11

UniversityUniversity of Turin of Turin International Labour International Labour OrganisationOrganisation

WIPOWIPO Worldwide Worldwide A Academycademy

ANTITRUST LAWANTITRUST LAW17-19 October 201117-19 October 2011

Paolisa NebbiaAutorità Garante della Concorrenza e del Mercato (Italian Competition Authority), Rome, Italye-mail: paola.nebbia@agcm.it

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Our plan:Our plan: Introduction;Introduction; Notion of “relevant market”;Notion of “relevant market”;

• IP rights and market definition;IP rights and market definition; Abuse of dominant position;Abuse of dominant position;

• Use of IP rights to abuse a dominant Use of IP rights to abuse a dominant position;position;

Vertical agreements;Vertical agreements;• Transfers of technologyTransfers of technology

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Introduction:Introduction:what is competition law what is competition law

about?about?

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In case T-201/04 In case T-201/04 Microsoft v CommissionMicrosoft v Commission the the European Court of First Instance upheld, almost European Court of First Instance upheld, almost entirely, a decision of the European Commission entirely, a decision of the European Commission

establishing establishing inter aliainter alia that: that:

Microsoft had a Microsoft had a dominant positiondominant position in the in the marketmarket for work group server operating systems; for work group server operating systems;

Its conduct was likely to Its conduct was likely to eliminate competitioneliminate competition altogether in that market, as it restricted altogether in that market, as it restricted interoperability between Windows PCs and non-interoperability between Windows PCs and non-Microsoft work group servers;Microsoft work group servers;

Microsoft was required to disclose complete and Microsoft was required to disclose complete and accurate interface documentation which would accurate interface documentation which would allow non-Microsoft work group servers to allow non-Microsoft work group servers to achieve full interoperability with Windows PCsachieve full interoperability with Windows PCs

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In practice, that meant that Microsoft had to disclose to In practice, that meant that Microsoft had to disclose to its competitors the information they needed to compete its competitors the information they needed to compete with Microsoft itself. with Microsoft itself. To the extent that any of this To the extent that any of this interface information might be protected by intellectual interface information might be protected by intellectual property, Microsoft would be entitled to reasonable property, Microsoft would be entitled to reasonable remuneration.remuneration.

According to the CFI, this would eventually favour According to the CFI, this would eventually favour innovatinnovation – innovation which had, until then, been ion – innovation which had, until then, been restricted Microsoft’s conduct.restricted Microsoft’s conduct.

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So, according to the So, according to the Court, disclosing Court, disclosing information to information to competitors promotes competitors promotes innovation…innovation…

How is this possible? How is this possible? Does it not contradict Does it not contradict the basic principles of the basic principles of IP law?IP law?

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There are a few concepts – such There are a few concepts – such as “as “dominant positiondominant position”, ”,

““relevant marketrelevant market”, ”, ““eliminating competitioneliminating competition” that ” that

need to be clarified in order to need to be clarified in order to understand the Microsoft understand the Microsoft

judgment…judgment…

……and the purpose of this module and the purpose of this module is to explain such concepts!is to explain such concepts!

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The relationship between competition law The relationship between competition law

and IP:and IP: They both pursue, via different They both pursue, via different

routes, the aim of keeping markets routes, the aim of keeping markets innovative and competitive:innovative and competitive:• Competition law’s concern is to maintain Competition law’s concern is to maintain

access to markets well open;access to markets well open;• IP law’s concern is to ensure the IP law’s concern is to ensure the

exclusive right to make, use and sell a exclusive right to make, use and sell a productproduct

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Is competition law a paradox?Is competition law a paradox?

… in an ideal world, with perfect competition, it may be!!!

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…but not if the players in the market misbehave…

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…or if they collude….

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What is competition law about? What is competition law about?

Ensuring lower prices, better products, Ensuring lower prices, better products, wider choice, greater efficiency bywider choice, greater efficiency by

- Promoting allocative efficiency;- Promoting allocative efficiency; Promoting productive efficiency;Promoting productive efficiency; Promoting dynamic efficiency;Promoting dynamic efficiency; Preventing the creation of market Preventing the creation of market

power;power;

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Q

P

offer

demand

Q’

P’

P(m)

Q(m)

Monopoly

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The birth of antitrust lawThe birth of antitrust law This is to be traced back to the US in 1890, This is to be traced back to the US in 1890,

when the US Congress passed the Sherman when the US Congress passed the Sherman Act.Act.

Trust = an institution whereby one delegates to a Trust = an institution whereby one delegates to a trustee his/her rights to vote on the board of a trustee his/her rights to vote on the board of a companycompany

Through criss-cross proxies on their respective Through criss-cross proxies on their respective boards, managers of competing companies boards, managers of competing companies decided price and market policies => cartels decided price and market policies => cartels

=> “ANY contract in restrain of trade is illegal”=> “ANY contract in restrain of trade is illegal”

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The common law heritageThe common law heritage

Subject matter of protection is not Subject matter of protection is not competition, but freedom of competition, but freedom of contract and third parties’ freedom;contract and third parties’ freedom;

Restriction is eitherRestriction is either A limit on the freeom of contract of one A limit on the freeom of contract of one

of the parties;of the parties; A limit on third parties’ freedom to stay A limit on third parties’ freedom to stay

in the marketin the market

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““Restraint to competition”Restraint to competition” US v Trans Missouri Freight Association: US v Trans Missouri Freight Association: what was what was

beneficial for the users was not the beneficial for the users was not the “reasonableness” of the agreed rates, but the “reasonableness” of the agreed rates, but the dynamics of competition; dynamics of competition;

NB. importance of small dealersNB. importance of small dealers

US v Aluminium Company of AmericaUS v Aluminium Company of America ‘it is possible, ‘it is possible, because of its indirect social and moral effect, to because of its indirect social and moral effect, to prefer a system of small producers, each dependent prefer a system of small producers, each dependent for his success upon his own skill and character, to for his success upon his own skill and character, to one in which the great mass of those engaged must one in which the great mass of those engaged must accept the direction of the few’ accept the direction of the few’

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The conceptual development:The conceptual development:

““Restraint” harms competition not Restraint” harms competition not when the agreement deprives when the agreement deprives someone of his freedom, but when it someone of his freedom, but when it allows the price to be higher than it allows the price to be higher than it would have been from the free would have been from the free interplay between supply and interplay between supply and demand (A. Marshall, demand (A. Marshall, Principles of Principles of economics, economics, 1890). 1890).

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SchwinnSchwinn Sylvania SylvaniaManufacturerManufacturer ManufacturerManufacturer

Retailers

RR

Retailers could only sell to final consumers

FF

Franchisees

Franchisees could not resell from outside their premises

Compare S v Arnold Schwinn & Co.Compare S v Arnold Schwinn & Co. and and Continental TV Inc. v Continental TV Inc. v GTE Sylvania Inc. GTE Sylvania Inc. ::

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Compare this with the development Compare this with the development of antitrust in the EC: of antitrust in the EC:

the European the European dirigiste dirigiste traditiontradition the Freiburger Ordoliberalen schoolthe Freiburger Ordoliberalen school the peculiar objectives of EC the peculiar objectives of EC

competition law, in particular market competition law, in particular market integration, protection of SMEs, integration, protection of SMEs, consumer protectionconsumer protection

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Parallel importsParallel imports

ManufacturerManufacturer

French distributor

Euros 10German distributor

Euros 15

Spanish distributor

Euros 7

unauthorized dealer

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Examples of multi-purpose Examples of multi-purpose competition policycompetition policy

Matra HachetteMatra Hachette: the impact of a certain : the impact of a certain allegedly anti-competitive conduct on allegedly anti-competitive conduct on public infrastructres and unemployment, is public infrastructres and unemployment, is an additional argument, to be taken into an additional argument, to be taken into account with other more economics-based account with other more economics-based arguments. arguments.

Ford/Volkswagen: Ford/Volkswagen: creation of jobs in a creation of jobs in a poor area (“harmonious development of poor area (“harmonious development of the EC) could justify restriction of the EC) could justify restriction of competition.competition.

CECEDCECED: protection of the environment : protection of the environment could justify a restriction to competition. could justify a restriction to competition.

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Sources of EC competition law:Sources of EC competition law: Treaty Articles (note re-numbering after Treaty Articles (note re-numbering after

Lisbon) and general principlesLisbon) and general principles; ; Regulations and Directives;Regulations and Directives; European Court of Justice case law European Court of Justice case law

(note Court of First Instance is now (note Court of First Instance is now called General Court);called General Court);

Practice of the Commission: decisions, Practice of the Commission: decisions, official notices, reports.official notices, reports.

NB. articles 101 and 102 produce NB. articles 101 and 102 produce horizontal horizontal direct effectdirect effect: : DelimitisDelimitis

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Defining the relevant Defining the relevant market… market…

……and the relevance of IP and the relevance of IP rights to market definitionrights to market definition

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““Relevant market”: product marketRelevant market”: product market

Circumstances in which it is Circumstances in which it is necessary to define a market;necessary to define a market;

The ‘hypothetical monopolist test’ The ‘hypothetical monopolist test’ (SSNIP);(SSNIP);

The ‘toothless fallacy’;The ‘toothless fallacy’; The Commission’s approach;The Commission’s approach; Relevant markets and IP rights;Relevant markets and IP rights;

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““Relevant market”: also consider…Relevant market”: also consider…

Geographic market;Geographic market; Temporal market.Temporal market.

-> identifying the relevant product and geographical market means identifying the competitive contraints to which a firm is subject. This is fundamental, especially in cases of abuse of a dominant position.

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Product markets and IP rightsProduct markets and IP rights

Exceptionally, a particular brand may Exceptionally, a particular brand may constitute a distinct market;constitute a distinct market;

This is usually the case where legal This is usually the case where legal (or factual or economic) factors (or factual or economic) factors preclude the substitution of preclude the substitution of alternatives for the branded goods;alternatives for the branded goods;

A few examples can be found in the A few examples can be found in the so-called ‘after-markets’: see so-called ‘after-markets’: see HuginHugin and and VolvoVolvo

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AftermarketsAftermarkets

An aftermarket consisting of the secondary An aftermarket consisting of the secondary products of one brand of primary product products of one brand of primary product may not be a relevant product market may not be a relevant product market where:where:

it is possible to switch to the secondary it is possible to switch to the secondary products of other producers;products of other producers;

it may be possible to switch to another it may be possible to switch to another primary product and thus avoidthe higher primary product and thus avoidthe higher prices in the aftermarket.prices in the aftermarket.

See an interesting example in 504 US 451 See an interesting example in 504 US 451 Eastman Kodak Company v. Image Eastman Kodak Company v. Image Technical Services IncTechnical Services Inc

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As the Commission put it (Notice on the As the Commission put it (Notice on the definition of the relevant market, 1997):definition of the relevant market, 1997):

““A narrow definition of market for secondary A narrow definition of market for secondary products, for instance, spare parts, may result products, for instance, spare parts, may result when compatibility with the primary product when compatibility with the primary product is important. Problems of finding compatible is important. Problems of finding compatible secondary products together with the secondary products together with the existence of high prices and a long lifetime of existence of high prices and a long lifetime of the primary products may render relative the primary products may render relative price increases of secondary products price increases of secondary products profitable. A different market definition may profitable. A different market definition may result if significant substitution between result if significant substitution between secondary products is possible or if the secondary products is possible or if the characteristics of the primary products make characteristics of the primary products make quick and direct consumer responses to quick and direct consumer responses to relative price increases of the secondary relative price increases of the secondary products feasible”.products feasible”.

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Abuse of dominant Abuse of dominant position…position…

……and the role of IP rightsand the role of IP rights

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Abuse of dominant position: article Abuse of dominant position: article 102 EC102 EC

Any abuse by one or more undertakings of a Any abuse by one or more undertakings of a dominant dominant positionposition within the within the common marketcommon market or in a or in a substantial substantial partpart of it shall be prohibited as incompatible with the of it shall be prohibited as incompatible with the common market in so far as it may common market in so far as it may affect tradeaffect trade between between Member States. Member States.

Such abuse may, in particular, consist in:Such abuse may, in particular, consist in:(a)(a) directly or indirectly imposing unfair purchase or directly or indirectly imposing unfair purchase or

selling prices or other unfair trading conditions;selling prices or other unfair trading conditions;(b)(b) limiting production, markets or technical development limiting production, markets or technical development

to the prejudice of consumers;to the prejudice of consumers;( c)( c) applying dissimilar conditions to equivalent applying dissimilar conditions to equivalent

transactions with other trading parties, thereby placing them transactions with other trading parties, thereby placing them at a competitive disadvantage;at a competitive disadvantage;

(d)(d) making the conclusion of contracts subject to making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, which, by their nature or according to commercial usage, have no connection with the subject of such contractshave no connection with the subject of such contracts

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Dominant positionDominant position ‘‘The power to behave to an appreciable The power to behave to an appreciable

extent independently of competitors, extent independently of competitors, customers and ultimately of consumers’ customers and ultimately of consumers’ ((Continental CanContinental Can), or), or

‘‘The ability of a firm to raise prices above The ability of a firm to raise prices above the competitive level –the benchmark the competitive level –the benchmark price- in a profitable manner for a price- in a profitable manner for a significant amount of time’ (market significant amount of time’ (market power).power).

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Establishing dominanceEstablishing dominance

1st step: definition of relevant market, 1st step: definition of relevant market, then assessment market power in that then assessment market power in that market;market;

In this second phase, measurement of In this second phase, measurement of market shares held by firms...market shares held by firms...

...taking into account that a high market ...taking into account that a high market share is not sufficient to conclude that a share is not sufficient to conclude that a firm has got high market power, and other firm has got high market power, and other factors need to be taken into account.factors need to be taken into account.

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Market sharesMarket shares

Presumptions:Presumptions:• Below 40%: not enough market power to Below 40%: not enough market power to

be dominant;be dominant;• Above 50%: presumption that firm is Above 50%: presumption that firm is

dominant;dominant;• In any case, there is never dominance In any case, there is never dominance

below 25% (EU) or 33%-40% (US). below 25% (EU) or 33%-40% (US). Market shares give only a prima facie Market shares give only a prima facie

picture of the competitive postiion of picture of the competitive postiion of the firm on a market.the firm on a market.

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Market shares may have little Market shares may have little meaning where:meaning where:

Production is limited by a crucial Production is limited by a crucial input;input;

The firm is unlikely to be a relevant The firm is unlikely to be a relevant player in the near future, eg because player in the near future, eg because of outdated production plants;of outdated production plants;

Competitors have/have not a Competitors have/have not a considerable excess of capacity;considerable excess of capacity;

Markets are characterised by large Markets are characterised by large and infrequent orders.and infrequent orders.

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Ease and likelihood of entryEase and likelihood of entry

The more entry is easy, rapid and The more entry is easy, rapid and costless, the less a firm will be able costless, the less a firm will be able to charge a high margin because to charge a high margin because large profits wold attract competitors large profits wold attract competitors (contestable markets theory);(contestable markets theory);

Need to take into account sunk costs, Need to take into account sunk costs, switching costs, lock-in effects, switching costs, lock-in effects, network externalities. network externalities.

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Buyer’s powerBuyer’s power

A strong buyer can use its bargaining A strong buyer can use its bargaining power to stimulate competition power to stimulate competition among sellers, eg. by theatening to among sellers, eg. by theatening to switch orders to another seller;Eswitch orders to another seller;E

Entry of new players is easy where Entry of new players is easy where buyers are concentrated:buyers are concentrated:

Enso/StoraEnso/Stora and and ABB/Daimler Benz ABB/Daimler Benz (mergers). (mergers).

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To sum up, factors relevant to proof To sum up, factors relevant to proof of dominance may be:of dominance may be:

Structural :Structural :• market shares (including that of market shares (including that of

competitors);competitors);• access to labour, finance, technology, and access to labour, finance, technology, and

raw materials;raw materials;• the degree of vertical integration;the degree of vertical integration;• ownership of intellectual property rights;ownership of intellectual property rights;• other barriers to entry, e.g. advertising.other barriers to entry, e.g. advertising.

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Factors relevant to proof of Factors relevant to proof of dominancedominance

Behavioural: Behavioural: • the ability to charge monopolistic prices;the ability to charge monopolistic prices;• the ability to engage in predatory the ability to engage in predatory

pricing;pricing;• other activities indicative of the other activities indicative of the

existence of considerable market power.existence of considerable market power.

NB: note ‘network externalities’NB: note ‘network externalities’

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““Abuse”Abuse”

Abuse includes both exploitative and Abuse includes both exploitative and exclusionary conduct; examples are: exclusionary conduct; examples are: • Predatory pricingPredatory pricing • Discount and loyalty rebates, see eg. Discount and loyalty rebates, see eg.

decision COMP/C-3/37990 decision COMP/C-3/37990 IntelIntel • Tying Tying • Excessive or unfair prices Excessive or unfair prices • Refusal to supplyRefusal to supply

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One example: bundling and tyingOne example: bundling and tying

When a product is offered by a seller When a product is offered by a seller on condition that another product is on condition that another product is also bought;also bought;

Anti-competitive effects:Anti-competitive effects:• Price discriminationPrice discrimination• Leverage of dominant position from the Leverage of dominant position from the

tying to the tied market.tying to the tied market.

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Tying in the (old) Microsoft case (T-Tying in the (old) Microsoft case (T-201/04):201/04):

Windows Media Player (WMP) sold Windows Media Player (WMP) sold together with operating system;together with operating system;

Microsoft was ordered to offer, within 90 Microsoft was ordered to offer, within 90 days of notification of the decision, a full-days of notification of the decision, a full-functioning version of its Windows client functioning version of its Windows client PC operating system which does not PC operating system which does not incorporate WMP, although Microsoft is to incorporate WMP, although Microsoft is to retain the right to offer a bundle of the retain the right to offer a bundle of the Windows client PC operating system and Windows client PC operating system and Windows Media Player.Windows Media Player.

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Tying in the (old) Microsoft caseTying in the (old) Microsoft case

Requirements: Requirements: the tying and tied products are two the tying and tied products are two

separate products;separate products; the undertaking concerned is dominant in the undertaking concerned is dominant in

the market for the tying product;the market for the tying product; the undertaking concerned does not give the undertaking concerned does not give

customers a choice to obtain the tying customers a choice to obtain the tying product without the tied product;product without the tied product;

the practice in question forecloses the practice in question forecloses competition.competition.

4343

Tying in the new Microsoft case Tying in the new Microsoft case COMP/39.530COMP/39.530

Potentially illegal tying of Microsoft web browser Potentially illegal tying of Microsoft web browser Internet Explorer (IE) to its dominant client PC Internet Explorer (IE) to its dominant client PC operating system Windows;operating system Windows;

The Commission took the preliminary view that:The Commission took the preliminary view that:• IE enjoyed a distribution advantage that other web IE enjoyed a distribution advantage that other web

browsers were unable to match and there were browsers were unable to match and there were barriers to downloading web browsers from the barriers to downloading web browsers from the Internet;Internet;

• in addition to reinforcing Microsoft's position on the in addition to reinforcing Microsoft's position on the market for client PC operating systems, the tying of market for client PC operating systems, the tying of IE to Windows created artificial incentives for web IE to Windows created artificial incentives for web developers and software designers to optimise their developers and software designers to optimise their products primarily for IE.products primarily for IE.

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By a decision of By a decision of 16.12.2009 the 16.12.2009 the Commission made the following Commission made the following

commitments binding:commitments binding: Microsoft agreed to make available a Microsoft agreed to make available a

mechanism in Windows that enables OEMs mechanism in Windows that enables OEMs and users to turn Internet Explorer off and on;and users to turn Internet Explorer off and on;

OEMs will be free to pre-install any web OEMs will be free to pre-install any web browser(s) of their choice on PCs and set it as browser(s) of their choice on PCs and set it as default web browser;default web browser;

Microsoft offered to distribute a choice screen Microsoft offered to distribute a choice screen software update to users of Windows PCs by software update to users of Windows PCs by means of Windows Updatemeans of Windows Update

4545

Another type of abuse: refusal to Another type of abuse: refusal to supplysupply

Firms are generally entitled to determine whom to supply and to decide not to continue to supply certain trading partners.

This may be anti-competitive where, eg., a dominant company denies a buyer access to an input in order to exclude that buyer from participating in an economic activity (vertical foreclosure): the Zoja case

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‘‘Essential facilities’Essential facilities’

‘‘An essential facility An essential facility is an indispensable is an indispensable input only when duplication of the existing input only when duplication of the existing facility is impossible or extremely difficult, facility is impossible or extremely difficult, either because it is physically or legally either because it is physically or legally impossible to duplicate, or because a impossible to duplicate, or because a second facility is not economically viable second facility is not economically viable in the sense that it would not generate in the sense that it would not generate enough revenue to cover its costs’enough revenue to cover its costs’ (Disc. (Disc. Paper on article 102, para.229Paper on article 102, para.229

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This includes…This includes…

• Purely physical facilities (harbour, Purely physical facilities (harbour, airport, terminal, rail road)airport, terminal, rail road)

• Data bases (TV/telephone listings)Data bases (TV/telephone listings)• Networks (combination of facilities and Networks (combination of facilities and

rules)rules)

The basic idea is that The basic idea is that the controller of an the controller of an essential facility must share it with its user essential facility must share it with its user market competitors on “reasonable and market competitors on “reasonable and non-discriminatory” terms.non-discriminatory” terms.

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The early cases concerned access to transport The early cases concerned access to transport

facilities, especially in sea ports...facilities, especially in sea ports... Case Sealink/B& I Holyhead Interim Measures

Case Sea Containers Ltd/Stena Sealink

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The principle was then applied to The principle was then applied to the private sector…the private sector…

Oscar BronnerOscar Bronner:: the refusal should be likely to eliminate the refusal should be likely to eliminate

all competition in the downstream all competition in the downstream market; market;

the refusal must be incapable of the refusal must be incapable of objective justification;objective justification;

the access to the facility must be the access to the facility must be indispensable; ie. there must be no indispensable; ie. there must be no actual or potential substitute for the actual or potential substitute for the facility requested.facility requested.

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Article 102 and IP rights:Article 102 and IP rights:

Distinction between ‘grant’ and Distinction between ‘grant’ and ‘exercise’ of an IP right;‘exercise’ of an IP right;

‘‘normal exercise’ (Volvo);normal exercise’ (Volvo); ‘‘Arbitrary refusal’ (Volvo, Magill)Arbitrary refusal’ (Volvo, Magill)

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……and then IMS:and then IMS:

The ECJ held thatThe ECJ held that refusal to supply a copyright refusal to supply a copyright licence to a potential licensee would be an abuse licence to a potential licensee would be an abuse under the following circumstances:under the following circumstances:

• • The licensee must be proposing to offer a new The licensee must be proposing to offer a new product, not just a "me-too" version of the product, not just a "me-too" version of the dominant firm's product;dominant firm's product;

• • There is no objective justification: refusal may be There is no objective justification: refusal may be justified by "objective considerations"; justified by "objective considerations";

• • Elimination of competition will occur: the refusal Elimination of competition will occur: the refusal must have the effect of "eliminating all must have the effect of "eliminating all competition" from the downstream market;competition" from the downstream market;

The facility is indispensable to carry on business. The facility is indispensable to carry on business.

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Misuse of IP rights as an anti-Misuse of IP rights as an anti-competitive practice: T-321/05 competitive practice: T-321/05

AstrazenecaAstrazeneca

First conduct: deliberately misleading First conduct: deliberately misleading representations to patent agents to representations to patent agents to acquire or preserve SPC for acquire or preserve SPC for omepraozole;omepraozole;

=> Creation of regulatory obstacles to => Creation of regulatory obstacles to competition by the unlawful grant of competition by the unlawful grant of exclusive rights;exclusive rights;

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Court rejected AZ’s argument…Court rejected AZ’s argument…

……that the existence of specific remedies which make it that the existence of specific remedies which make it possible to rectify, or even annul, patents and SPCs possible to rectify, or even annul, patents and SPCs granted unlawfully justifies application of the granted unlawfully justifies application of the competition rules only where an anticompetitive effect is competition rules only where an anticompetitive effect is demonstrated. demonstrated.

INSTEAD…INSTEAD…

Where behaviour falls within the scope of the Where behaviour falls within the scope of the competition rules, those rules apply irrespective of competition rules, those rules apply irrespective of whether that behaviour may also be caught by other whether that behaviour may also be caught by other rules, of national origin or otherwise, which pursue rules, of national origin or otherwise, which pursue separate objectives. Similarly, the existence of remedies separate objectives. Similarly, the existence of remedies specific to the patent system is not capable of altering specific to the patent system is not capable of altering the conditions of application of the prohibitions laid down the conditions of application of the prohibitions laid down in competition law.in competition law.

5454

Astrazeneca (follows)Astrazeneca (follows)

Second conduct: de-registration of Second conduct: de-registration of marketing authorization for LOSEC marketing authorization for LOSEC capsules at the time when exclusive capsules at the time when exclusive rights were about to cease;rights were about to cease;

Substitution of capsules with LOSEC Substitution of capsules with LOSEC tabletstablets

5555

Court held:Court held:

whilst the fact that an undertaking is in a whilst the fact that an undertaking is in a dominant position cannot deprive it of its dominant position cannot deprive it of its entitlement to protect its own commercial entitlement to protect its own commercial interests when they are attacked, it cannot interests when they are attacked, it cannot use regulatory procedures in such a way use regulatory procedures in such a way as to prevent or make more difficult the as to prevent or make more difficult the entry of competitors on the market, in the entry of competitors on the market, in the absence of grounds relating to the defence absence of grounds relating to the defence of the legitimate interests of an of the legitimate interests of an undertaking engaged in competition on undertaking engaged in competition on the merits or in the absence of objective the merits or in the absence of objective justification. justification.

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Essential facilities:Essential facilities:

Could you argue this is a case of Could you argue this is a case of essential facilities, ie. a case of a essential facilities, ie. a case of a refusal to supply by a dominant firm refusal to supply by a dominant firm by virtue of the exercise of a by virtue of the exercise of a property right?property right?

Why would AZ try to argue the case Why would AZ try to argue the case is about an essential facility?is about an essential facility?

5757

Anti-competitive Anti-competitive agreements and concerted agreements and concerted

practicespractices

In particular, vertical In particular, vertical agreements and transfers of agreements and transfers of

technology agreementstechnology agreements

5858

Article 101 ECArticle 101 ECThe following shall be prohibited as incompatible with the common The following shall be prohibited as incompatible with the common

market: all agreements between undertakings, decisions by market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may associations of undertakings and concerted practices which may affect trade between Member States and which have as their affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of object or effect the prevention, restriction or distortion of competition within the common market, and in particular those competition within the common market, and in particular those which:which:

(a)(a)directly or indirectly fix purchase or selling prices or any other directly or indirectly fix purchase or selling prices or any other trading conditions; trading conditions;

(b)(b) limit or control production, markets, technical development, or limit or control production, markets, technical development, or investment;investment;

(c)(c) share markets or sources of supply;share markets or sources of supply;(d)(d)apply dissimilar conditions to equivalent transactions with other apply dissimilar conditions to equivalent transactions with other

trading parties, thereby placing them at a competitive trading parties, thereby placing them at a competitive disadvantage;disadvantage;

(e)(e)make the conclusion of contracts subject to acceptance by the make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the or according to commercial usage, have no connection with the subject of such contracts.subject of such contracts.

5959

Analysis:Analysis:

““Undertaking”Undertaking” ““Agreement”, “concerted practice”Agreement”, “concerted practice” ““Effect on trade”Effect on trade” ““Object or effect”Object or effect” ““Prevention, restriciton, distortion of Prevention, restriciton, distortion of

competition”competition” ““appreciability”: de minimisappreciability”: de minimis

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““Object or effect”:Object or effect”:

Horizontal agreements are deemed to Horizontal agreements are deemed to have as their object the restriction of have as their object the restriction of competition, see eg.:competition, see eg.:• Price fixing;Price fixing;• Controlling production, markets, technical Controlling production, markets, technical

developments or investments;developments or investments;• Sharing markets.Sharing markets.

Vertical agreements usually require an Vertical agreements usually require an assessment of the “effect” assessment of the “effect”

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““Effect on trade”Effect on trade”

““Appreciable restrictionAppreciable restriction”” De minimisDe minimis: Commission Notice of : Commission Notice of

2001;2001; ““Cumulative effects” of networks of Cumulative effects” of networks of

agreements. agreements.

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Vertical agreements: art.101(3)Vertical agreements: art.101(3)

3. The provisions of paragraph 1 may, however, be declared 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:inapplicable in the case of:

- any agreement or category of agreements between - any agreement or category of agreements between undertakings,undertakings,

- any decision or category of decisions by associations of - any decision or category of decisions by associations of undertakings,undertakings,

- any concerted practice or category of concerted practices,- any concerted practice or category of concerted practices,which contributes to improving the production or distribution which contributes to improving the production or distribution

of goods or to promoting technical or economic progress, of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting while allowing consumers a fair share of the resulting benefit, and which does not:benefit, and which does not:

(a) impose on the undertakings concerned restrictions which (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;are not indispensable to the attainment of these objectives;

(b) afford such undertakings the possibility of eliminating (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products competition in respect of a substantial part of the products in question. in question.

6363

Block exemptionsBlock exemptions

Certain types of restraints Certain types of restraints automatically fulfill the conditions of automatically fulfill the conditions of article 101(3);article 101(3);

Block exemption regulations;Block exemption regulations; The revolution of Regulation The revolution of Regulation

330/2010 (“BER): the black list330/2010 (“BER): the black list

6464

Most common types of vertical Most common types of vertical agreements:agreements:

Exclusive distribution agreements Exclusive distribution agreements (EDAs)(EDAs);;

Selective distribution (SDAs);Selective distribution (SDAs); Franchising agreements.Franchising agreements.

6565

Hardcore restrictions (art.4 BER)Hardcore restrictions (art.4 BER)

Resale Price Maintenance (RPM): compare Resale Price Maintenance (RPM): compare to the US, to the US, Leegin Creative Leather Leegin Creative Leather Products v. PSKS, Products v. PSKS, http://www.supremecourtus.gov/opinions/06pdf/06-480.pdf

Territorial and customer sales restrictions;Territorial and customer sales restrictions; Territorial and customer sales restrictions

in the context of selective distribution systems;

Restrictions concerning aftermarkets.

6666

Excluded restrictionsExcluded restrictions

Non-compete obligations during the term of the agreement;

Post-term non-compete obligations; Non-compete obligations and

selective distribution.

6767

The consequences of violating The consequences of violating article 101:article 101:

Art.101(2):Art.101(2):"Any agreement or "Any agreement or decisions prohibited pursuant to this decisions prohibited pursuant to this Article shall be automatically void“;Article shall be automatically void“;

->Provisions contravening Article ->Provisions contravening Article 101(1) are, in principle, automatically 101(1) are, in principle, automatically void void ab initioab initio, and , and may not be may not be enforcedenforced

-> note severability. -> note severability. -> action for damages -> action for damages

6868

Regulation 330/2010 and IP rightsRegulation 330/2010 and IP rights

Ber applies to IP rights provided that: Ber applies to IP rights provided that: • provisions relating to IP rights must be part of provisions relating to IP rights must be part of

a vertical agreement;a vertical agreement;• these provisions refer to the assignment to the these provisions refer to the assignment to the

buyer or use by the buyer of intellectual buyer or use by the buyer of intellectual property rights;property rights;

• these provisions do not constitute the primary these provisions do not constitute the primary object of the vertical agreement; object of the vertical agreement;

• these provisions are directly related to the use, these provisions are directly related to the use, sale or resale of goods or services by the buyer sale or resale of goods or services by the buyer or its customers; or its customers;

6969

Common terms in the license of IP Common terms in the license of IP rights:rights:

Territorial and sale restrictions;Territorial and sale restrictions; Field of use restrictions;Field of use restrictions; Non-compete obligations; Non-compete obligations; No-challenge clause;No-challenge clause; Improvements.Improvements.

Case-law: Case-law: Nungesser, Louis Erauw-Nungesser, Louis Erauw-JacqueryJacquery

7070

Regulation Regulation 772/2004 (TTBER)772/2004 (TTBER)

Exclusivity between the licensor and Exclusivity between the licensor and the licensee;the licensee;

Exclusivity between licensees;Exclusivity between licensees; Requirement to use the licensor’s Requirement to use the licensor’s

trademark;trademark; Limitation of production;Limitation of production; Permissible duration.Permissible duration.