LEVEL 6 - UNIT 6 SUGGESTED ANSWERS - JANUARY …

1 Page 1 of 12 LEVEL 6 - UNIT 6 EUROPEAN UNION LAW SUGGESTED ANSWERS - JANUARY 2012 Note to Candidates and Tutors: The purpose of the SUGGESTED ANSWERS is to provide students and tutors with guidance as to the key points students should have included in their ANSWERS to the JANUARY 2012 examinations. The SUGGESTED ANSWERS set out a response that a good (merit/distinction) candidate would have provided. The SUGGESTED ANSWERS do not for all questions set out all the points which students may have included in their responses to the questions. Students will have received credit, where applicable, for other points not addressed by the SUGGESTED ANSWERS . Students and tutors should review the SUGGESTED ANSWERS in conjunction with the question papers and the Chief Examiners reports which provide feedback on student performance in the examination. SECTION A Question 1 This Article is a key part of the part of the Treaty structure designed to secure the single market by preserving competition.

2 It operates in parallel with Art 101 which regulates collaborative behaviour. Both apply to undertakings which are any entities engaged in commercial activity; a group of undertakings under common ownership and control are treated as a single entity, but no distinction is made between different business vehicles. Art 102 deals with the independent action of undertakings with market power (and, although rarely, with cases where separate undertakings collectively enjoy dominance: Italian Flat Glass (1989), but for there to be collective dominance there must be transparency between the undertakings, a consistent common policy, and evidence that the policy can operate irrespective of the actions of others: Airtours/First Choice (1999)). The Article requires that there be a dominant position in a defined market. This of itself is permitted, but abuse is not. All the elements dominance, market and abuse, have been extensively considered by the ECJ and General Court.

3 A dominant position is one where the undertaking is able to act autonomously, without having regard to the behaviour of competitors or consumers: United Brands (1978). However dominance cannot exist in a vacuum, before assessing whether an undertaking is dominant, the relevant market must be determined. This relevant market will have two dimensions: the relevant goods or services (the product market), and the geographic extent of the market (the geographic market). This is an area where soft law in the form of the Notice on the Definition of the Relevant Market is of considerable significance. The product market comprises those products which are interchangeable or substitutable. The main focus is on cross-elasticity of demand as for instance in Hoffman La Roche (1979), although the primacy of this factor was contested in Continental Can (1973). It is Page 2 of 12 important to establish the extent to which there are separate markets: United Brands/Continental Can.

4 The larger the market, the more products and producers there are, and the more the share of the undertaking under examination is diluted. The Commission tends to look at substitutability see the Notice on the Definition of the Relevant Market. One important device used is the SSNIP test is demand for the product susceptible to change in the face of a small but significant non-transitory change in price? If not, it is likely to be a separate market this was one factor relied on in United Brands. It is also necessary to consider entry barriers, which inhibit cross-elasticity of supply; if they are high, an existing dominant share may be durable. One criticism of the Commission is that it can take a snap-shot and too readily deduce dominance without examining the evolution of the market over time. If there are separate markets it is easier to establish dominance in one of them. Once it is established whether there are separate markets we should consider market share in each of them.

5 A very high share is presumptive proof of dominance: Hoffman La Roche. This is sometimes referred to as super-dominance and the undertaking concerned is held to have particular duties not to damage the remaining competition (Compagnie Maritime Belge (2000)), although this can be criticised as a penalty for success, since the undertaking may have achieved dominance by innovation or efficiency, and is of course open to new competitors if the market is attractive enough. A lower share may still indicate dominance, if, for example, the market is fragmented: United Brands/Michelin. In such circumstances dominance could exist at the lower threshold of the generally accepted parameters for market power, namely 30%. It is immaterial that dominance has been achieved by merger. The geographic market is prima facie EU wide, but may be smaller if conditions of trading are not uniform: United Brands, where states in which the banana market reflected colonial preference rather than dollar bananas were excluded.

6 Dominance is not itself prohibited. Abuse is as stated in, inter alia, Microsoft (2007). Abuse may be exploitative, this is action targeted at the customer, and includes excessive pricing (levying a monopoly rent) and tying-in so customers must also buy other things: Hilti (1989). Anti-competitive abuse is aimed at eliminating competitors: Intel (2008) and includes predatory pricing (sales at below average variable costs): Akzo Chemie (1991), and loyalty and cumulative discounts, which are seen as foreclosing the market, as distinct from discounts for volume, which are seen as efficient: Hoffman La Roche. The undertaking must operate in a substantial part of the EU but this can be a state, or even in extreme cases a single location: Sealink. Criticism has centred on whether product markets are sufficiently tightly defined, the over-reliance on the SSNIP test and willingness to find market power and therefore dominance at a relatively low market share.

7 Some abuses are merely aggressive marketing strategies which can be used by smaller undertakings. This creates an imbalance between established and successful dominant undertakings and their competition. Question 2 Article 263 is an action for annulment, equating to a national application for judicial review, and allowing the Court of Justice or General Court to rule on the legality of any binding act of an institution, however designated (AETR), with a two month time limit. It is principally intended for use by the privileged Page 3 of 12 applicants, namely other institutions and the member states, who are the principal stakeholders within the EU. Non-privileged applicants, namely natural and legal persons, could pre-Lisbon only review decisions, including decisions in the form of a regulation, for example regulations in the field of anti-dumping or allocation of licences/quota under CAP, where a single Regulation bundled together a series of decisions on the position of individual offenders or applicants.

8 The decision had to be addressed to them or be of direct and individual concern. This is the situation SUGGESTED by the question. Most such decisions are quasi-judicial ones by the Commission, in relation to competition issues and the challenge is in the nature of an appeal. The intention was that those directly addressed or closely affected ( unsuccessful complainants in competition cases) should have locus standi. Direct and individual concern was the test adopted to achieve this tight limitation. Direct concern has been interpreted as existing when the measure in question confers no discretion, so it will be applied in a specific way: Alcan (1970). Where the measure gives the state (or an EU institution) a discretion, then in principle an improper exercise of that discretion will give rise to a separate action. Individual concern was interpreted very early as relating to measures which applied specifically to the applicant as though he were the addressee, distinguishing him from all others: Plaumann (1963).

9 This has usually proved possible only where there is a measure which is applied to a defined and closed class: Bock (1971), Toepfer (1965). In Piraiki-Patraiki (1985) there was individual concern where existing contractual arrangements were interfered with, and in Codorniu (1994) where intellectual property rights were affected, but these are exceptional cases. Attempts were made to argue that there was a gap in legal protection where a regulation could not effectively be challenged in Art 267 proceedings prospectively; this argument met with some sympathy from Advocate General Jacobs and the General Court, but was rejected by the Court of Justice in UPA (2002) and J go-Qu r (2004), where the case that inability to challenge a regulation left a gap in effective legal protection, by appearing to exclude review in cases where there was no alternative redress available, was countered by the argument that it was for the member states to ensure that any decision/regulation of a general nature could be challenged in the national court.

10 The plea of illegality under Art 277 could be deployed here in relation to the regulation in question, and although the national court could not rule on legality, it could make an Art 267 reference. Article 263 has been modified by the Lisbon Treaty following criticism of these decisions. However, this modification applies only to a regulatory act, which appears (although the TFEU is actually not explicit on the point) to relate to secondary regulations made by the Commission, and not using a legislative process (see Simmenthal (1979)). However, although this modification has in effect reversed the effect of the J go-Qu r decision by removing the requirement for direct concern in these cases, it appears to be an ad hoc solution, rather than a clear distinction in principle. Art 263 remains bedevilled by its dual role, and those member states which failed to provide for a remedy via Art 267 have been let off the hook.