Article 101 aims to prevent collusion between parties. The article deals with scope, substance, and possible justifications.
The scope of Article 101 is limited. It applies to certain entities, particular kinds of conduct (deciding, concerting, practicing), and in certain territories (affect trade between member states).
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[.]
In sum, Article 101 does not apply to unilateral conduct (there needs to be another party involved), and the conduct has to restrict competition (however, you can collude to increase competition). Territorially, you don't need to be in the EU or established in it, just affecting trade in it.
Article 101(1) has four conditions:
- There are two or more undertakings
- They collude
- That collusion restricts competition
- The conduct of the undertakings affects trade between member states
If these conditions (101(1)) are satisfied, the agreement is void (per 101(2)) unless there is a justification (under 101(3)).
What is an Undertaking?
'Undertaking' is an intentionally vague term used to encompass all sorts of legal entities. If it were well-defined, EU member states could (and probably would) start making exceptions for themselves.
Per C-41/1990 Höfner, an undertaking is "[a]ny entity engaged in economic activities regardless of the legal status of the entity and the way in which it is financed." But that just means we have to define 'economic activity' now.
Economic Activity
Economic activity is generally considered to be the offering of goods and services with the potential to make profit. Just purchasing goods and services isn't economic activity, only supplying (per FENIN).
Per 118/85 Commission v Italian Republic, state activities may be considered undertakings.
The state may act either by exercising public powers or by carrying on economic activities of an industrial or commercial nature by offering goods and services on the market
Likewise, in Joined Cases C-264/01 etc AOK, AG Opinion
In assessing whether an activity is economic in character, the basic test appears to me to be whether it could, at least in principle, be carried on by a private undertaking in order to make profits. If there were no possibility of a private undertaking carrying on a given activity, there would be no purpose in applying the competition rules to it
Economic activity does not require a profit making motive, and it don't even need to be making a profit (just have the potential to). Potential is judged under any legislative regime, rather than under the current one (is there a potential to make a profit? Rather than is there a potential to make profit under the law?)
The facts in Höfner make this a bit more clear. Under German law, recruitment services could only be provided by the Bundesanstalt fuer Arbeit (the German version of the Job Centre). Services are provided for free, and every job must be advertised there and only there. Mr Höfner was a recruitment consultant, and his client refused to pay. Höfner brought action for breach of contract, but his client alleged the contract was void, as it's illegal to hire this way. The court decided this was a matter of interpreting EU law, and referred the issue to the EU courts.`
The EU court asked if the Bundesanstalt fuer Arbeit would be considered an undertaking, and ultimately held that
The fact that employment procurement activities are normally entrusted to public agencies cannot affect the economic nature of such activities. Employment procurement has not always been, and is not necessarily, carried out by public entities. That finding applies in particular to executive recruitment It follows that an entity such as a public employment agency engaged in the business of employment procurement may be classified as an undertaking for the purpose of applying the Community competition rules.
Basically, everyone engaged in economic activity is an undertaking unless it's impossible to make a profit. The most obvious example is if you're providing a public good. Public goods are non-rivalrous in consumption (consumption doesn't prevent others from doing the same) and non-excludable (can't exclude free riders, everyone benefits). Lighthouses are often cited as an example.
Attribution
Once it's been decided that there was an anti-competitive agreement, the Commission needs to work out who to attribute it to. This is usually straightforward, but in the case of conglomerates (a combination of multiple business entities) it's less clear. This is largely because parent companies can get fined up to 10% of their turnover (sometimes in the billions of euros) and, as a result, there have been a lot of appeals about attribution.
In general, you can attribute to parent companies when
- They're a participant in the cartel infringement
- They directed or had knowledge of subsidiary participation
- They had decisive influence (which is usually presumed when wholly owned) over the subsidiary when the infringement took place
C-62/86 Akzo suggests that, even with 100% of shares owned, the presumption of decisive influence can be rebutted (but an undertaking would have to demonstrate the two entities do not comprise a single economic unit, perhaps for legal reasons).
Conversely, if a minority shareholder can be seen to have decisive influence over an undertaking, they may be attributed, as in C‑179/12 Dow Chemical.