COMPETITION LAW

BY T.K.VISWANATHAN
SECRETARY , MINISTRY OF LAW &
JUSTICE
LEGISLATIVE DEPARTMENT

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 In the beginning there was only law.
Then came law and society, law and
history, law and economics and so on.
These developments have transformed
the vocation of the legal scholar from
that of a Priest to that of a Theologian.ơ -
---Ms Kathleen Sullivan Dean of Stanford Law School


Law as Epi-phenomenon

 Legal scholarƞs interests in exploring the

relationship between law and
economics was triggered by Marxist
theory of law.

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 Building upon the foundation laid by Karl
Marx the Austrian jurist Karl Renner
expounded in his book Institutions of Private
Law and their Social Functionơ the theory that
in spite of stability of legal concepts like
property and contract, their social functions
have undergone transformation.
 According to Renner, to expound a legal
concept one has to penetrate its economic
base.

_
Economic Analysis of Legal
Concepts
 To begin with, ownership was synonymous
with land.
 The power of control resided in the same
person who owned the land which is the
subject matter of ownership.
 Advent of industrial revolution and
emergence of stock markets gave birth to
new forms of intangible property like shares.

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Modern Corporation & Private Property- Adolf
Berle and Gardiner Means the first
interdisciplinary study between law and
economics
 Stock markets led to divorce of ownership
from control.
 This change was highlighted by Berle and
Means study which pointed out that due to
widespread dispersal of stock holdings
through stock markets it was impossible for
any person to own 51% of shares in any
company to exercise control over it.
 On the contrary, he was able to exercise
control with lesser percentage of shares.
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Constitutional Dimensions of Contract
Law

 Contract law which was strictly private law till

the end of 19th Century ceased to be private
and assumed constitutional dimensions.
 Thus economic analysis of ownership
revealed that how legal institutions under
went radical transformation while outwardly
the conceptual shell remains intact.

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eed to apply legal limitations
on the Market Forces
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Incredients of Competition Law

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Anti Trust laws are Magna Carta of free
enterprise

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 Competition law prohibits the deliberate exploitation

of a dominant market position by a firm.

 Generally any agreement, arrangement or

understanding between enterprises that has the
effect of substantially lessening or limiting access to
market is prohibited by Competition law.

 This prohibition applies not only to written

agreements but also to oral and informal
agreements.
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!
 

 To determine whether an agreement

unreasonably restrains competition,
courts have applied one of two methods
of analysis, depending on the type of
agreement at issue

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Per se offences
 Certain agreements (called "per se"
offenses") are deemed to be so
inherently anticompetitive that they
are always illegal,
 regardless of the intent of the
parties or
 the actual effect of the agreements
on competition.

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 These agreements include agreements between
competitors
 A) to fix prices or the terms and conditions of credit
and sales,
 B) to allocate customers or territories;
 C) Not to deal with any person or persons ("group
boycotts"), and, in certain circumstances,
 D) to sell one product conditioned on an agreement
by the buyer to purchase a second, distinct product
("tying").
 E) Resale price maintenance

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Exceptions to Prohibited
Practices-
 Apart from the above anti-competitive agreements
there are other types of agreements between
suppliers and distributors and members of trade
associations which enhance economic efficiency,
even though they may result in anti-competitive
effects.

 Such agreements, though anti-competitive, in effect

can be exempted by the competitive authorities after
weighing the anticipated gain in efficiency from such
agreements vis-à-vis any adverse effect on
competition

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÷ule of ÷eason & Block Exemption

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„ertical Agreements
 Vertical agreements are between independent
enterprises

 at different stages of production or distribution

process like exclusive dealing etc

 which can be exempted from the purview of

competition law

by the rule of reason approach by the competition

law authorities.

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wrice

fixing
A collective agreement to fix prices is regarded
as a per se offence.

[ àowever this is subject to two exemptions:-

[ (a) a list of recommended prices issued by the

trade associations to its small business members
may not be regarded as an infringement of
competition law, if the prices are only
recommendatory in nature and individual
enterprises are free to charge what they like.

[ (b) cartels which seek to fix export prices for

certain commodities are exempted from
competition law because competition law is
generally concerned with the effects of anti-
competitive practices on the domestic market º
alone.
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 The European Court of Justice has

ruled on several occasions that sport, in
its economic aspect is subject to
Community law, but again, recognising
at the same time certain special
characteristics of the sector.

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 The European Court of Justice's ruling

in the Walrave case[ C-36/74 Walrave and
Koch [1974] EC÷ 1405.] established that
European Union Law applies to sports,
insofar as the practice constitutes an
economic activity within the Union.

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 Joint selling on an exclusive basis restricts
competition - be it in the sports or in any
other sector - because it has the effect of
reducing output and limiting price
competition.
 The sale of the entire rights on an exclusive
basis and for a long period of time has the
effect of reinforcing the position of the
incumbent television companies as the only
ones with the financial strength to win the
bids.

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 This, in turn, leads to unsatisfied demand
from broadcasters and a lesser ability to
make an attractive offer to customers.
 Sports and films are two key ingredients for
television and for pay-TV channels in
particular.
 They are also proving increasingly critical for
the development of new technologies.

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 Õ e declaration on t e specificity
of sport adopted by t e European
Council in Nice stresses t e need
to take account, in all action by t e
Community, of "t e social,
educational and cultural functions
in erent in sport and making it
special, in order t
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C-415/93 Bosman [1995]
EC÷ I-4921
 However, it was only in mid 1990s,
after the judgement in the Bosman case
;and
 the increasing money being paid for
broadcasting rights to major sporting
events,

that the economic aspects of sporting

activities became an issue of major
importance"
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 àe brought an action against ÷C Liege
and later against the Belgian Football
Federation and the uEFA.
 Mr Bosman sought a declaration from
the national court that the transfer rules
and nationalit clauses were not
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licable to him on the grounds that
the were incom
atible with both the
Õreat of ÷ome rules on com
etition
and the free movement of workers.
 Õhe national Court referred the issue to
the Euro
ean Court
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 Point 3: The Court has decided to
exclude, exceptionally, any
retroactive effect of its
interpretation on the temporal
effects of the judgment as regards
the transfer system, except for
persons, such as Mr. Bosman, who
have taken steps in good time to
safeguard their rights.
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 Õhe Cham
ions League is a tournament

organised ever ear between the to

Euro
ean football clubs -- 72 clubs

artici
ate from both Euro
ean union
and non-Eu countries.
 Õhe last stage, which begins in
Se
tember, com
rises the 32 qualif ing
clubs.
 Õhe Cham
ions League season ends in
Ma the following ear.
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 until now uEFA sold all the Õ rights to
the final stages of the uEFA Cham
ions
League on behalf of the clubs

artici
ating in the league.
 Õhe rights were sold as a bundle on an
exclusive basis for u
to four ears to a
single broadcaster in each Member
State, in general a free-to-air television
com
an which would normall sub-
licence some rights to a
a -Õ
la er.
 Mne of the drawbacks of the s stem is
that some of the rights, including live
footage, were unex
loited.
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 The Commission had objected to the current
rules, which had been notified for regulatory
clearance, on the grounds that if a group of
people join forces to sell a given product then
that restricts competition.

 The rules distorted competition between

broadcasters, encouraged media
concentration and stifled the development of
Internet sport services and the new
generation of mobile phones by barring
access to key content, which is not in the
broad interest of fans and consumers _Ñ

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 Mne effect of joint selling is that onl bigger
media grou
s are able to afford the acquisition
and ex
loitation of the bundle of rights.
 Õhose grou
s are t
icall dominant
incumbent broadcasters.
 It also leads to unsatisfied demand from those
broadcasters who are unable to obtain the
rights and slows down the use of new
technologies, because of a reluctance of the

arties to embrace new wa s of
resenting
sound and images of football.

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 After its preliminary analysis, the Commission
considers that the notified agreement may
represent an infringement of EC competition
rules, the object and effect of which would be
price fixing as well as the sharing, among the
parties, of the relevant markets.
 The price, as well as other conditions for the
exploitation of the broadcasting rights, would
be imposed by Audiovisual Sport SL on third
operators which obtain a license to broadcast
the Spanish 'Liga' and 'Copa' matches in pay-
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per-view
 In particular, the Commission considers that
serious restriction of competition exist in the
market for the acquisition of rights to
broadcasting of football events.
 The parties would share this market through
a joint buying system.
 Likewise, the Commission considers that the
parties would establish a system of joint
selling and price fixing on the downstream
market for the wholesale of such rights, that
is, the market in which the undertakings who
have obtained the broadcasting rights from
the football clubs grant licenses to operators
in all modalities of broadcasting (free to air, vº
pay-TV and pay-per-view).
 Such restriction of competition would cause serious
anti-competitive effects in the downstream market
for pay-TV and pay-per-view, in particular the
foreclosing of the market to the new entrants and the
elimination of potential competitors.
 This fact is aggravated by the strong position that the
parties have on all relevant markets.
 It would also have negative effects for consumers,
who might see reduced coverage of the rights to
broadcasting. Furthermore, the joint exploitation by
the parties of such rights would lead to an increase in
the prices that subscribers must pay for watching the
Spanish 'Liga' and 'Copa' on pay-per-view.
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 After the Commission's intervention, in June
the parties granted access to the relevant
football rights to new cable and digital
terrestrial television entrants in Spain.
 They also modified their agreements and
formally guaranteed competitors that they
are free to set the prices of the pay-per-view
football matches

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 After long negotiations, the Fédération

Internationale d'Automobile (FIA) agreed to
change its rules to bring them into line with Eu
law.
 Õhe modifications ensure that the role of FIA is
limited to that of a s
orts regulator, with no
commercial conflicts of interest.
 FIA rules will not be used to
revent or
im
ede new com
etitions unless justified on
grounds related to the safe, fair or orderl
conduct of motor s
ort. A

eal
rocedures
against FIA have also been strengthened.
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