EU Competition Law & Commercial Contracts: Key Concepts

EU Competition Law & Commercial Contracts

Antitrust Law: Functioning of the European Union (TFUE) Against Unfair Competition

1. Collusive Agreements

Two or more undertakings coordinate their behavior, restricting competition.

Cartels: The most serious and harmful anti-competition conduct. Agreements with competitors to:

  • Raise prices
  • Limit quantities produced
  • Geographically divide up customers

2. Abuse of Dominant Position

High market power allows raising prices or worsening quality, damaging competitors, suppliers, and customers.

3. Economic Concentration Control

  • Allows economies of scale (EOS)
  • Reduces production and distribution costs
  • Improves profitability
  • Speeds up technical progress

4. Control of State Aid

Economic advantage in many forms from public authorities, using state resources on a selected basis.

European Commission Directorate General for Competition (DGCOMP): In charge of analyzing state aid and deciding on compatibility with the European Single Market.

Unfair Competition

When market participants seek to gain an advantage over rivals.

Acts of Unfair Competition:

  • Realized in the market or cause economic injury
  • Purpose to produce harm

Against Market Functioning:

  • False advertising
  • Aggressive acts
  • Infringement of laws
  • Selling at a loss
  • Unlawful publishing

Against Customers:

Misleading Practices

  • Causing confusion
  • Concerning codes of conduct/quality marks
  • Bait advertising & misleading promotions
  • Pyramid sale practices
  • Convert commercial practices

Aggressive Practices

  • Aggressive practices using coercion
  • Aggressive practices using harassment (e.g., sales calls at home)
  • Aggressive practices & minors

Commercial Contracts

Due conditions of entrepreneur of advertiser & advertising agency, seeking massive diffusion.

Elements:

  • Advertiser (Aga): Natural/legal person
  • Advertising Agency: Natural/legal person professionally organized to create, prepare, schedule & execute advertising.

Advertisement/Broadcasting Contract:

Advertising media in exchange for a price.

  1. Media obligated to diffuse advert
  2. Advertiser pays agreed price
  3. Only spread in advertising spot
  4. Liability on advertiser, NOT advertising media

Sponsorship Agreement:

Agreement under which one party makes a contribution to another party (monetary). In exchange = display advert.

Prohibitions: Tobacco, drugs & medicines, illegal adverts, alcoholic beverages with +20ยบ

Breach of Contract:

Affected party can request fulfillment or termination of contract with corresponding compensation for damages.

Illegal Advertising:

Threats to the dignity of a person, violence, values/rights recognized in the constitution; women, children, youth.

Subliminal Advertising:

Ads of images + sound to influence customers without being conscious.

  • Illegal if it changes customers’ consumption habits.

Renting:

Related to movable, non-fungible goods (e.g., computer vehicles + computer equipment) with a purchase option.

Engineering Procurement & Construction (EPC)

Construction contract between parties.

Constructor: Responsible for engineering procurement & construction activities.

  • Fixed price
  • Fixed contemplation date
  • Single point responsibility
  • Performance guarantee

MUST:

  • Detail engineering/design of project
  • Procurement of necessary equipment
  • Construction of facility guaranteed time & price.

Outsourcing Agreement:

Contract formed between a company & a service provider, where the provider promises to deliver specified services.

Merchandising Contract:

Marketing contract to make the latter’s products more competitive.

  1. Trademark merchandising
  2. Personality merchandising
  3. Merchandising fictional characters

Contract Law Basics

Contract: A legal transaction by which parties create or modify a patrimonial legal relationship.

Aim: To satisfy individual interests & serve a higher social purpose.

Elements: Consent, Object, Cause

Liquidated Damages:

Compensation for damages.

Three functions: Punitive, compensatory, warrantee.

Electronic Contracting:

Formalized by electronic means, telematic networks.

Sales Contract:

A person (seller) delivers an item to another person (buyer) who pays a price.

To be considered a Commercial Agreement:

  • Movable things (raw material, speculative – customer buys to resell)
  • Buyer is also an entrepreneur & uses the purchased thing for their economic activity

Seller’s Obligation:

Deliver movable goods, provide warranty

Buyer’s Obligations:

Payment of price, receipt of goods

Instalment Sale Contract:

One party sells a good to another, postponing payment of the price fully/partially in +3 months.

  • To facilitate the acquisition.

Business Lease Agreement:

One party, in exchange for a price, cedes to another the exploitation of an economically productive unit.

Distribution Agreements:

An entrepreneur acquires in their name & under their risk the products of another entrepreneur (suppliers) to resell them in a given territory.

Commission Agreement:

A commission agent participates in an act of mercantile agreement on behalf of another person.

Brokerage Agreement:

A person is bound to pay a mediator/broker for serving as an intermediary, provided they have effectively contributed to it.

Syndicated Loans:

Financing offered by a group of lenders who work together to provide for a single borrower.

Participative Loans:

A form of financing with quite affordable access requirements & interest is linked to the operation of the company.

Bailment Contract:

Transfer of possession of a good to another person.

Guarantee:

A legal instrument to ensure fulfillment of an obligation like surety, pledge, or mortgage.

IN REM: Debtors offer as a safeguard their own property.

  • Mortgage: Price of real estate subjected as assurance. Creditor receives payment from the price of the real estate.
  • Pledge: As liability for debt, some chattel goods are deposited in the power of the creditor (e.g., a car).