Competition law
Markets, dominance, information exchange and professional advice
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Lead-in
Start with what competition law is trying to protect.
Discuss with a partner.
- What do you know about competition law?
- Can you name and talk about any recent well-known cases in your country?
A useful starting pointCompetition law generally addresses conduct or market structures that may weaken effective competition. The governing tests, institutions and remedies vary by jurisdiction.
Reading 1: competition law
Predict first, then read to check and refine your answers.
Before reading
- Competition law monitors two main types of commercial activity. What are they?
- What is competition law known as in the USA?
- Is knowledge of competition law only important for big businesses?
- What can the consequences of breaching competition law be for a business and for individuals?
- What are the two main systems of competition law?
Competition law
Competition law essentially prohibits agreements or practices that restrict free trading or competition between business entities. It also bans abusive behaviour by a firm dominating a market or anticompetitive practices that lead to a dominant position, such as predatory pricing, tying, price gouging and refusal to deal. In the United States, it is known as antitrust law, because trusts could be set up which businesses could hide behind and behave in a way that could be anticompetitive.
Competition law is designed on the one hand to enhance and on the other hand to regulate all forms of commercial and business transactions. As such, any business, whatever its legal status, size and sector, needs to be aware of competition law for many reasons. Firstly, so that it can meet its obligations and, in so doing, avoid findings where agreements are unenforceable. Secondly, to remove the risk of being fined up to 10% of group global turnover for particularly damaging behaviour. Thirdly, in order to remove the possibility of damages actions from customers. Fourthly, to minimise the risk of individuals in business facing director disqualification orders or even criminal sanctions for serious breaches of competition law; and fifthly, so that it can assert its rights and enable it to protect its position in the marketplace.
The two largest and most influential systems of competition law regulation are the United States antitrust law and European Community competition law. While there has been a tendency for international competition law to follow the model of the United States, international initiatives have also involved major organisations concerned with the effects of monopolies and cartels, including UNCTAD, the OECD, the WTO and the International Competition Network.
Reveal sample reading answers
- Restrictive agreements or practices, and abusive or dominance-related conduct.
- Antitrust law.
- No. The article says businesses of any status, size or sector need awareness.
- Fines, unenforceable agreements, damages actions, director disqualification and possible criminal sanctions.
- The US antitrust system and European Community competition law.
Language work
Learn this vocabulary in chunks: the word partnerships and grammar patterns it really turns up in.
Definition challenge
Take turns choosing a word, defining or describing it, and using it in your own sentence.
Reading 2: dominant undertakings
Compare how these six countries approach market dominance.
Discuss before reading.
- What is the difference between making a presumption about X and saying that something is deemed to be X?
- What are two meanings of the word undertaking?
- What do you understand by the term dominant undertaking?
Historical source noteThese summaries come from the course material and are here for language comparison. They are not a statement of current law. Current thresholds and legal tests must be checked in authoritative sources.
Austria
The supplied summary says the burden of proof shifts where an undertaking has more than 30% of the relevant market, or more than 5% while exposed to competition from no more than two other undertakings, or more than 5% while belonging to the four biggest undertakings whose joint share is at least 80%.
Belgium
No statutory threshold is stated in the summary, but the cited case law suggests a presumption of dominance at a market share of 50% or more.
Bulgaria
The undertaking is deemed dominant if its market share exceeds 35%.
Cyprus
No market-share threshold is defined. The focus is on what constitutes abuse of a dominant position rather than what constitutes a dominant undertaking.
Czech Republic
An undertaking is deemed not dominant if its relevant-market share does not exceed 40%, unless other indicators prove otherwise. The summary also lists sales or purchases, economic and financial power, barriers to entry, vertical integration, market structure and competitors’ shares.
France
No formal threshold is stated. A share above 40% or 50% may be a factor, but it is not the only factor and may not be the main basis for a decision.
Writing: an internal legal memorandum
Organise a case update before giving cautious advice.
Training case file: Jupiter Electronics
Jupiter Electronics has received a competition authority request for documents. At trade-association meetings, two sales managers allegedly exchanged future price ranges and customer information with competitors. One manager says the discussion was only general benchmarking. No conclusion has been reached about whether an agreement existed or affected market conduct.
Andrew, an associate, is about to be away from the office. He must brief Sylvia, the senior partner, identify the attached legal materials and suggest immediate steps.
Discuss.
- How strong does Jupiter Electronics’ case appear on the information currently available?
- What should happen next?
| TO / FROM / SUBJECT | |
|---|---|
| Context and issue | |
| Information and attachment | |
| Action and closing |
Speaking: advising a client
Balance legal risk, cost and evidence without promising an outcome.
Cruise-line client
Your firm represents a small cruise line. Its owner believes that two larger cruise companies are conspiring to fix prices and asks for advice.
Discuss your advice
- Problems involved in proving a price-fixing conspiracy
- Possible legal action
- Costs and risks of taking or not taking proceedings
- Alternative action
Exam practice
Complete the reading, then plan two professional communication tasks.
Reading: Part 2
Competition law and sharing information among companiesInformation exchange between companies is (0) an everyday commercial reality. If companies (1) exchange information, commercial life would grind to an abrupt halt, as nobody would ever be (2) to reach agreement. Even competitors may publish certain information in (3) that those active in the market can gauge the general health of an industry. Without (4) exchanges, important investment decisions by businesses themselves, as (5) as by investors and government, would be made in the dark. (6) this, companies must be very careful when making information available, as sharing too (7) information could breach competition law and create exposure to the risk of a large fine or even criminal sanctions (8) to individuals.
Competition law becomes relevant when the nature of the information exchanged between current or potential competitors (9) it easier for them to predict each others’ behaviour and adjust (10) own accordingly. This in its most severe form may enable participants to fix prices or allocate customers or markets, in other words, create a cartel. For this reason, (11) is this exchange of information that is most strictly controlled by competition law. Information exchange between supplier and buyer is (12) only permissible but necessary if they are to reach a commercial agreement.
Speaking: Part 3
You run legal training programmes for companies. A client asks you to design a one-day competition-law programme. Decide what to include and why.
- Anti-competitive activity
- Consequences of breach
- How to achieve compliance
Writing: Part 2
You have invited a training agency to deliver a day’s competition-law course for your employees. Write a memorandum to employees. Explain why the day is being organised, identify the course content, give the times and state what employees should do after receiving the memo, including questions for the trainers.
Write 200 to 250 words.
Teacher’s answer key
Every closed and open task includes an answer or model, plus teaching notes and qualifications.