EU Competition Policy Michele Colucci ISDE-JMLS Barcelona June 2-4, Web site:

2 PRINCIPLES Art. 2 EC COMMON MARKET HIGH DEGREE OF COMPETITIVENESS

EU Competition Policy Legal basis: Rules applying to undertakings: Art. 81 EC Art. 82 EC State aids Art. 86 EC Art. 87 EC

Four main forms of restriction of competition: Agreements between companies (Art. 81) Abuse of dominant position (Art. 82) Mergers (Regulation 139/2004) State aids EU Competition Policy

Art The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which: (a)directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Art LEGAL ANALYSIS SUBSTANTIAL ANALYSIS

LEGAL ANALYSIS DEFINITION OF TRADE NEUTRALITYAPPRECIABILITY

LEGAL ANALYSIS 1. Definition of TRADE (Point 19: Commission Notice 2004/C 101/07) The concept of trade is not limited to traditional exchanges of goods and services across borders. It is a wider concept, covering all cross-border economic activity including establishment. The concept of trade is not limited to traditional exchanges of goods and services across borders. It is a wider concept, covering all cross-border economic activity including establishment. Art. 81.1

Legal ANALYSIS 2. MAY AFFECT (Point 23: Commission Notice 2004/C 101/07) […] the notion may affect implies that must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or fact that the agreement or practice may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States Art. 81.1

Legal ANALYSIS 3. NEUTRALITY (Point 34: Commission Notice 2004/C 101/07) The term pattern of trade is neutral. It is not a condition that trade be restricted or reduced. Patterns of trade can also be affected when an agreement or practice causes an increase in trade. The term pattern of trade is neutral. It is not a condition that trade be restricted or reduced. Patterns of trade can also be affected when an agreement or practice causes an increase in trade. Art. 81.1

11 LEGAL ANALYSIS 4. APPRECIABILITY (Point 44: Commission Notice 2004/C 101/07) The effect on trade criterion incorporates a quantitative element, limiting Community law jurisdiction to agreements and practices that are capable of having effects of a certain magnitude. Agreements and practices fall outside the scope of application of Article 81 and 82 when they affect the market only insignificantly having regard to the weak position of the undertakings concerned on the market for the products in question. Appreciability can be appraised in particular by reference to the position and the importance of the relevant undertakings on the market for the products concerned The effect on trade criterion incorporates a quantitative element, limiting Community law jurisdiction to agreements and practices that are capable of having effects of a certain magnitude. Agreements and practices fall outside the scope of application of Article 81 and 82 when they affect the market only insignificantly having regard to the weak position of the undertakings concerned on the market for the products in question. Appreciability can be appraised in particular by reference to the position and the importance of the relevant undertakings on the market for the products concerned Art. 81.1

12 LEGAL ANALYSIS 4. APPRECIABILITY (Point 52: Commission Notice 2004/C 101/07) Agreements are not capable of appreciably affecting trade between Member States when 2 conditions are both met: Agreements are not capable of appreciably affecting trade between Member States when 2 conditions are both met: a. If the aggregate market share of the parties to the agreement is less than 5%, b. Horizontal Agreements: aggregate annual turnover of the undertakings does not exceed 40 Million Euro Vertical Agreements: aggregate annual Community turnover of the supplier does not exceed 40 Million euro Vertical Agreements: aggregate annual Community turnover of the supplier does not exceed 40 Million euro Art. 81.1

13 SUBSTANTIAL ANALYSIS Impact on Competition Object (contained in art. 81.1) De Minimis (Commission Notice on Agreements of minor importance) 1.P aragraph 7 : H. A. 10% Market Share 2.P aragraph 7 : V. A. 15% Market Share (Aggregate) Art. 81.1

14 Art INDIVIDUAL EXEMPTION BLOCK (OR GROUP) EXEMPTION

15 The Art.81.3 exception only refers to that behavior which falls within Art This is a fundamental point. Art The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. Art. 81.3

16 INDIVIDUAL EXEMPTION 4 Cumulative conditions: Positive Conditions Positive Conditions 1. Economic Benefits 1. Economic Benefits 2. Fair Share for Consumers 2. Fair Share for Consumers Negative Conditions Negative Conditions 3. Indispensability 3. Indispensability 4. Enough competition in the market 4. Enough competition in the market Art. 81.3

17 INDIVIDUAL EXEMPTION Positive conditions 1. Economic Benefits a. Improving Production or a. Improving Production or b. Improving distribution or b. Improving distribution or c. Promoting technical progress or c. Promoting technical progress or d. Promoting economical progress d. Promoting economical progress N.B. These 4 conditions are alterantives, while the previuos 4 are cumulatives 2. Fair share for consumers Art. 81.3

18 INDIVIDUAL EXEMPTION Negative Conditions Negative Conditions 3. Indispensability 3. Indispensability [… does not … impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives (referred to in the first condition…]. Art. 81.3

19 INDIVIDUAL EXEMPTION Negative Conditions Negative Conditions 4. No Restriction of Competition 4. No Restriction of Competition [… which does not … afford such undertakings (which are party to the agreement) the possibility of eliminating competition in respect of a substantial part of the products in question.] Art. 81.3

20 Comm. Regulation 2790/1999 – Vertical Agreements This regulation is the concrete application of the new approach to vertical agreements and it is the first group exemption of the new generation Instead of indicating the clauses of vertical agreements which would benefit the exempion, the Commission decided to indicate only the clauses which would prevent the exemption and would permit the rest. White list White list Block Exemption Black List

21 Comm. Regulation 2790/1999 – Vertical Agreements For a V.A. to be caught by the Art exemption, it must fulfill 2 conditions cumulatively, found in Art. 3.1 and Art. 4 of the Regulation: 1. Market share held by the supplier does not exceed 30% of the relevant market on which it sells the contract goods or services; 2. The agreement does not contain a clause which lays down a restriction of the type mentioned in the black list of art. 4 (No Hardcore Restriction) Block Exemption

22 Hardcore Restrictions for Vertical Agreements Art. 4 Commission Regulation n. 2790/ Price fixing 2. Territorial Restriction 3. Restriction to sell to end users 4. Restriction of Cross- supplies 5. Components and spare parts restriction Block Exemption

23 Hardcore Restrictions for Vertical Agreements Art. 11 De Minimis Notice = Art. 4 Commission Regulation n. 2790/1999 Block Exemption

24 Active Sales Approaching individuals customers by direct mail or visit; or actively approaching in a specific territory a customer by establishing a warehouse or a distribution outlet Passive Sales Responding to unsolicited request from individual customers including delivery of goods or services to such customers Block Exemption

25 Hardcore Restrictions for Vertical Agreements Art. 4 Commission Regulation n. 2790/ Market Sharing Not possible the restriction of the territory but: Not possible the restriction of the territory but: 2.1 Possible restriction of Active Sales (paragraph 50 guidelines) 2.2 Possible restriction of Active and Passive Sales to end users by the wholesaler 2.3 Selective Distribution 2.4 Possible restriction to sell componets to costumers who would use them to manifacture the same type of goods Block Exemption

ABUSE OF DOMINANT POSITION ART. 82 EC: Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market in so far as it may affect trade between Member States.

ABUSE OF DOMINANT POSITION Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

MARKET GEOGRAPHICAL MARKET PRODUCT MARKET

Fields of application in Sport Transfer rules Sale of tickets Broadcasting rights Monopoly of federations Multi-ownership of clubs

BASIC PRINCIPLES OF EC LAW EC law applies to Sport in so far it constitutes an economic activity (ECJ case law) No Activities purely social, artistic or sporting but then MECA MEDICA judgement of 18 July but then MECA MEDICA judgement of 18 July Test of Necessity Test of Proportionality

The Legal Methodology in the Meca Medina case STEP 1: Are the EC anti-trust rules, i.e. Articles 81 and/or Art. 82 applicable to Sporting rules? STEP 2: If EC anti-trust rules are applicable, does the sporting rule fall outside the prohibition of Articles 81 (1) and 82? STEP 3: Can the rule be considered compatible with EC anti-trust rules because it fulfils the conditions of Article 81(3) EC or because of an objective justification under Article 82 EC?

STEP 1 1. Is the sports association that adopted the rule in question an undertaking or anassociation of undertakings? – –a. The sports association is an undertaking to the extent it carries out an economic activity itself (e.g., the selling of broadcasting rights). – –b. The sports association is an association of undertakings if its members carry out an economic activity. – –If no economic activity, Articles 81 and 82 do not apply – –Is trade between MS affected (geographical market, production market, Community interest...)?

STEP 2 Compatibility of rules with the Community rules on competition cannot be assessed in the abstract. Taking into account: – the overall context in which the decision of the association of undertakings was taken or produces its effects. –Its objectives: measures inherent in the pursuit of those objectives and proportionate to them. –Proportionality of measures (quid sportive sanctions?)

STEP 3 Can the rule be considered compatible with EC anti-trust rules because it fulfils the conditions of Article 81(3) EC or because of an objective justification under Article 82 EC? –Case by case approach –No General sports exception!

Sporting rules that are more likely to comply with Art. 81 and Art. 82 EC Selection criteria for sport competition At home and away rules Transfer periods Nationality clauses for national teams Rules prohibiting the multiple ownership of clubs Antidoping rules Rules of the game

Sporting rules that are less likely to comply with Articles 81 and 82 EC Rules regulating professions ancillary to sport Rules excluding legal challenges of sports awards before ordinary Courts Rules limiting the number of foreign players Rules requiring transfer payments for players at the end of their contracts

CONCLUSIONS ALL ROADS LEAD TO ROME BUT FIRST.... THEY GO THROUGH BRUSSELS!