Ukrainian Law Blog: The EU: Competition rules

Monday, September 21, 2015

The EU: Competition rules

The EU has strict rules protecting free competition. Under these rules, certain practices are prohibited (see below).

However big or small your business, you have to play by the rules! If you infringe the EU's competition rules, you could end up being fined as much as 10% of your annual worldwide turnover. In some EU countries individual managers of offending firms may face serious penalties, including prison.

EU competition rules apply directly in all EU countries - the courts in your country will uphold them. These rules apply not only to businesses but to all organisations engaged in economic activity (such as trade associations, industry groupings, etc).

Prohibition 1: illegal contacts and agreements

These agreements are known as cartels. They are forbidden because they restrict competition. They can take many forms, and need not be officially approved by the companies involved. The most common examples of these practices are:

Price fixing
Market sharing
Agreement on customer allocation
Agreement on production limitation
Distribution agreements between suppliers and re-sellers where, for example, the price charged to customers is imposed by the supplier.

All agreements and exchanges of information between you and your competitors that reduce your strategic uncertainty in the market (around your production costs, turnover, capacity, marketing plans, etc.) can be seen as anti-competitive.

Even disclosing this kind of strategic information unilaterally via mail, phone or meetings could be seen as infringing this rule.

To be on the safe side:

Do not fix prices or other trading conditions
Do not limit production
Do not share markets
Do not exchange strategic information about your company.

Some agreements are not prohibited - if they can be justified as benefiting consumers and the economy as a whole. One example is agreements on research & development and technology transfer. These cases are covered by the Block Exemption Regulations .

Prohibition 2: abuse of a dominant position

If your company has a large market share, it holds a dominant position and must take particular care not to:

charge unreasonably high prices which would exploit customers
charge unrealistically low prices which may drive competitors out of the market
discriminate between customers
force certain trading conditions on your business partners.

How to report anti-competitive behaviour?

If you come across business practices that might restrict competition, you can report them. If the situation is specific and limited to the country or area where you live, or involves no more than 3 other EU countries, start by contacting your national competition authority.

If you are unsure about the problem, you can contact the European Commission at: comp-market-information@ec.europa.eu or write to:

European Commission, Directorate General for Competition
Antitrust Registry
B-1049 Brussels, Belgium

If you think your company is involved in a cartel or other activity restricting competition, you should know that the first company to submit evidence of a cartel may receive total immunity from fines! (see the leniency programme).

Initial contact with the European Commission should be made by fax to +32 2 2994585 or by telephone to +32 2 2984190 or +32 2 2984191.

Mergers

Companies of a certain size (starting at EUR 2.5 billion of combined aggregate worldwide turnover) doing business in the EU and wishing to merge must ask the European Commission for approval - irrespective of where their headquarters are located. Approval of the merger will depend on the market share that the merged company would have in the EU. Mergers between small businesses are not usually restricted.

State aid

The EU rules generally prohibit state aid (which take various forms such as grants, interest and tax relief, loan guarantees) because they risk putting certain businesses at an advantage over their competitors, thereby distorting competition.

State aid may be permitted in the following cases: