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Competition law

Competition is the process of rivalry between companies willing to win customer’s business over time. Competition law consists of a series of rules designed to protect a system where consumers can benefit from lower prices, better products, wider choice and improved goods or services. Nowadays, there are more than 130 competition law systems in the world.

Competition laws are enforced both by public authorities and by private individuals. Public enforcement at European Union (EU) level is done in parallel by the European Commission and the National Competition Authorities of the Member States. In the Netherlands, the regulator is the Authority for Consumers & Markets (ACM), which also enforces the Dutch competition law rules.

In the EU, two treaty provisions mainly constitute the law in this area: Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). EU Member States have their own competition law systems based to a greater or lesser extent upon Articles 101 and 102 TFEU. In the Netherlands, the law in this field is constituted by Articles 6 and 24 of the Dutch Competition Act. A third component of the EU competition law system (as well as national legal systems) is the merger control regime.

The cartel prohibition as contained in Article 101 TFEU (and the Dutch law equivalent) prohibits agreements and other forms of cooperation which reduce the competitive pressure that companies normally face in the market. For instance, an agreement concluded between several sugar suppliers to sell their sugar at a given price in the future will typically be caught by the cartel prohibition. Such an agreement would reduce the supplier’s uncertainty about their competitors’ prices as well as make it more difficult for new producers to enter the sugar supply market. Article 101 TFEU does not only prohibit agreements between competitors (horizontal agreements), but also between non-competitors (vertical agreements). For example, a restriction imposed by a supplier on a distributor to sell its products at a minimum price would, in principle, be prohibited. Article 101 TFEU prohibits both agreements that are restrictive in themselves and agreements which, without being restrictive themselves, produce the effects of restricting competition in the market. The equivalent provision in the Netherlands is Article 6 of the Dutch Competition Act.

Article 102 TFEU prohibits companies that hold a dominant position in a market from abusing such a position. A company enjoys a dominant position when it is able to behave independently from its competitors and customers, with, generally, a market share exceeding 40%. For instance, a dominant company would be one that can afford to offer considerably greater discounts to its customers in comparison with its competitors. To hold a dominant position is not forbidden, what is not allowed is to abuse such a position. An abuse of a dominant position can take many forms. A type of abuse caught by Article 102 would be a requirement by a dominant company to its customers that wish to buy a certain product to also buy another product (this practice is known as tying). The equivalent provision in the Netherlands is Article 24 of the Dutch Competition Act.

The merger control regime is concerned with the possibility that a merger or acquisition may adversely change the market conditions by making the markets less competitive. The EU merger control system operates in a way that, when the turnover of the companies involved in a “concentration” (change of control) meets the EU thresholds, approval by the European Commission prior to the completion of the transaction is required. The European Commission is the only one that has jurisdiction to assess such mergers; this is the principle of “one-stop-shop merger control” in the EU. When a concentration does not meet the EU turnover thresholds, Competition Authorities of the Member States affected by such merger may assess it, provided that the national turnover thresholds are reached. In the Netherlands, the ACM is the authority in charge of such assessment. The merger control regime in the Netherlands is found in Chapter 5 of the Dutch Competition Act.

Private enforcement of competition law can be sought by way of actions before national courts. Articles 101 and 102 TFEU as well as the equivalent Dutch legal provisions create rights for private parties and can therefore be directly invoked before the Dutch courts.

Eversheds’ Competition Law practice provides legal services across the entire spectrum of competition law. If you have any queries please contact Michel Chatelin or Manish Bahl for more information.