Competition Law

1. Introduction

The starting point must be that Competition Law exists to protect the process of competition in a free market economy-that is an economic system in which the allocation of resources is determined solely by supply and demand in free markets and is not directed by government regulation.

The history of competition law reaches back to the Roman Empire. The business practices of market trades, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law.

The first European ‘competition law’ was enacted in Germany in 1923 in response to the postwar inflation crisis. The system created to implement this legislation became an important factor of economic and legal life in Germany during the 1920s and established competition law as an operational reality rather than merely an idea. It was, however, to weak to withstand the pressures ranged against it, and it was eliminated during the 1930s.

German experience with this system was nevertheless influential in the spread of competition law ideas, and during the late 1920s these ideas were widely discussed throughout Europe. By the early 1930s, additional statutes along the lines of the German legislation had been enacted in several smaller European states. More importantly, these discussions and enactments generated a framework for thinking about the roles and characteristics of competition law that was to be used after the Second World War as the basis for the competition legislation and that remains influential.

In Europe, competition law is to be seen as part of an ‘economic constitution’ which embraces social justice and is part of the political system. EC competition law uses economic analysis as a tool in the application of competition law, and the context of the law is the aims and objectives of the Treaty of Rome.

2. The Principles of Competition Law

Competition Law, or antitrust law, has three main elements:

• prohibiting agreements or practices that restrict free trading and competition between businesses. This includes in particular the repression of free trade caused by cartels.

• banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, price gouging, refusal to deal, and many others.

• supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing.

The European Court of Justice (ECJ) has developed and introduced a body of unwritten law, the general principles of law, as part of Community law. These are rules, based on national laws of Member States and international treaties to which the Member States are signatories, especially the European Convention on Human Rights and Fundamental Freedoms, in accordance with which Community law is interpreted. The principles are important when determining the boundaries of proper and lawful action of the Community and national institutions (when the latter are acting within the sphere of Community law).

The actions of institutions applying and enforcing the EC competition rules must respect the general principles of law, in particular, the principles of proportionality, legitimate expectations, and fundamental rights. The point is of special importance to the Commission which must ensure that when conducting competition investigations its administrative procedures comply with principles of human rights, rules of natural justice, and rights of defense, for example the right to be heard and to know the case against one. In many appeals from a Commission’s competition decision the parties have alleged that the Commission has failed to observe these principles. National authorities must also respect these principles when applying Articles 81 and 82.

The general principles were previously unwritten Community law, in the sense that they were to be found in the case law of the Court. However, a Charter of Fundamental Rights of the European Union was ‘solemnly proclaimed’ by the Council, Parliament, and Commission and politically approved by the Member States at the Nice European Council summit in December 2000. The Charter, which ‘could perhaps best be described as a creative distillation of the rights contained in the various European and international agreements and national constitutions on which the ECJ had for some years been drawing’ was not expressed to be legally binding, largely because of the opposition of certain Member States, notably the UK. The Constitution for Europe includes the Charter and if the Constitution is ratified the Charter will acquire full legal force.