms of conduct, such as horizontal price fixing, are generally deemed to be anticompetitive by object; others, such as vertical distribution agreements, must be analysed in order to determine the competitive effects of the conduct. For the prohibition to apply, there must be an effect on trade between Member States. Article 101 TFEU has direct effect, and conduct prohibited is illegal without any decision to that effect being necessary.
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17. Unfair Competition Law
Justine Pila and Paul L.C. Torremans
This chapter focuses on EU law on unfair competition. Unfair competition law is concerned with fair play in commerce. It normally acts in tandem with its more powerful, but much more narrowly focused, counterpart competition law. Together they are generally regarded as necessary in order to steer competition along an orderly course. And they thereby contribute to promoting an efficient market system that serves the interests of all participants. While there is no single EU instrument that deals with unfair competition law as a whole, there is a significant level of EU legislative intervention in relation to comparative and misleading advertising and in relation to unfair business-to-consumer commercial practices; each of these are discussed in detail.
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17. UK market studies and market investigation references
This chapter discusses market studies and market investigations. Market studies and market investigations are tools available to the Competition and Markets Authority (CMA) in the event that a market failure is identified in a specific market. Market studies examine the causes of specific markets not working well for consumers, and make specific proposals for improvement. A market investigation reference is a feature of UK law by virtue of which a market ‘failing’ to operate competitively as a whole may be investigated by the CMA. The CMA has very wide powers to order changes to the way the market operates, or to accept undertakings to remedy defects. No penalties may be imposed for past behaviour, and no rights arise for third parties in relation to conduct found to be in need of change.
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18. The economics of merger control
This chapter deals with the key arguments that underpin the policy goals behind merger control which, in essence, relate to two factors: first, the creation or extension of monopoly power, including the raising of barriers to entry for potential competitors; and second, increasing the scope for collusion in a market which, post-merger, will be more oligopolistic and less competitive than was the market premerger. The first of these two factors is related to the control of dominant firm conduct; dominance itself is not condemned in either the EU or the UK. Nevertheless, in merger control there is a situation where the attainment or extension of dominance may be condemned or prevented.
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19. The EU merger control regime and the treatment of joint ventures
This chapter discusses the application of competition law to mergers, focusing on the EU and the EUMR. In the EU, where a merger (‘concentration’) meets the relevant thresholds, it falls within the exclusive competence of the European Commission to examine the merger. Undertakings contemplating such a merger are required compulsorily to notify the Commission. The test of a merger’s acceptance is that of whether it substantially impedes effective competition in the internal market, in particular, but not exclusively, by creating or strengthening a dominant position. Using the powers set out in the Merger Regulation the Commission may authorize, or block, the merger over a two-stage process. Tight time limits apply. Appeals against Commission decisions are to the General Court.
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22. Competition law and intellectual property
This chapter discusses the relationship between competition law and intellectual property rights. Competition law may limit the ability to exercise intellectual property rights. Article 101 TFEU and Chapter I Prohibition may apply to agreements to license intellectual property, as well as pay-for-delay settlements between a patent holder and potential competitors. Article 102 TFEU and Chapter II Prohibition may apply to the use of intellectual property rights by a dominant undertaking, particularly when the protected asset is essential to third parties. The existence of intellectual property rights does not automatically confer a dominant position — the product or service may still face competition.
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23. The common law and competition
This chapter considers the areas in which the operation of the common law impacts upon issues that are closely related to the public regulation of competition. Certain doctrines of common law may be applied to situations in which competition is being restrained, or to competitive conduct. Common law doctrines in antitrust are becoming less important following the growth of modern competition law. The restraint of trade doctrine remains vibrant, and is often relied on in professional disputes. Restraint of trade is a doctrine of contract law under which certain contracts are unenforceable if they unreasonably restrain the activity of a party after the termination of the main contract. A number of rarely used torts may also be relevant to certain competitive situations.
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3. The relationship between European Union and United Kingdom competition law
This chapter focuses on the current interaction between European Union and UK law. EU law is currently a source of UK law. However, the relationship between the two regimes is expected to change in the future as a consequence of the UK’s decision to withdraw from the EU. The European Union (Withdrawal) Act 2018 stipulates that the European Communities Act 1972 will be ‘repealed on exit day’, which would be 29 March 2019 provided that the two-year period since Article 50 TEU was triggered is not extended. Once the European Communities Act 1972 has been repealed, EU law will cease to be a source of UK law. No major immediate changes to the national competition legislation are to be expected, but future reforms could distance the UK system from the EU rules.
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4. International issues and the globalization of competition law
This chapter draws a distinction between public, institutional enforcement of competition law, which may raise issues of public international law, and private actions before national courts. The coexistence of competition law regimes around the world means that companies that trade internationally may find themselves subject to the law of a ‘foreign’ state. While in the US the effects doctrine is relied on to assert jurisdiction, in the EU there has been no explicit adoption of the effects doctrine. Instead, the EU relies upon an ‘implementation’ doctrine. Under principles of comity a state may recognize the interests of another state when applying its competition law. Multilateral initiatives have been taken to try to resolve difficulties, but there is at present no single global agreement on competition law.
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1. Introduction to competition law
This chapter presents an introduction to competition law covering the development of competition law, the experience of the United States, economics and competition law, and competition law resources. Competition law is the legislation that ensures competition is protected from unrestrained market power in free market economies. The primary purpose of competition law is to remedy some of the situations in which the free market system — in which supply and demand, and not government intervention, determine the allocation of resources — breaks down. The point was well made in the House of Lords debate during the passage of the Competition Act 1998 (CA) that ‘competition law provides the framework for competitive activity. It protects the process of competition’.
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12. The cartel offence
This chapter discusses cartel offence, contained in Part 6 of the Enterprise Act 2002 (EA), and in particular section 188, which made it a criminal offence to engage in cartel activity implemented in the UK. It applies to horizontal price fixing, market sharing, bid rigging, and production limitation agreements. Individuals can be prosecuted and may face imprisonment and/or individual fines. In its original formulation, the cartel offence had limited success. In 2013, the Enterprise and Regulatory Reform Act 2013 (ERRA) introduced three important modifications to section 188 of the EA: it removed the requirement that the conduct be ‘dishonest’; it added a section 188A with a list of exclusions, or circumstances under which engaging in a cartel would not be ‘criminal’ and it included, in new section 188B, possible defences.
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16. An analysis of the principal abusive practices
This chapter focuses on the most important pricing and non-pricing practices, which together constitute the larger part of the anti-competitive and exploitative abuses of dominant firms. The types of conduct considered abusive of market power are similar under most competition regimes, and include both pricing and non-pricing practices. The ‘form-based’ analysis of abusive practices is progressively shifting to an ‘effects-based approach’. In the EU and the UK, both exclusionary and exploitative abuses may fall foul of the relevant competition law provisions. Exclusionary practices are usually considered abusive when they are likely to lead to ‘anticompetitive foreclosure’. The EU and UK law and practice in relation to all these potential abuses is and will remain aligned until the UK has formally left the EU.
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7. Procedure: complaints and third-party rights
This chapter focuses on the rights of those wishing to take action against an infringement of competition law, potentially with a view to being compensated for the harm they may have suffered. One option is going to the relevant competition authority and filing a complaint to trigger the public enforcement route, saving the cost of litigation. The other option is to seek competition law enforcement in private claims before the courts. Claimants may seek damages or other remedies, including injunctions. In the UK, damages may be sought before the Competition Appeals Tribunal (CAT) and before the national courts. Collective claims can only be brought before the CAT. The number of private actions is increasing, and efforts have been made both by the EU and UK legislators to encourage more private litigation.
