Sample Term Paper on Competition Laws

Part one

Question one (a)

The US

Essentially, competition aims at offering the consumers with the most affordable terms of business transactions irrespective of the competitive pressure exerted on the market. The US Federal Government has well stipulated antitrust laws that outlaws any business transaction that is likely to unjustly deprive the US consumer of any benefits associated with competition. For instance, the Sherman Antitrust Act (section 1) explicitly outlaws any form of contract, transactions, or schemes that unreasonably restrain interstate and foreign trading activities on the American soil.

Any person or company that may practice voracious unfair competitions definitely violates section 1 of the Sherman Acts. These entails arrangements among competitors to fix prices and allocate clients and are categorized as criminal misdemeanors in the US. Monopolizing any part of the interstate business under the provisions of the Sherman Acts is also a crime punishable by law. For instance, in a case pitting the US v Metropolitan Enterprises 728 F.2d 444 (10th Cir 1984), the court ascertained accomplishing unlawful purpose through unlawful or lawful means was criminal offence under section 1 of the Sherman Act.

Blatter’s intentions to unlawfully monopolize the PC business by suppressing the potential competition from Prince Ali is considered an anticompetitive conduct under the section 1 of the Sherman Act. For instance, by not choosing to satisfy the requests of those customers who are purchasing PC games from Prince Ali, Blatter aims at blocking an active competitor from the US market. This practice is a violation of one of the US Antitrust policy that forbids unhealthy market competitions. However, Blatter arguably does not violate the section 1 of the Sherman Act when he decides to lower the prices of the PC in the face of rigorous competition from Prince Ali and limited legal redress options are available against him. According to the decision from the case pitting the US v Colgate & Co, 250 US 300 (1919), the court affirmed that engaging in purely private business activities and exercising own independent discretion was not restricted under section 1 of the Sherman Act.

Notably, by increasing the market share of the fighting games in the US, Blatter considerably reduces the prices of its products. While this is a welcome news to most of the consumers in the US market, the policy of price-cutting below its competitors effectively blocks any possible entry into the market. Like in the case Mitchel v Reynolds, the Sherman Antitrust Act clearly prohibits this action by Blatter to limit foreign investment into the US soil. For instance, in the case between Addyston Pipe & Co v US, restricting competition in any way was illegal per se.

Correspondingly, the Federal Trade Commission Act, though stipulates no criminal penalties, vehemently prohibits all unfair techniques of competition in the interstate business. For instance, Prince Ali may argue based on this Act and claim that by choosing not satisfy the request of the customers who wanted Prince Ali’s PC, Blatter applied unfair methods of competition. This decisions from the discussed cases are mostly used by the US Department of Justice in fighting illegal market activities that aims at limiting competition.

The EU

Also, the European Union Antitrust policies, under article 101 and 102 of the Functioning of the European Union Treaty (TFEU) clearly explains what is considered legal and illegal in the competition for market control in the EU regions. For example, the treaty under article 102 forbids any company that is dominant in a certain market niche to take advantage of their market superiority. For instance, in the case of Bayer AG v Commission, any involvement in agreements that creates cartels (monopolies) was held illegal. Based on article 102, Prince Ali in his legal suit can argue that Blatter took advantage of their market dominance when they decided to increase the prices of all his games by 12 percent to compensate for the losses incurred as a consequence of Prince Ali’s entry in the EU market.

Under article 101 (1) TFEU, a single person may be described as an ‘undertaking’ when the individual has amassed complete market control without considering the plight of the consumers according to the case of Akzo Nobel NV and others v Commission, case C-97/08 (2008) ECR 1-8237. Similarly, such companies aiming to merge to form a market monopoly to limit competition are prohibited by the provision postulated under article 101 of the TFEU. Any type of decision, agreement or concerted practices must be within the stipulated laws and guidelines that controls market activities. The possible effects of market competition must be what is described under article 101 as ‘appreciable’ and do not wipe competition completely from the market.

Directly or indirectly fixing market selling and purchase prices, limiting the product production processes and reducing the market shares (sources of supply) are all restricted under article 101 of the TFEU. The provisions postulated in the competition law provides comprehensive guideline to business entities on the consequences of violating TFEU. Article 102, on the other hand is very explicit and precise as it inhibits unfair trading conditions in the commodity market that may reduce competition and result into monopoly. In addition, the provisions of the article is strict on supplementary obligations in contracts and trading between member states. Any limit on production activities and inhibiting innovation is prohibited under article 102. Prince Ali should, therefore, be advised that most of the actions by Blatter are direct violation of both the US Antitrust and the EU competition laws.

Question one (b)

EU

The control of mergers in the European Union is a sole responsibility of the commission that is out to ensure fair competitions in the internal EU markets. The EU system of antitrust policy administration are majorly based on criminal penalties for any proven violation of the provisions of article 101 and 102. For instance, the treaty under article 101 strongly prohibits any form of agreement among market operators that may consequently limit competition in the European Union regions. Any horizontal or vertical agreement between market operators, for instance, between a manufacturer and a distributer is closely scrutinized by the provisions stipulated under this article. Essentially, the formation of cartels among market competitors that may entail fixing prices or even market sharing all violates the provision of article 101 of the EU Antitrust policies according to the decision from case of Volk v Vervaecke 5/69 (1969). Blatter and Warner vehemently violates the provisions under article 101 of the treaty that prohibits the fixing of prices between market competitors.

The European Union is intensely authorized by the treaty to apply these rules and guidelines in the control of the market coupled with a number of investigative jurisdictions. Any agreement between a manufacturer and a distributer, for instance, is limited by some exceptions as stipulated by the Acts and according to the decision from the case of Metro-SB-Grossmarket GmbH & Co v Commission. By merging their production and distribution lines, the primary objective of Blatter and Warner is to reduce market competition for the commodity and to increase their competitiveness.

 

The US

The US antitrust and merger control and enforcement is arguably based on a viable criminal law system that penalizes those found to be in violation of the postulated Acts with financial and custodial punishments. The Sherman and Clayton Acts explicitly outlaws such practices that may include price discriminations and market fixing arrangements among competitors. Though a civil statute (carries no criminal punishments), Prince Ali in his legal redress against Blatter can quote this Act. Both section 1 of the Sherman Act and the Clayton Act also prohibits any form of mergers or procurements among market competitors that may consequently reduce competition according to the case of US v Potteries Co.

The merger between Blatter and Warner aims at fixing market prices for the products and the amount of commodities produced is prohibited according to the case pitting the US v Trenton Potteries Co. This limits the completion for PC for children aged 5 years, above and below. Similarly, by agreeing to segment the market into geographic locations, Blatter and Warner are using unfair completion method and violated the US Antitrust laws as provided under Clayton and Sherman Acts.

In the case of US v Topco Associates 405 US S96 (1972), market sharing agreements between competitors and allocating territories to limit competition was affirmed to be illegal. Blatter and Warner after merging intends to jointly decide on market prices for the products and to determine the amount of commodities being supplied to the market. All these entail predatory and unfair market practices that aim at monopolizing the market for the PC. As a result, Clayton’s and Sherman’s Act that aims at controlling mergers in the US market will be violated as affirmed from the decision in the case of Continental Television v GTE Sylvania 433 US 36 (1997).

Part two

The role of Hong Kong Competition Commission in the Application of the Hong Kong Competition Law

The Competition Ordinance (CO), a competition law that is applicable in the entire Hong Kong economy was initiated back in the year 2002. On March 2015, a revised draft guidelines of the Competition Ordinance Acts was published by the Hong Kong Competition Commission to be used by market stakeholders. Competition Ordinance prohibits business mergers and acquisitions, anti-competitive agreements, and any potential abuse of market dominance. Under the Competition Ordinance, the Competition Commission, a statutory body emanated to help implement the provisions of the Competition Ordinance. For instance, tasked with prohibiting those factors that are likely to restrict market competition or even promote mergers, the Commission ultimate aim was to reduce competition in Hong Kong.

Similarly, in championing for a level playing field among competitors, the Competition Commission aimed at investigating such conducts that are likely to contravene competition rules stipulated under the CO. correspondingly, the commission is tasked with promoting public comprehension of the significance of competition in an economy and the role of Competition Ordinance (CO) in controlling and directing market competitions. The commission also aims at providing technical advice to the Hong Kong Government on competition in and out of Hong Kong. Conducting comprehensive market studies and analysis to determine such factors that limits market competitions in Hong Kong remains one of the many responsibilities of the Competition Commission. Lastly, the Competition Commission occasionally promotes research that concentrates on the legal, economic and policy facets of the Competition Ordinance laws in Hong Kong.

Vertical Mergers

Vertical mergers refers to the agreement between two or more companies that produces different types of commodities to fusion and produce particular finished commodities. The two or more companies agrees to merge their operational and organizational structures to become one entity. The aim of this type of merger is to escalate synergies associated increased and efficient operation coupled with an expanded market niche. Similarly, vertical mergers between companies arguably reduces reliance or costs of operations and consequently increases profitability of individual entities.

Vertical mergers results into such merged companies developing single brands for a particular product and franchising to ensure brand protection. Vertical mergers aim at creating market monopoly due to a reduction in market competition through merging of related companies. For instance, when the firms being merged are only competitors in the market, a monopoly will definitely suffice. The prices of such commodities will be subjected to control by the merged firms violating the EU Competition policies and US Antitrust legislations.

However, vertical mergers significantly reduces the costs of production and distribution, various competitive hiccups emanates from this type of merger. For instance, vertical mergers limits the entry of competitors to the market of the product given that the merged firms control key outlets and production units. Under the US antitrust legislations, the Clayton Act prohibits any form of mergers or acquisitions that may successively diminish market competition. Correspondingly, the European Union competition policies, under the provisions asserted in Article 101 of the Treaty passionately prohibits any form of merger between competitors.