EU Competition Law and the Financial Services Sector

Andrea Lista

• Publisher: Informa Law from Routledge
• Year: 2013
• Print ISBN: 9780415830539
• eBook ISBN: 9781135044640
• Edition: 1
• Topic: Diritto
• Subtopic: Diritto commerciale

Competition law is a complex and constantly evolving area of law which affects every aspect of the market economy, including the financial services sector. This book is a comprehensive and practical guide to the application of the EU competition rules to banking and insurance industries.

This book is divided into two parts: the first part explores the application of Articles 101, 102 and 107 TFEU to the insurance industry. Emphasis is placed on recent changes which have progressively eroded the block exemption regime that traditionally benefited the insurance industry.

In the second part of the book, focus is on the application of the Articles of TFEU to the banking industry, with specific reference to card payment systems, which give rise to some of the most intricate antitrust issues in the financial services sector. Relevant Commission decisions and European Court of Justice case law are discussed and suggestions are made for an alternative regulatory framework through comparative analysis of US regulations.

This book will be an invaluable reference point for legal practitioners specialising in EU Competition law, as well as postgraduate students and academic researchers working in competition law and the financial services sector.

PART 1

SETTING THE SCENE

CHAPTER 1

THE MEANING OF EU COMPETITION LAW

1.1	The Meaning of EU Competition Law—The General Picture
1.2	Article 101 of the TFEU and the Control of Collusive Behaviors
	1.2.1	Anticompetitive agreements under Article 101: Horizontal Agreements
1.3	Article 102 TFEU: Abuses of Dominant Position by One or More Undertakings: Meaning and Issues
1.4	State Aid

1.1 THE MEANING OF EU COMPETITION LAW—THE GENERAL PICTURE

Competition law is a constantly developing legal field. Although it is characterized by an idiosyncratic and technical nature, competition law has a pervasive influence on every area of law and on rules of politics and economic policy.

Its principal function is to safeguard and promote the competitive process, with the aim of ensuring an optimum allocation of resources in a market and to maximize consumer welfare. In other words, competition law regulates market activities in order to preserve a free market system. In a market without any form of control, undertakings would be naturally inclined to collude to fix prices, those in a dominant position to abuse their market strength, and mergers might inevitably lead to excessive concentrations of economic power. Such practices can hinder or inhibit the competitive process.

The aim of competition law is therefore to regulate the relationships between undertakings selling goods or providing services of the same kind at the same time to an identifiable group of customers within the same geographical market.

The creation of the European Economic Community in 1957 started a process of economic integration in which competition law has played a principal role. Within this process, for more than 50 years the Commission and the Community Courts have built a complex and wide-ranging framework of competition law principles, with which Member States are required to comply.¹ EU competition law is a unique legislative framework: it has been structured on the basis of the different historical and legal experiences that have shaped national competition laws of the various member states and has been superimposed on them.

EU competition law includes four main policy areas arising from the Treaty rules:

(i) The control of any type of cartels or control of collusion and other anticompetitive practices that have an effect on the EU (Article 101 TFEU²);

(ii) The prohibition of monopolies or any abuse of dominant market positions (governed by Article 102);

(iii) The control of direct and indirect aid given by EU Member States to companies (state aid, covered under Article 107); and

(iv) The control of proposed mergers, acquisitions, and joint ventures involving companies having a defined amount of turnover in the EU/EEA (governed by Article 102 and by Council Regulation 139/2004 EC, the Merger Regulation)

This chapter considers these policy areas in turn.

1.2 ARTICLE 101 OF THE TFEU AND THE CONTROL OF COLLUSIVE BEHAVIORS

Article 101 of the TFEU is the provision of the Lisbon Treaty related to anticompetitive behaviors representing the outcome from collusion among undertakings. Article 101 prohibits all agreements between undertakings, decisions by associations of undertakings, and concerted practices that may affect trade between Member States and that have as their object or effect the prevention, restriction, or distortion of competition within the common market.

Article 101 states that:

(1) The following shall be prohibited as incompatible with the common market: all 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 common market, and in particular those which:

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

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

(c) share markets or sources of supply;

(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;

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

(2) Any agreements or decisions prohibited pursuant to this Article shall be automatically void.

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

– any agreement or category of agreements between undertakings;

– any decision or category of decisions by associations of undertakings;

– any concerted practice or category of concerted practices,

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

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

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

Article 101 has a clear construction laying down three basic statements:

(a) a general prohibition of anticompetitive agreements, decisions by associations of undertakings and concerted practices;

(b) a sanction of nullity for any of such kind of agreements, decisions, and concerted practices;

(c) the prospect to give an exemption to those agreements, decisions, and concerted practices by virtue of their positive and beneficial effects.

Article 101 can be defined as the foremost means for the control of anticompetitive behaviors in the common market. It involves all possible types of action against a fair competition, prohibiting first of all anticompetitive agreements. These kinds of agreement can be horizontal, “meaning that they are made between firms at the same level of the production cycle,” or vertical, that is, “between firms at different levels of the distribution cycle.”

Second, Article 101 concerns “decisions by associations of undertakings”; because the Treaty does not specify the notion of “decision,” this concept was developed by the European Courts of Justice. Giving a broad definition of “decisions,” the Courts stated that this notion covers “not only agreements between its members, but also recommendations issued by the association, provided that they are shown to be binding, either in law or in fact, on its members.”

The third category envisaged in Article 101 involves the concept of “concerted practices.” The rationale that lies behind this concept is to prohibit all anticompetitive practices, including the ones relating to any type of collusion among undertakings. Although the treaty does not provide a definition of the concept of “concerted practices,” the ECJ³ offered an interesting characterization of this concept in the case ICI v. Commission.⁴ At paragraph 64 of the judgment, a concerted practice is defined as: “… a form of cooperation between undertakings, which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition.” The essence of this definition is thus the existence of “an act of reciprocal communication between undertakings, which has the aim of distorting competition in a particular market.”

To this end, in order not to infringe Article 101, undertakings must determine independently the economic policy they intend to adopt. Beyond that, any form of direct or indirect coordination between undertakings that aims to create artificial conditions of competition in a given market will be caught by Article 101.

Agreements restricting competition within the internal market can be exempted provided only that they fulfil the four cumulative conditions listed in Article 101(3): they must increase efficiency; consumers must receive a fair share of the resulting benefits; the restrictions must be indispensable to the attainment of these objectives; and, finally, such agreements must not allow the elimination of competition.

Article 101 is structured into three paragraphs. The first paragraph lays down a general prohibition of any collusive behavior between undertakings having as its object or effect the restriction, prevention, or distortion of competition in the market. This prohibition has a vast area of application, which includes both informal agreements (gentlemen's agreements) and concerted practices, that is, forms of practical collusion where undertakings adopt the same behavior raising or lowering prices at the same time in absence of a formal agreement (i.e., without having physically agreed to do so).

Furthermore, Article 101 covers both horizontal agreements (agreements between undertakings occupying the same position in the production or distribution chain, e.g., agreements between retailers) and vertical agreements (between undertakings having a different position in the production or distribution chain, e.g., agreements between retailers and suppliers), effectively outlawing the operation of cartels within the EU.

Horizontal agreements represent the most serious threat to competition and include the so-called hard-core restrictions, that is, price-fixing, establishment of quotas, and market sharing. Information exchange agreements are another very controversial form of horizontal agreements due to their capabili...

Table of contents

• Cover Page
• Half Title page
• Series page
• Title Page
• Copyright Page
• Dedication
• Preface
• Contents
• List Of Tables And Figures
• Table of cases
• EU and U.S. Secondary Legislation
• Part 1 Setting the Scene
• 1. The Meaning of EU Competition Law
• 2. The Application of EU17 Competition Law to the Financial Services Sector: General Issues
• Part 2 Insurance
• 3. Setting the Scene: The Application of Article 101 to the Insurance Sector: The Early Stages and the First Block Exemption Regulation
• 4. The Recent Past Scenario: Regulation 358/2003114
• 5. Regulation 267/2010: The Current Regulatory Framework for Horizontal Agreements in the Insurance Sector
• 6. The Way Forward: A Future without the Eu Insurance Block Exemption?185
• 7. Article 102 TFEU and Mergers and Acquisitions in the Insurance Sector
• 8. State Aid and the Insurance Sector
• Part 3 Banking
• 9. The Application of EU Competition Rules to the Banking Industry: General Issues
• 10. Article 101 TFEU and Price Competition Issues in the Banking Sector
• 11. Payment Card Systems and Competition Concerns: Multilateral Interchange Fees and No-Discrimination Rules630
• 12. Article 101 and Non-Price Competition Issues in the Banking Sector
• 13. Article 102 and Mergers and Acquisitions in the Banking Sector
• 14. Article 102 and Clearing and Settlement Services in the Banking Sector
• 15. State Aid in the Banking Sector
• Bibliography
• Miscellaneous
• Index