Market definition
Theory of competition law Based on the economic theory of the free market-
a belief that businesses operating in a competitive market
will be more beneficial for society than businesses that are
protected from competition.
Main purpose of competition law is to ensure that free
markets operate freely for the benefit of its consumers-
thus businesses should not be removing the competition
as this diminishes the concept of a perfect competition
model.
Consequences of infringing competition law OFT Guidance: could be fined up to 10% of their
annual worldwide turnover
Agreements infringing Chapter 1 and Article 81 are
void and cannot be enforced (anti-competitive
agreements)
Enterprise Act 2002- illegal for individuals to engage
dishonestly in cartels- unlimited fine or up to 5 years in
prison
Directors can be disqualified for up to 15 years
Damages claims can be brought by third parties
Appeals can be made to the Competition Appeal
tribunal
, Primary mechanisms for defining types of anti-competitive behaviours
Art 101 TFEU (Chapter Restrictive business practices
1)
Prohibits 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 internal market
Examples of art 101 Increasing prices around the same time and the same amount
abuse Offer same discount or identical structures
Refuse to supply a customer because of their location
Use terms such as – our competitors will not quote a different price- whilst
these factors are not wholly conclusive, they should indicate a level of enquiry.
Art 102 TFEU Abuse of dominant market position
(Chapter 2)
Any abuse by one or more undertakings of a dominant position within the
internal market or in a substantial part of it shall be prohibited as incompatible
with the internal market in so far as it may affect trade between member states.
Dominance
Legal test for dominance: United Brands v Commission [1978]: relates to a
position of economic strength enjoyed by an undertaking which enables it to
prevent effective competition being maintained on the relevant market by
affording it the power to behave to an appreciable extent independently of its
competitors, customers and ultimately it’s consumers.
Why the market definition mattered in Hilti
It was able to establish that bundling had taken place
If it had been a powder activated fastening market, they would have had 55%-
presumption of dominance
If the separate markets were the three identified- nails and cartridges they
would have had 70-80% share, greater chance of dominance
Examples of art 102 The business can operate independently without competitive pressures
abuse or concern of competitors.
Charging excessively high prices
Limiting production
Refusing to supply an existing long-standing customer without good reason
Making a contract conditional on factors that have nothing to do with the
subject of the contract
Theory of competition law Based on the economic theory of the free market-
a belief that businesses operating in a competitive market
will be more beneficial for society than businesses that are
protected from competition.
Main purpose of competition law is to ensure that free
markets operate freely for the benefit of its consumers-
thus businesses should not be removing the competition
as this diminishes the concept of a perfect competition
model.
Consequences of infringing competition law OFT Guidance: could be fined up to 10% of their
annual worldwide turnover
Agreements infringing Chapter 1 and Article 81 are
void and cannot be enforced (anti-competitive
agreements)
Enterprise Act 2002- illegal for individuals to engage
dishonestly in cartels- unlimited fine or up to 5 years in
prison
Directors can be disqualified for up to 15 years
Damages claims can be brought by third parties
Appeals can be made to the Competition Appeal
tribunal
, Primary mechanisms for defining types of anti-competitive behaviours
Art 101 TFEU (Chapter Restrictive business practices
1)
Prohibits 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 internal market
Examples of art 101 Increasing prices around the same time and the same amount
abuse Offer same discount or identical structures
Refuse to supply a customer because of their location
Use terms such as – our competitors will not quote a different price- whilst
these factors are not wholly conclusive, they should indicate a level of enquiry.
Art 102 TFEU Abuse of dominant market position
(Chapter 2)
Any abuse by one or more undertakings of a dominant position within the
internal market or in a substantial part of it shall be prohibited as incompatible
with the internal market in so far as it may affect trade between member states.
Dominance
Legal test for dominance: United Brands v Commission [1978]: relates to a
position of economic strength enjoyed by an undertaking which enables it to
prevent effective competition being maintained on the relevant market by
affording it the power to behave to an appreciable extent independently of its
competitors, customers and ultimately it’s consumers.
Why the market definition mattered in Hilti
It was able to establish that bundling had taken place
If it had been a powder activated fastening market, they would have had 55%-
presumption of dominance
If the separate markets were the three identified- nails and cartridges they
would have had 70-80% share, greater chance of dominance
Examples of art 102 The business can operate independently without competitive pressures
abuse or concern of competitors.
Charging excessively high prices
Limiting production
Refusing to supply an existing long-standing customer without good reason
Making a contract conditional on factors that have nothing to do with the
subject of the contract
