The Enforcement of Competition Law in Europe

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Overview

In the debate on the enforcement of competition law, many take the view that Europe should avoid the traps US law has fallen into by admitting excessive litigation. European law should not pave the way for judicial proceedings which ultimately serve the interests of lawyers or other agents rather than injured parties. This inquiry describes the state of remedies in competition law in fifteen European countries, analyses the underlying determinants, and proposes ways of improving the enforcement of competition law. The International and European legal frameworks are presented, as is the approach of US law. It is argued that efforts to strengthen private enforcement of antitrust law should benefit from the rich European experience in unfair competition law. The divergence between the two fields of law is not so huge that a completely different treatment is justified. Thus, a specifically European way of competition law enforcement could be developed.
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Editorial Reviews

From the Publisher
'... this volume is a most reliable guide to the various national regimes plaintiffs and claimants will have to operate under for years to come. In both scenarios, it provides most valuable pointers for national and European lawmakers exploring options of legal reform.' Friedrich Wenzel Bulst, European Competition Law Review
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Product Details

  • ISBN-13: 9780521181563
  • Publisher: Cambridge University Press
  • Publication date: 11/25/2010
  • Series: Common Core of European Private Law Series
  • Edition description: Reissue
  • Pages: 740
  • Product dimensions: 6.00 (w) x 9.00 (h) x 1.80 (d)

Meet the Author

Thomas M. J. Möllers has a Chair for Civil Law, Business Law, European Law, Comparative Law and International Private Law at the University of Augsburg.

Andreas Heinemann is Professor of Law at the Centre of Comparative and European Law of the University of Lausanne.

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Cambridge University Press
9780521881104 - The Enforcement of Competition Law in Europe - Edited by Thomas M. J. Möllers and Andreas Heinemann
Excerpt


Introduction

In December 2005, the European Commission published a Green Paper on Damages Actions for Breach of the EC Competition Rules. This document has provoked a discussion on the role of private actions which goes far beyond competition law. Many take the view that Europe should avoid the traps into which US law has stepped by admitting excessive litigation due to a system of class actions, punitive damages, pre-trial discovery and contingency fees. European law should not pave the way for judicial proceedings which ultimately do not serve the interests of the injured parties but rather those of their lawyers, consultants or other agents. According to the methodology of the Common Core of European Private Law project, this inquiry gives a description of the state of remedies in competition law in fifteen European countries and analyses the underlying determinants. On this basis, proposals are developed showing how the enforcement of competition law could be improved. The flaws can be fixed without running the risk of abusive litigation. To this end, it has been instructive to include two fields of law which are normally treated separately, i.e. unfair competition law and antitrust law. Although the two branches share common goals, their enforcement has taken completely different paths. Whereas in many reporting countries unfair competition law is endowedwith effective private law (and in some countries also with public law) remedies, the implementation of antitrust law is in practice almost completely entrusted to administrative enforcement. This is not so much a question of legislative principles – all reporting countries provide for private remedies for violations of antitrust law – but of certain legal and factual obstacles and of a lack of incentives.

The present inquiry aims at analysing the enforcement components and the different weight given to them in both fields of law. The legal framework on the international and European level is presented, as is the approach of US–American law. The cases are structured in groups concerning on the one hand the sanctions available and on the other hand the potential plaintiffs and defendants. Eight cases concern unfair competition law, seven are on antitrust law. All cases are solved according to the fifteen legal systems involved. After a comparative analysis, shortcomings and strengths are analysed. Reform proposals are based upon this result. It will be shown that efforts to strengthen private enforcement of antitrust law should benefit from the rich European experience in unfair competition law. The divergence between the two fields of law is not so huge that a completely different treatment is justified. Thus, a specifically European way of competition law enforcement could be developed.


PART I.   REMEDIES IN UNFAIR COMPETITION AND CONSUMER PROTECTION LAW

THOMAS M. J. MÖLLERS


A. Setting the basics – the legal framework

I. Approach of this comparative study

1. The status quo of legal harmonization in unfair competition law

a) Lack of a ‘European unfair competition law’

European integration is making progress; the European Constitution Treaty has been passed1 and scholars are discussing a European Civil Code.2 In the field of unfair competition law only few directives exist and one is tempted to use F. Rittner’s words which he once used to describe the law of contract: European directives create only ‘islands’ of harmonized law3 within each national law that exist without any connection between them.4 Accordingly the law of unfair competition is still based on many origins and very often overlaps with the law of consumer protection, contract and intellectual property.

Nowadays all modern legal systems offer protection against unfair competition, i.e. against ‘any act of competition contrary to honest practices in industrial or commercial matters’,5 in short against ‘dirty tricks’.6 Because of the differing traditions in the Member States the enforcement of infringements of unfair competition law has only been harmonized marginally. In the different European directives courts and administrative agencies are equally named as competent for enforcement. Moreover, an additional self-control is allowed.7 This form of harmonization leaves everything as it was before. The sanctions are numerous and as disparate as the provisions dealing with material aspects.8

b) Shortcomings in the enforcement against unfair advertisement

In everyday life it is common to be without protection against unfair measures: deceptive prize draws, direct marketing of bogus slimming agents, deceptive advertisements for summer resorts are only some examples. Sweepstakes that convey that the addressee has already won and only has to invest a small handling fee, wholehearted advertisement for panaceas that promise to reduce the gasoline consumption by 40 per cent or make your hair grow again are examples taken from everyday life.9 Lately the opinion arguing that the system of remedies instituted in art. 4–6 Misleading and Comparative Advertising Directive 84/450/EEC is ‘insufficient’ is becoming stronger. Because of the different bodies that are competent to deal with infringements, legal scholars raised the reproach that in some Member States no sufficient legal protection is offered. This has been explicitly stated for English law because the Office of Fair Trading hardly ever brings proceeding against infringements.10

An example: in Germany over the last few years consumers have been flooded by unwanted fax machine messages; cold-calling is widespread and the abuse of 190-numbers is common. Even the federal government conceded when it amended the German Unfair Competition Act in 2004 that there are some minor infringements that will not be penalized.11 German consumers’ associations ascertain that they are able to record up to 80 per cent of the relevant cases;12 this figure is likely to be too positive. This strongly opposes the widely held view that in Germany infringements of unfair competition law will always be stopped by competitors or by associations. That view is, at least in cases of nuisance or misleading advertising, not completely true.

The principle that ‘An infringement of unfair competition law reaps rewards’13 proves true. All legal harmonization remains l’art pour l’art if it remains ‘law in the books’14 and only pretends to harmonize this area of law. Actions for an injunction are directed towards the future.15 This indicates that it will be worthwhile to examine whether further remedies should be introduced that sanction the first infringement. One will also have to discuss whether it is reasonable to institute an exclusive means of legal recourse, either through a public agency or the courts.

c) Creation of an internal market

This study examines the law of unfair competition in Europe (with some remarks concerning the law of the USA). To an extent it intends to pay heed to the demands of a European theory of legislation. The European Union is aiming towards the abolition of borders, an internal market as it is defined in art. 14 para. 2 EU (art. I-3 para. 2 TCE). For the purpose of harmonization it has developed different measures: either the approximation of law or mutual recognition. The principle of subsidiarity in art. 5 para. 1 EU (art. I-9 para. 3 TCE) burdens the EU with the proof that the measure is necessary for the completion of the internal market. Legal harmonization is thus no aim in itself. If the measure is not necessary for the completion of the internal market the competition between the different legal systems of the Member States is preferable.16

The euro as a common currency has deepened the internal market since it creates price transparency. The advent of e-commerce has facilitated cross-border trade. Different legal systems and different enforcement of provisions could result in the consumer abstaining from cross-border transactions since he is unable to enforce infringements of his rights.17

In a market economy, advertisement is of greatest importance for a company to survive competition or to enter into competition with other companies. As the ECJ has stated, advertisement fulfils an essential function in the ‘opening of markets’.18 Failing to implement European unfair competition provisions restricts competition as it has the same effect as state aid. It gives the Member State’s companies an advantage over foreign companies that have to obey the implemented rules. If companies are forced to develop different marketing concepts because of varying legal requirements this results in additional costs.19 Ultimately, differences in the legal requirements can even bar companies from entering a market altogether.20 Consequently, small and medium-sized companies are still excluded from cross-border trading.21

d) Reactions to these shortcomings

The European Union has offered three new acts to harmonize the law of unfair competition.22 Surprisingly, these new acts did not attempt to harmonize the sanctions against infringements.23 The Directive 2005/29/EC concerning Unfair Commercial Practices does not introduce any previously unknown remedies.24 Only the Regulation on Consumer Protection Cooperation No. 2006/2004 is more courageous in demanding an agency that is competent to sanction cross-border infringements.25

In recent years many member states have developed their law of unfair competition; very often blanket clauses have been introduced. And there are good reasons why Member States such as the United Kingdom,26 Germany27 or Portugal have amended and modernised their law of unfair competition. The German legislature amending its UWG in 2004 to make it ‘fit for Europe’ has also refrained from harmonizing its sanctions.28 It even claims its legislation to be a ‘model for a future European law of unfair competition’.29 If confidence in this claim can be sustained, one will have to examine it by comparing the different legal systems.

In the last few years a couple of studies have been devoted to a comparison of the substantive provisions in the law of unfair competition.30 The legal consequences are either excluded31 or dealt with summarily.32 In scholarly writing, proposals for the legal consequences are rare or rather short. Thus one can find the demand to introduce on the European level an action for the confiscation of unlawful gains,33 the right to sue for consumers or associations,34 a harmonization taking the TRIPS-Treaty as a role model35 or in general to ‘clearly define the borderline of unlawful and lawful behaviour where administrative and penal sanctions are conceivable’.36

e) Methodical requirements of comparative law and the European harmonization of law

The Common Core Project

This study would like to examine the different remedies in European unfair competition law on a comparative law basis and deliver answers to the above-mentioned questions. Its ultimate aim is thus to remedy the above-mentioned shortcomings.

The starting point is the law of the individual Member States. Before any proposals are made the state of the law in fifteen different states is examined. Originally, comparative law aimed at introduction of a universal law.37 The same underlying idea can be found if one examines which provisions of another state can be introduced in one’s own state.38 The Common Core Project follows the approach of Schlesinger


© Cambridge University Press

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Table of Contents

Preface     xi
Contributors to the volume     xiii
Abbreviations (including legislation)     xv
Introduction     1
Remedies in Unfair Competition and Consumer Protection Law     3
Setting the basics - the legal framework     5
Approach of this comparative study     5
The legal background in the different Member States in unfair competition law     26
The European context of unfair competition law     54
Enforcement and sanctions under US - American unfair competition law     67
Contemporary solutions: the case studies     89
Objects of claim - the sanctions     89
Risky bread: order to cease and desist, elimination, publication     89
Watch imitations I: interim injunction     130
Whisky: damages and discovery     158
Plaintiffs and defendants     199
Children's swing: attracting customers - the different plaintiffs     199
Discontinued models: misleading advertisement - the consumer as plaintiff     253
Child labour: civil and criminal law     281
Recycled paper: advertising agencies and the press as defendants     306
Out-of-court settlements of disputes     327
Watch imitations II: pre-trial measures     327
Results and conclusions for remedies in unfair competition law     359
Summary of theses     359
Proposed draft     367
Instead of closing words - methods of harmonizing European law     369
Graphics     375
Remedies in Antitrust Law     387
Introduction     389
Methodological note     389
National antitrust law - a survey     395
The European context of antitrust law     423
Private enforcement of competition law: a comparative perspective   David J. Gerber     431
Private enforcement in US antitrust law     434
Competition law in Europe: administrative centrality     442
Incorporating private enforcement into European competition law: comparative perspectives     448
Concluding comments     452
Case studies     453
Objects of claim     453
Predatory price undercutting agreements - forbearance (cease-and-desist order)     453
Abuse of a dominant market position against a competitor - damages     499
Boycott - pre-trial measures and temporary relief     535
Plaintiffs and defendants     564
Horizontal restraints of competition - consumer claims against general cartel effects      564
Horizontal restraints of competition - validity of subsequent contracts     583
Vertical restraints of competition - resale price maintenance     597
Selective distribution and refusal to deal     616
Conclusions     637
The overall results of the country reports     637
Measures for the strengthening of private enforcement     639
Conflict of laws     652
European harmonization of remedies in antitrust law?     656
Conclusion     658
Outlook: the link between unfair competition law and antitrust law     659
Reasons for the different weight of private enforcement in unfair competition and antitrust law     659
Unfair competition law remedies as a model for antitrust law?     661
Examples     661
Standing of consumers     662
Standing of consumer protection associations     662
Future prospects     663
Bibliography     664
General index     680
Index by state     690
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