Throughout history, competition has been one of the thriving force behind innovation of products and services. It is vital for the development of companies, and the never ending quest to provide better quality to the demands of the market. The European union has been able to stablish a system of laws that provide an even ground to all companies interested in competing in this market, which have been adapting as the union expands and evolves. With new members joining, with new players for the market, it is important to have a clear idea of the rules in which the different entities coexist. These laws are imposed by the European commission and the National cartel authorities of each member State, cooperating with each other by the European Competition Network. But the jurisdiction of these entities is limited to trade between member states, leaving the responsibility of the State level to the National authorities. These authorities establish their own set of laws, which are in compliance with the European Union laws, and are bound to them in the general terms.

This set of laws are primarily imposed in order to confront 4 types of irregular activities that might interfere with the proper behavior of the European Market. They are:

They are defined through their prohibition in the Treaty on the functioning of the European Union (TFEU) in Article 101:

 

  1. The following shall be prohibited as incompatible with the internal 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 internal 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.

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It is vital for the development of companies, and the never ending quest to provide better quality to the demands of the market.
  • Dominant position.

The dominant position practice is defined in Article 102 of the Treaty on the functioning of the European Union (TFEU):

Article 102

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. Such abuse may, in particular, consist in:

(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions;

(b) limiting production, markets or technical development to the prejudice of consumers;

(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby

placing them at a competitive disadvantage;

(d) making 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.

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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…

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

  • Mergers and Acquisitions.

These are defined in the EC Merger regulation in Article 3:

Article 3

Definition of concentration

  1. A concentration shall be deemed to arise where a change of control on a lasting basis results from:

(a) the merger of two or more previously independent undertakings or parts of undertakings, or

(b) the acquisition, by one or more persons already controlling at least one undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings.

  1. Control shall be constituted by rights, contracts or any other means which, either separately or in combination and having regard to the considerations of fact or law involved, confer the possibility of exercising decisive influence on an undertaking, in particular by:

(a) ownership or the right to use all or part of the assets of an undertaking;

(b) rights or contracts which confer decisive influence on the composition, voting or decisions of the organs of an undertaking.

  1. The creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity shall constitute a concentration within the meaning of paragraph 1(b).

 

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any aid granted by a Member State or through State Resources in any form whatsoever which distorts or threatens to distort competition
  • State Aid.

The boundaries regarding State Aid to internal markets is defined in Article 107 of the Treaty on the functioning of the European Union (TFEU):

Article 107

  1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.
  2. The following shall be compatible with the internal market:

(a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned;

(b) aid to make good the damage caused by natural disasters or exceptional occurrences;

(c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.

  1. The following may be considered to be compatible with the internal market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) aid to promote culture and heritage conservation where such aid does not affect trading

conditions and competition in the Union to an extent that is contrary to the common interest;

(e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission.

Present situation in new markets

After analyzing the case studies provided in the conference, there is a whole new market that is affecting the reach that the regulations on competition have on guaranteeing a fair ground for all companies inside the EU. Since approximately 2010, the world has begun to see a change of platform that has affected the way content is being distributed to users. From a simple sharing of photos and videos, to direct services that can be quantifiable in the physical world, the mobile world has become the biggest platform for small and big companies to compete. With more than 10 billion devices operative worldwide, it is the fastest growing market, compared to the other platforms in history and their impact like the PC era (only 1 billion devices in a similar time period). And the biggest most quantifiable acquisition in this market has become the user´s personal data. Its this factor what has allowed companies like Facebook, and Google to emerge and become the biggest companies in the world, taking in consideration data like their valuation:

Company Valuation (billions) Num. of employees Average value (per employee)
Facebook $228,2 10.082 $22.634.000
Google 383,1 56.600 $7.147.000
2017

With this level of valuation, there is always the tendency of creating cases of dominant position, like the case study regarding Google and its preference in their own affiliate services. This case can extend to all the type of services Google offers, including their own internal set of rules and laws regarding page positioning, which might or might not comply with those of the European commission, the National cartel authorities of each member State, and the European Competition Network. In order to face this situation, lawmakers must be constantly informed about the extends of these new markets and their players. And although the European Union has enacted very detailed and strict rules to safeguard competition on the single market, the sanctions imposed must be directly proportional to the extension of this new markets that operate internally and externally. Cases of clashes between the digital and the real market are seen everyday: In Spain, services like Air B&B and UBER are having a direct impact on the housing and transportation markets, affecting in a negative way the status quo. A rise on property value and complain of illegal practice are some of the points raised by the entities affected directly by this changes in the market, and are new legal grounds on which lawmakers must provide a level ground of competition, in order to safeguard the competition on the single market.

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Thanks to @aleixvalls for this great presentation, and @MoritzBarcelona and @ClubMktBcn for the planning of this event.
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