Competition policy and the legal instruments through which it is implemented (Competition Law) are very convoluted in practice. Equinox is there to assist you in handling these complexities, in initiating action for the infringement of your rights at the local or the EU level and in limiting your regulatory exposure and regulatory burden.

Competition law is nothing new. It dates back at least to classical times when Roman lex mercatoria prohibited restrictive trade. Written evidence from 1414 also documents the examination by English courts of the restrictive trade agreement in Dyer’s Case where the court denied the collection of a bond for John Dyer’s breach of his agreement not to ‘use his art of dyer’s craft within the town … for half a year’.

Fast-forward to 1624 when the Statute of Monopolies was adopted in England and then to post-1789 revolution France when the courts declared as unconstitutional, hostile to liberty and void any agreements of members of the same trade fixing price of an industry or its labour, and one can also start making out a vivid evolution of sorts taking place.

Despite its long history, however, what we can effectively refer to as modern competition law was first put in action just over 120 years ago (1889) in Canada and addressed restrictions of trade at the national level. A year later, one of the most famous legal statutes on competition law, the Sherman Act, was enacted in the United States.

In the EU, competition law was initially very much a product of pressure on Germany from the allied forces culminating in the enactment of the 1958 German competition law. On a regional level, (in particular in 1951) the six founding members (France, Italy, Germany and the BeNeLux countries) of the European Coal and Steel Community (ECSC) were trying to prevent Germany from re-establishing its dominance in the production of coal and steel, and competition law was included in list of issues that signing countries attempted to address with conclusion of ECSC Treaty.

Article 65 of the Treaty banned cartels, whereas Article 66 included a provision on concentrations (i.e. mergers), and another on the abuse of a dominant position by firms. The building blocks of today’s EU Competition Policy were thus laid. Today, after subsequent regulatory developments and after a plethora of Guidelines and case law judgements for the interpretation of what prima facie would misleadingly seem simple legal provisions, the Competition Policy Framework (including State Aid) within the EU is embodied in articles 101 to 109 of the Treaty on the Functioning of the European Union(TFEU).

Despite the influence of US competition policy on its EU counterpart, today stark differences remain in the application of competition policy ‘across the pond’. Moreover, due to the fragmentation in policies and enforcement systems on an international level, the area of supranational competition policy becomes even more complex as it is dependent on an intricate web of bilateral and plurilateral agreements on co-operation and enforcement.

EU Competition Policy, today, remains a mystery to most companies, corporations and governments who have never invested in the expertise to be able to gear up to it. Although it is normal for such commercial enterprises and statal entities to think that they are immune to competition policy scrutinies and proceedings, it might be worth noting that this view was also adopted by those entities that have been found guilty of abuses in terms of the competition policy framework and for which they have suffered hefty fines as well as negative press coverage. Antitrust authorities have exposed and penalised a multitude of cartels in the past decade. Nearly every industry is affected, with a multitude of renowned companies being involved. Some of the fines meted out by the European Commission are listed by industry below (all values are in Euros).

  • Air freight: 799 million (2010)
  • Animal feed: 176 million (2010)
  • Bathroom equipment: 622 million (2010)
  • Beer: 274 million (2007)
  • Bitumen: 183 million (2007)
  • Car glass: 1.384 billion (2008)
  • CRT glass bulbs: 128 million (2011)
  • Detergents: 315 million (2011)
  • Dynamic RAM computer memory: 331 million (2010)
  • Elevators and escalators: 992 million (2007)
  • Flat glass: 487 million (2007)
  • Freight forwarders: 169 million (2012)
  • Gas insulated switchgears: 751 million (2007)
  • Gas: 1.106 billion (2009)
  • Haberdashery: 329 million (2007)
  • Heat stabilisers: 174 million (2009)
  • LCD panels: 648 million (2010)
  • Marine hoses: 131 million (2009)
  • Paraffin waxes: 676 million (2008)
  • Power Transformers: 68 million (2009)
  • Pre-stressing steel: 518 million (2010)
  • Refrigeration compressors: 161 million (2011)
  • Rubber: 248 million (2007)
  • Sodium chlorate: 73 million (2008)
  • Videotapes: 75 million (2007)
  • Window mountings: 86 million (2012).

Firms found liable of anticompetitive abuse are liable to punitive fines of up to 10% of worldwide turnover and may also be sued by victims of the anticompetitive abuse for the restitution of damages suffered. It is worth noting that:

(1) clearance from ex ante regulators does not exculpate an entity from ex post(competition related) culpability; and

(2) exoneration by a national tribunal or authority at the Member State level is not final and can be, at any time, reversed by the European Commission, which is the sole entity that can claim to have a final say as to whether a company has breached EU rules following a recent ruling by the ECJ (C-375/09).

The EC Treaty gives the victims of anti-competitive behaviour a basic right to obtaining reparation for the damage caused. The private enforcement of EC law in general has been embedded in case law for more than 40 years, even though till only recently, the process of obtaining redress in competition-related matters was so cumbersome and burdensome on the victims that it made this right, to a certain degree, unenforceable notwithstanding the landmark case of Van Gend en Loos v Nederlandse Administratie der Belastingen of 1963 (C-26/62), where the ECJ emphasised that “the vigilance of individuals to protect their rights amounts to an effective supervision in addition to the supervision entrusted to the diligence of the Commission and of the Member States” thereby creating the principle of direct effect. This principle was confirmed to be applicable to competition law as well as to other areas in the Courage et al v Crehan judgment of 2001 (C-453/99).

In a nutshell, the EC Treaty creates rights which protect every country, company and consumer and every beneficiary of those rights can go to court to have them enforced.

A number of bilateral and multilateral agreements between the EU and other blocs and countries also exist. These may be found here.

The State Aid part of the competition policy framework is currently being modernised through the State Aid Modernisation (SAM) initiative. It gives rights similar to those it gives to victims of anti-competitive behaviour to legal persons who have suffered from distortion of competition through government aid under certain specific conditions.

In Malta the competition policy framework is implemented through the following legal instruments.

As an EU Member State, this framework reflects Community competition rules but their applicability is restricted to Malta. The reverse does not apply and community-wide regulation applies to Malta and binds Maltese institutions. As such, all block exemptions issued at the EU level by DG Comp will apply in Malta as well. Unlike in several other EU Member States, Malta’s legal framework does not include imprisonment for corporate officials found guilty of abuses in terms of competition law.

The Malta Competition and Consumer Affairs Authority (MCCAA), established by virtue of CAP 510 of the laws of Malta is the authority responsible for overseeing the implementation of competition policy in Malta and for taking action either of its own accord or upon the submission of a complaint.

Although the Maltese Office of Fair Trade, now subsumed under the MCCAA, has never, to-date, fined any undertaking for abuse in terms of the competition policy and despite the fact that any action to that effect needs to go through the Maltese Courts, meaning, in effect, that the case may take long to be adjudicated, the European Commission may be asked to intervene, especially if the anti-competitive abuse is deemed to affect intra-EU trade.

A Commission for Fair Trading (Kummissjoni Ghall-Kummerc Gust) is also set up as a judicial institution in which the power to review the decisions of the Director for Fair Competition and to determine whether the conduct of investigated entities is in contravention of the Act is vested. It requires a magistrate, an economist and a Certified Public Accountant to function in line with law.

Complaints about unnotified state aid that can distort competition needs to be addressed to either the MCCAA or the European Commission (DG Comp).

The most common abuses for companies to watch out for, either in their own operations or those of their competitors include, but are by no means limited to, the following practices:

Abusive Discounts / Rebates

Discounts or bonuses by dominant undertakings which constitute neither quantity discounts or bonuses, nor fidelity discounts or bonuses within the meaning of the judgment in Hoffmann-La Roche (C-85/76), constitutes an abuse. The basis for this claim is that such discounts / rebates can produce an exclusionary effect, and can make it more difficult or impossible for co-contractors to choose between various sources of supply or commercial partners as in the British Airways (C-95/04) case. Discounts and/or rebates can also lead to price discrimination and margin squeeze.

Dividing Territories

Agreement by two or more companies to stay out of each other’s territory and reduce competition in the agreed-upon territories constitutes cartelisation and could also be liable to antitrust busting under certain conditions.

Exclusive Dealing

If a retailer or wholesaler is contractually obliged to only purchase from the contracted supplier, the practice might be deemed to be abusive in terms of competition policy.

Excessive Pricing

Excessive pricing entails charging a price which is excessive and has no reasonable relation to the economic value of the product supplied. If the undertaking pricing excessively is in a dominant position in its relevant market, it may be guilty of an abuse of a dominant position as in the judgement of United Brands (C- 27/76).

Limiting Supply / Quantitative Restriction

Producing less to be able to charge more for the same product /service, thereby resulting in quantitative restrictions, is also considered to be an abuse of one’s dominant position in the market if the undertaking limiting the supply of its product / service is, in fact, dominant.

Predatory Pricing / Limit Pricing / Dumping

Predatory pricing is a practice whereby an undertaking sells a product in a competitive market at a loss to force other competitors out of the market, after which the company would be free to raise prices for a greater profit. As the Akzo case (C-62/86) judgement has made amply clear, competition policy prohibits a dominant undertaking from eliminating a competitor, strengthening its position by using methods other than those which come within the scope of competition on the basis of quality.

Price Discrimination

Price discrimination occurs when different categories of clients are charged differently for the same product or service without a cost-based justification. Traditionally, 3 degrees of price discrimination used to be identified, with an academically-contentious fourth degree price discrimination having been proposed for addition to the taxonomy recently. If applied by a firm that is dominant within the market that it operates in, it can constitute an abuse of its dominant position.

Price Fixing

Price fixing is a practice where firms, even though they might not be dominant in their own right, collude to set prices, effectively dismantling the free market, undermining competition and effectively establishing a monopoly.

Refusal To Supply / Refusal To Deal

Refusal to supply involves a situation where a firm operating at the upstream (wholesale) market level owns a product line, a service line or an infrastructure that is critical for the provision of products or services at an associated downstream (retail) market level and refuses to give access to potential competitors at the downstream market level. Where the barriers to entry at the upstream level are insurmountable, competition will also be affected at the downstream level and if it is determined that the firm operating at the upstream market is dominant within the relevant market in which its product / service falls, and is refusing access to its infrastructures to potential entrants at the downstream level, the firm denying access may be found guilty of anticompetitive market foreclosure.

Tying and Product Bundling

Product bundling and tying are market positioning strategies that associate the sale of one product with another. Through bundling and tying, consumers are made to purchase together products that aren’t naturally related saleswise. This could result in the leveraging of a dominant position in one market into another market, margin squeezing and predatory pricing, and may thus, under certain specific conditions, constitute an abuse of the dominant position even if the dominant firm is dominant in only one of the product / service markets over which the bundling or tying is taking place.

Margin Squeeze

Margin Squeeze happens mostly (though not exclusively) with vertically integrated firms where the upstream arm of the firm supplies its own downstream operator with the product / service at a rate that is cheaper than that with which it supplies competing downstream operators. As per the Deutsche Telekom ruling (C-280/08), margin squeeze can, by and of itself, constitute an abuse within the meaning of Article 102 TFEU in view of the exclusionary effect that it can create for competitors who are at least as efficient as the appellant.

Resale Price Maintenance

Resale price maintenance describes a situation where retail resellers are not allowed to set prices independently for the product or service being retailed but are instructed to “maintain” a price level governed by the supplier or face sanctions. If the undertaking engaging in such pricing strategies is dominant in the relevant market it can be held liable for breaching competition rules.

Equinox Advisory’s competition law services are comprehensive and cross-jurisdictional. Although our practice is based in Malta, we understand that competition policy and the legal instruments that implement it go beyond national borders and we have, to that effect, established a network of associates from different jurisdictions with whom we can work when such cross-jurisdictional cooperation is in the client’s interest.

In this area, our service offering includes:

  • Market definitions
  • Articulation and quantification of damages suffered
  • Competition economics supporting services
  • Initiation of legal proceedings & litigation
  • Complaints to the MCCAA and the European Commission
  • Facilitation of early detection of antitrust risks
  • Prevention of antitrust infringements
  • Regulatory exposure assessments
  • Training for regulatory liability limitation
  • Preparation for dawn raids
  • Case advice and strategy
  • Stage 1 and Stage 2 concentration notifications
  • Other bespoke services in accordance with your requirements.
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