Collusion & Dominance
As a Member State of the European Union, national competition law to a large extent reproduces the principles established under European Community competition law. Article 5 and 9 of the Competition Act (Chapter 379 of the Laws of Malta), constitute the Maltese equivalents of Article 81 and 82 of the EC Treaty.
Article 5 prohibits any form of collusion between undertakings having the object or effect of restricting or distorting competition, and thereby outlaws any cartel-like situation operating on either the horizontal (e.g. between retailers) or vertical (e.g. between retailers and suppliers) level. Article 9 prohibits the abuse by one or more undertakings of a dominant position, which includes price exploitation and price discrimination but is more generally associated with predatory pricing or the practice of dropping the prices of a product to the extent that smaller competitors can no longer compete and are pushed out of the market.
Although the applicability of most rules contained in the Competition Act is limited to Malta, Articles 81 and 82 of the EC treaty apply directly where a collusive practice between undertakings or an abuse of a dominant position by an undertaking may affect trade between Malta and any one or more Member States.
On a straightforward level competition law aims at the elimination of cartels and monopolies. On a more nuanced level it involves the interplay of a number of factors which need to be gauged against one another to determine the existence of a prohibited action. In most cases there is a very fine line between what constitutes a restrictive practice and what constitutes an exemption under antitrust law.
The mere anticompetitive effect of an agreement is sufficient to make it illegal even if the parties were unaware of it or did not intend such effect to take place. On the other hand, there exist legal exemptions in certain defined situations where the benefits of a collusive agreement or practice outweigh the anti-competitive effects or where the impact of the agreement or the practice on the market is minimal (de minimis principle). While the former requires the fulfillment of a number of conditions, the latter is often a difficult matter to evaluate as it requires proving the correlation between the legal and economic definition of the relevant market.
The authority responsible for investigating restrictive practices is the Malta Competition and Consumer Affairs Authority. Such investigations may be initiated by the Director himself, upon a reasonable allegation by a complainant, or at the request of any Member State’s designated competition authority, or the European Commission. If it results that a serious infringement has occurred, findings are consequently reported to the Commission for Fair Trading, a judicial organ having the power to review decisions of the Director for Fair Competition and to determine the existence of restrictive practices. In so doing, the Commission construes the Competition Act in accordance with its previous decisions, the interpretation practice of the European Commission and the judgments of the Court of Justice of the European Union.
At GTG, we work proactively with clients to structure corporate agreements and commercial strategies so as to bypass elements of collusion and dominance which may distort or restrict competition.