Application of competition law. It is widely believed that the best economic and social results are achieved in an environment where businesses can freely compete against each other. Accordingly, competition law prohibits unfair restraints on competition and acts of monopolisation. Agreements that may (adversely) affect trade between EU member states, within the U.S. or other economic free trade areas and which prevent, restrict or distort competition are therefore prohibited. Agreements that create sufficient benefits that outweigh the anti-competitive effects are exempted from this prohibition.
Competition vs. antitrust law. Whereas the European terminology refers to ‘competition law’, in the USA, the term ‘antitrust laws’ is more commonly used.
The aim of this section is to introduce the scope and impact of competition law, in particular in the EU and the U.S. Especially due to the fact that the regulatory legal framework is so extensive and somewhat technical, this section will mainly identify the prohibitions and permitted actions. A violation of competition (or antitrust) law may result in extremely high penalties.
Violations in the EU. The European Commission may impose penalties up to 10 percent of the annual worldwide turnover of the company involved, periodic penalty payments as well as state aid recovery decisions or 30 percent of the company’s annual sales to which the infringement relates, multiplied by the number of years of participation in the infringement. Under EU law, anticompetitive agreements are automatically void and competitors and consumers can take damage actions.
Violations in the U.S.. For a violation of U.S. antitrust law, a company may be subject to very substantial penalties, including criminal penalties, of up to hundreds of millions USD (and higher). Also private parties may sue for damages. In addition, a violation of competition law may also enable consumers or competitors to initiate court proceedings, resulting in substantial liability claims. In some U.S. states, successful plaintiffs may be awarded triple the amount of their damages plus court costs and attorney fees. A violation of competition law can result in an exclusion of the company from public procurement (tender) procedures.
Criminal offense. Next to penalty fines, a violation of national competition laws can also constitute a criminal offense by the corporate offender, such as a director or employee. These individuals can be fined or sentenced to imprisonment.