'Modernizing the EC Competition
Regime: Lessons from Asia'.
Asia Competition Law Forum
May 20, 2008
Valentine Korah, UCL
EC Law = indirect model for
• Competition law in Singapore is based on
UK Competition Act 1998
• Which in turn is based on EC law, Articles
81 and 82.
• UK merger law has an older basis in
Monopolies and Mergers legislation,
– It applies only to mergers not caught by EC
– I will not consider it today.
Modernisation of EC law
• The formalistic rules that grew up round
article 81 were modernised substantially
between about 1990 and 2004, a period
when for much of the time Mario Monti
• Reform of Article 82 has been far less
successful, partly owing to early formalistic
judgments of the 1970s, which the Courts
are still following.
Reform of merger law
• There was concern that mergers that might not
result in the creation or strengthening of a
dominant position for a single firm might not be
covered. Tacit collusion an oligopolistic market
amounted to a joint dominant position, but
unilateral action might not be covered by the
merger regulation of 1989.
• Regulation 139/2004 extended the coverage of
the former regulation to a significant lessening of
competition, in particular, the creation or
strengthening of a dominant position..
• Whether unilateral conduct was covered by the
earlier regulation was still unclear. Now, clearly it
• The new reg. 139/04 made other important
changes, especially extending the deadlines and
enabling cases to be allocated to the
Commission or NCAs by reference.
• I shall not deal with the reform of merger law
EC competition law formalistic
• In early days, with notable exceptions, EC
officials were used to interpreting
competition law in formalistic way due to
their civil law backgrounds and to the ordo
• Any restriction on freedom of conduct was
treated as restriction of competition.
In Singapore, see effects on market
• This is denied for Singapore in s. 34, G
2.18. CCS will assess market effects
through reference to legal and economic
context. Good! Your law is better than ours
was, but our approach to cooperation such
as joint ventures is changing towards
Art 81 bifurcated
• Art. 81(1) (EC) prohibition is much like your s.34
save for references to the common market and
trade between Member state,
• but EC law is qualified by Art 81(3), which
provides for exemptions or exceptions. Until
2004, individual exemptions could be granted
only by the Commission (Com.) and it lacked the
resources to manage more than 3 or 4 in most
Commission takes control
• By taking exclusive power in Reg 17/62 to
grant exemptions and construing the
prohibition widely, the Commission took
control over difficult decisions when
balancing of pro and anticompetitive
effects was required.
• But at a cost to the enforcement of
Courts could not enforce contracts
• National courts asked to enforce an agreement
that had the object or effect of restricting
competition, could not do so unless agreement
came within a block exemption or was
– Exempted formally by the Commission.
• Consequently, some provisions in a contract
were illegal and void, but other provisions could
be enforced even if they would never have been
agreed without those that were illegal and void,
eg. Ard, criticised by Rothnie,  EIPR 72.
Reform in 2003
• This situation required reform.
• Considerable discussion took place within
the Commission throughout the 1990s.
Senior officials differed on policy.
• Eventually regulation 1/2003 EC provided
that national authorities and courts might
also apply article 81(3)
– Burden of proof for exceptions on parties.
Singapore law better than EC
• Your legislators learned the lesson and gave
exclusive power to CCS only in relation to group
• Courts are thereby encouraged to interpret the
prohibition narrowly: it applies only when there
are significant adverse effects on competition.
See CCS Gs on s. 34, 2.18.
• In Singapore, is burden of proof on person
Relationship between CCS and
– Gs on 34, 7.1 – 7.4, & Gs on s.47, 8.3
– allow damage action by victim only if the conduct was
first forbidden by CCS,
• Nullity under s34 and ? s 47seems to be
automatic and could come before a court.
– Will too many requests for decisions be brought
before CCS in order to claim damages in a court
• Can courts grant interim injunction against
infringing either section, if the CCS has not ruled
on the matter?
EC officials concerned by vertical
• In 20th century, most EC Com officials
were more concerned about vertical
agreements than agreements between
competitors. They saw exclusive
distribution agreements are dividing
common market, usually on national lines.
– In Singapore, no such concern.
• Some officials also concerned about
vertical aspects of joint ventures.
Vertical aspects (2)
– Even when they increased competition, they were
often exempted not cleared,
– Creating problems for enforcement of other joint
• a problem avoided by Singapore legislation,
which is less concerned about vert effects,
– No competition between parties to be reduced,
– Each is interested in the other selling more of
complementary item at a lower price (Cournot).
Vertical distribution agreements
• Those concerned with EC reform in 1990s
– (Klaus Dieter Ehlermann, David Deacon, Emil
Paulis and others)
• were concerned by Com’s lack of
resources to grant individual exemptions.
• Need for contracts to be enforceable.
• Convinced that vertical agreements rarely
• Com increased scope of bagatelle notice, OJ
2001. C368/13,increasing market share ceilings
from 5% to 10% if agreement between
competitors and to 15% if not.
• Officials started preparing BE for distribution
agreements because they were easier to deal
with and usually pro-competitive. By1999, clear
that horizontal agreements more likely than vert
to harm competition & consumers.
Group exemption for distribution
• Adopted Reg. 2790/99 – BE for vertical
distribution agreements and guidelines.
– More economic approach.
– Former regs were formalistic
• Guidelines in 1999 listed anti-competitive effects
(Gs 103 – 105). 4 groups of practices:-
– Single branding (buyer to buy only from nominated
source), limited distribution (excl. territory), rpm and
• Pro-competitive effects, mainly solving problem
of free riding, which might deter investment for
benefit of brand (Gs 106 – 118).
Singapore excludes distribution
EC block exempts it
• The EC BE is subject to controls of
– Market share ceiling for supplier of 30% (art
– Hard core restraints (art 4) & excluded
provisions (art 5).
– Possible withdrawal by Com
• In Singapore, it takes ministerial order to
reverse the exclusion.
Vertical agreements excluded from
• Note that definition in Annex 3 (exclusions), para
8(2) is based on that in Art 2(1) of reg 2790/99
EC – it excludes IP licences from EC BE unless
provisions re buyer’s use of ipr ‘constitute the
primary object of such agreements and are
directly related to use sale or resale of goods or
services by the buyer . . .’ ? Burden of proof
when both are needed.
• EC has separate BE for licensing and S treats
Licensing of IP rights
• The old EC group exemptions for licensing patent,
knowhow etc. were formalistic.
• Reg 772/2004 - Wider coverage than before – software
copyright but, not TMs
• Same structure as for vertical agreements.
• *Art 1(1)(j) Competitors only if actual competitors
on technology market, and on product market if
in absence of agreement, they would have been
actual or potential competitors.
Market share limit
• Limit of market share lower than for distrib -
cumulative 20% if between competitors, and
30% each between non-competitors.
• New counterfactual turned most horizontal
licences into vertical ones.
- Not enough for medicines, and
pharmaceutical cos need patent protection
- But may license actual or potential
competitor if no hard core restraints.
Technology transfer reg 772/2004
• Hard core list (art 4(1)) strict v. price fixing, restriction of
production or market allocation if actual or potential
competitors, less strict and relating mainly to distribution
if not competitors (art 4(2),
• Advice when licensing, avoid hard core provisions and
consider policy in guidelines.
• More formalistic than CCS Gs, but more based on
economic effect than former BEs on licensing.
Black list for hor licences allows some market division via field of
CCS looks at each case – more flexible but EC Gs more flexible
Licensing guidelines (EC)
• G3. Application not mechanical
• G5. Recites consumer welfare,
• G7. No inherent conflict between IP and competition
• G7. No presumption v. licences outside reg.
• G8. Mentions sunk costs and risk
• *G12. Counterfactual without the agreement or without
• Special section on market definition
– More difficult when technology moving fast.
– EC looks only to actual competition in technology market, Aliter
• Most of this in CCS Gs
Other recent EC group
exemptions & Gs
• BE for R & D (Seldom useful when
– For large area, previously divided by customs
barriers. Not helpful for Singapore
– unduly protective of dealers.
• Reg. 1.2003 substituted the general
procedural provisions for those of Reg.
4056/86 for liner conferences.
• The substantive provisions permitting
price fixing and the regulation of capacity
etc in order to comply with international
obligations were deleted by reg
1496/2006 on the grounds that they did
not qualify under article 81(3).
Liner Shipping 2
• Commission always disliked the Council’s
BE for liner shipping & construed it
• Had Singapore legislation gone too far
when government knew of European
• Is this example of political influence
reducing freedom of CCS?
Gs on 81(3) very important
– G5. Analytical framework
– G6. No mechanical application
– G13. Consumer welfare & efficient allocation
– G18. Counterfactual in absence of agreement
and of restraint
– G21.object – contrast CFI in GSK
– G23. Hard core in BEs and Gs
– G24. Appreciable effects
Conclusion on s. 34
• Singapore legislation good – has learned
lessons from our earlier attempts. It has much to
teach EC, little to learn from us.
• Almost every item on slide 24 is also in CCS gs.
• Restr of freedom not necessarily of comp.
– Even more important here if no individual exemptions
• To infringe, must restrict competition on a
• Dominant Position
• Market definition
• Dominant within Singapore or elsewhere
• Ipr may be entry barriers, but there may be
• Only from 2004 was much attention paid
to reforming art 82 (EC), and much less
success than over anticompetitive
CCS considers only foreclosure,
not excessive prices
• Art 82(a) EC, abuse includes unfair buying
and selling prices or unfair terms.
• Singapore Act omits this exploitative
conduct from prohibition.
• In EC there is no satisfactory test of unfair
bargains – cost plus in United Brands, or
more expensive than elsewhere if market
homogenous in SACEM cases.
• You have avoided intractable problems
EAGCP Report 2005
• I think you have also avoided treating different
kinds of conduct differently.
• EAGCP report published when famous
discussion paper on art 82 was already being
considered by NCAs, shortly before general
publication on website. Report by the EAGCP
- "An economic approach to Article 82"
• EAGCP:- identify a competitive harm and assess
extent to which such a negative effect on
consumers is potentially outweighed by
Discussion Paper on Art 82 (DP)
• Distinguished various examples of
foreclosure – exclusive dealing, predation,
tying etc. with different consequences.
• We expected Guidelines, but ECJ on BA
far more formalistic, and Commission loath
to publish guidelines contrary to ECJ
• Status of DP odd. From officials, not
Commission, published only in English on Com’s
web site, not in OJ in all the official languages
• Nevertheless, Com officials may not investigate
a case like BA.
• DP a lot less formalistic than judgments of
1970s, which are being followed by CFI and
• I shall speak more on art 82 and IPRs for the
Singapore IP Academy & Law Society on Friday.
• Reforms of article 81 made our approach to
anticompetitive agreements depend on effects
and likely effects and the balance between
benefits and detriments to consumers.
• Reform of Art. 82 far less successful.
Commission practice may be more based on
economic effects, but unless it actually clears
practices, rather than ignoring them, it will be
risky to advise clients contrary to recent
judgments of ECJ.
• Your law and guidelines are much better
conceived than ours.
• Europe has more to learn from you than
the other way round.
• Thank you!