Irish Competition Law And European Commission Law European Essay

Published Date: 02 Nov 2017

The Competition Act, 2002, amended in 2006 and 2012 (herein as ‘Competition Act’) is the latest enforcing competition law in Ireland [1] . Since its existence in 1991, the act created a ‘prohibition with automatic effect on all forms of anti-competitive behaviour’. [2] In the Competition Act, section 4 and 5 correspond with The European Commission (herein as E.C.), Article 101 and 102 (ex Article 81 and 82) of the treaty of Rome 1957. These Articles establish a ‘prohibition of activities which prevent, restrict or distort competition in Trade in the state or ... abuse of dominant position in such trade. [3] â€™ The E.C. law is enforced when trade between member states are effected under Article 101-107. The Competition Act enforces competition law in Ireland only. Under the Irish Competition Act, section 4 and 5 is found in part 2 setting down ‘Competition Rules and Enforcements’.

Section 4 deals with anti-competitive behaviour and practice which states; ‘All agreements between undertakings, decision by association of undertakings and concerted practices’ of anti-competitive behaviour effecting the state ‘are prohibited and void’. [4] For example S.4 (1) (a) those which fix purchase or selling prices.... (b) Limiting or controlling production and/or development. (c) Share markets or sources of supply (d) Apply conditions placing competitors at a disadvantage. (e) Make the conclusion of contracts subject to acceptance without the other party having any commercial connection.

Thus, Agreements made by firms or sole traders with or without writing can deem to be Undertaking, undertaking means; ‘a person or individual, ‘a body corporate or an unincorporated body of persons engaged for gain in the production supply or distribution of goods or the provision of a service’ [5] .

Section 5 deals with the abuse of dominant positions stating; ‘Any abuse by one or more undertakings of a dominant position in trade for any goods or services in the state or in any part of the state is prohibited’ [6] . Such abuse can relate to unfair purchase or selling prices S.5 (2).

Section 6 &7; an undertaking that is prohibited under section 4 & 5 or Article 101 and 102 is deemed guilty of an offence and is liable to penalties, unless under section 6 or 7. The undertaking at that time has in their position a granted exemption by the commission or state.

On failing section 6 & 7, penalties and proceedings are death with under section 8.

The Competition Authority

The Competition Authority (TCA) was established in 1991 under Part 4 of the Competition Act. Previous to this its members were part of the Restrictive Practices Commission Est.1953 [7] . The TCA is a state body responsible for enforcing Irish and E.C. Competition law in Ireland. Its role is to investigate possible breaches of competition and take enforcement action as appropriate. The TCA on notification or by investigation has the power to make decisions whether certain mergers and acquisitions will/have anti-competitive impacts on the market [8] . If required the TCA has the power to seize documents and enter premises with warrants from the District court. The TCA do not have the power to impose penalties on undertakings, however they or the Director of Public Prosecutions can bring them to court where penalties are decided. On an annual basis in conjunction with Section 42 (1) of the Competition Act the TCA are required to publish a report of activities within two months of the last financial year. In this report, investigations, notifications, decisions and advice by TCA are published. In the recent 2012 Annual Report the TCA published its awareness on the proposed major reform of water services in Ireland [9] . On behalf of the Department of the Environment, Community and Local Goverment (DECLG) an independent assessment of the market was done by PricewaterhouseCoopers (PWC). The government at this stage is currently establishing the ‘public water monopoly’ called, Irish Water [10] . A single producer or a monopoly means there is no competition. The disadvantage of state monopolies overtime can also lead to less efficiencies and competitive prices [11] . On the advice of PWC there is no regard for competition in the transfer of local authority water schemes. The TCA believes this is not an ideal outcome. However due to dramatic changes which have to take place to form Irish Water the monopoly shall exist until the public system is self-funded. Once this structure is in place the TCA believe the introduction of competition could future benefit consumers and efficiency in water services.

In this scenario the TCA is providing advice to the government. Thus the decisions and notification made by the TCA are legal if not superseded by the higher powers such as ministers and the government.

Mergers and Joint Ventures

Merger and Acquisitions, Part 3 of Competition Act present monitoring rules to prevent firms from reducing competition and abusing dominant positions. A merger or acquisition is deemed to occur when ‘two or more undertakings previously independent of one another merge’ [12] . This can happen by ‘Horizontal Merging’ eliminating competition in the same field or ‘vertical merging’ such as taking over suppliers which may deny competitors to raw materials or distribution outlets [13] .

Mergers occur for logical reasons; Undertakings maybe interested in increasing economies of scale or efficiencies. Economies of scale arise when unit costs reduce because of an increase in the firm size. Efficiencies can be achieved in marketing and administration. The result should offer customers better prices and a wider range of produces. Cartel arrangements between competitors on the other hand can increase profits for the firm. This is anti-competitive under section 4 and Article 101 and offence can result in severe penalties.

Although Joint ventures are de minims in the Competition Act, partaking in commercial or economic activities is seen as ‘undertaking’; therefore they are subject to E.C. and Irish competition law. To another extend joint ventures may be treated as mergers under S.16 (4); ‘The creation of a joint venture to perform, on an indefinite basis, all the functions of an autonomous economic entity shall constitute a merger’ [14] . The procedures for Mergers under the Competition Act come under different thresholds. Outlined in Pr.3 S.18 Obligation to notify certain mergers, Notification should be given to the TCA if; two of the undertakings involved have an annual financial turnover of €40 million worldwide, and at least two of them have a €40 million turn over in the state. Mergers that are below the threshold for mandatory notification may still give rise to anti-competitive behaviour. Hence, the Competition Act allows for voluntary notification to the TCA to give firms legal certainty [15] . Undertakings of any size are still subject to enforcement under section 4 & 5 of the Competition Act.

For instance in a notification by Eason/Argosy to the TCA, Eason & Son Ltd and Argosy Librariers Ltd are the only two Irish-based wholesalers of new books in Ireland. Although their actions were not notifiable under the Competition Act, the merger signed on 27th August 12 meant a reduced number of competitors in the state from two to one. The TCA were concerned that the proposed transaction with increase prices and restrict the range of books to the markets. In light of these findings the TCA proceeded against the merger with infringement of section 4 prohibiting agreements that restrict competition. When undertakings were informed, they abandoned the merger and agreed for one year to notify the TCA of any future merges [16] .

Joint Venture – Pre-notification

According to Part 3 of the Competition Act, joint ventures are subject to voluntary notification if; the venture is jointly controlled by undertakings; The venture is ‘Full function’ [17] ; or the companies concerned meet revenue thresholds in S.18 for mandatory notification. A joint venture is not full function if it only takes part in one specific activity without autonomous entity on the market. In any case for joint ventures the TCA advise undertakings to contact them in advance of formally creating a joint venture. Forming a joint venture can bring increased efficiencies but can in some cases restrict competition as horizontal mergers, if the number of competitors is significantly reduced, ‘prima facie the burden of proof is on the parents’ [18] . Joint ventures are seen as an opportunity to compete more effectively then each firm operating on its own. For example limited to a single stage or ‘One Function’ the process of R & D or marketing provides a service to both parents efficiently.

In the decision of Flachglas/Vegla, the joint venture was set up by two important glass companies to provide a network of collection points, sorting and processing plants in Germany. The E.C. found that the undertakings were not only ‘suppliers of scrap flat glass but they were also among the most important buyers of recycled scrap flat glass’. Therefore the E.C. found the joint venture lacked sufficient autonomy to be full function [19] .

The Competition Act provides that mergers and acquisitions are only valid when; The TCA has made a determination they can proceed; The TCA has outlined any conditions applied to the transaction [20] ; Subject to section 4, the period after notification by the undertakings has elapsed without the TCA informing the parties [21] ; Subject to section 5, the period of investigation has elapsed without the TCA making a determination [22] .

Outlining conditions in a transaction by the TCA is a precaution taken to avoid any infringements of section 4 and 5 or Article 101 and 102 if permission to proceed is given. This is done in a European Commission Case for joint venture between Alitalia and KLM airlines [23] . The two airlines planned to integrate their scheduled passengers and cargo activities and act effectively as a single economic entity. The E.C. authorised the concentration as creating good competition but however had concerns for the two routes that linked the two companies; Amsterdam-Milan and Amsterdam-Rome. The two airlines are the only operational airlines on the two routes. The merger would therefore create a monopoly on the routes. To avoid anti-competitive situations the joint venture airlines proposed to take measures and conditions that would allow potential competitors to enter.

The conditions set out by the undertakings, KLM and Alitalia, were passed and will remain in existence for the duration of the joint venture. The decision taken and granted in this E.C. case is similar to the analysed case of Group 91 and The competition Authority in 1995.