Market competition dynamics have recently taken centre stage in Malta, sparking fervent discussions within legal, economic and public spheres on the existence or otherwise of cartel behaviour in Malta.
In this context, it is interesting to delve into the dynamics of cartels, exploring both the European Union (EU) framework and Malta’s domestic legal landscape to better understand the regulatory measures in place and the challenges faced in curbing anti-competitive behaviour.
How does the EU Legal Framework regulate Competition in the EU?
Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) together prohibit anti-competitive agreements and the abuse of dominant positions.
As a general rule, Article 101 of the TFEU prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between EU member states, and which have as their object or effect the prevention, restriction or distortion of competition within the internal market.
Article 102 of the TFEU, on the other hand, prohibits any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it, insofar as it may affect trade between EU member states.
The European Commission is the principal European body that is responsible for enforcing competition law at EU level, with the Court of Justice of the European Union (CJEU) undertaking a review role of the European Commission’s decisions in this respect.
What about the Maltese Competition Law Framework?
The Competition Act (Chapter 379 of the laws of Malta) is the primary legislative enactment that regulates competition in Malta. The Maltese competition regulatory framework is based on the underlying principles and rules set out in the TFEU.
Article 5 of the Competition Act prohibits any agreement between undertakings, any decision by an association of undertakings and any concerted practice between undertakings having the object or effect of preventing, restricting or distorting competition within Malta or any part of Malta, subject to certain stated exceptions.
Another restrictive practice that is prohibited by the Competition Act is the abuse by one or more undertakings of a dominant position within Malta or any part of Malta.
The Office for Competition (OfC) within the Malta Competition and Consumer Affairs Authority (MCCAA) along with the Maltese courts have the exclusive competence to apply the legal framework set out in the Competition Act.
The OfC assumes a pivotal role as the primary initiator and enforcer in the oversight of competition law in Malta. It serves as the forefront authority, investigating and taking action against instances of anti-competitive practices.
Examples of Prohibited Agreements and Practices
In particular, the currently applicable competition legal framework prohibits any agreement, decision or practice which:
- directly or indirectly fixes the purchase or selling price or other trading conditions;
- limits or controls production, markets, technical development or investment;
- shares markets or sources of supply;
- imposes the application of dissimilar conditions to equivalent transactions with other parties outside such agreement, thereby placing them at a competitive disadvantage; or
- makes the conclusion of contracts subject to the acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
When may an Abuse of a Dominant Position be deemed to exist?
While holding a dominant position in the market is not inherently unlawful, engaging in the abuse of such dominance is prohibited by law.
One or more undertakings may be considered as abusing a dominant position, where it or they:
- directly or indirectly impose/s an excessive or unfair purchase or selling price or other unfair trading conditions;
- limit/s production, markets or technical development to the prejudice of consumers;
- apply/ies dissimilar conditions to equivalent transactions with different trading parties, thereby placing any or some of the trading parties at a competitive disadvantage; or
- make/s the conclusion of contracts subject to the acceptance by the other party of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
What is a Cartel?
A cartel may be generally described as a group of independent businesses or producers that join together to coordinate the production, pricing or marketing of goods and services, often to control or manipulate the market for their mutual benefit.
The Immunity from Penalties and Reduction of Penalties in Cartel Investigations Regulations (Subsidiary Legislation 379.10) broadly define the term “cartel” as meaning “an agreement or concerted practice between two or more competitors aimed at coordinating their competitive behaviour on the market or influencing the relevant parameters of competition, through practices such as, but not limited to, the fixing or coordination of purchase or selling prices or other trading conditions, including in relation to intellectual property rights, the allocation of production or sales quotas, the sharing of markets and customers, including bid-rigging, restrictions of imports or exports or anti-competitive actions against other competitors”.
While cartels can sometimes involve abuse of dominance, Article 101 of the TFEU and Article 5 of the Competition Act respectively are the primary provisions addressing cartel behaviour within the EU and Maltese competition law framework.
EU competition law provides a robust framework against anti-competitive practices. Malta’s Competition Act is fully aligned with EU competition rules and principles, thus giving rise to a comprehensive regulatory framework which is intended to safeguard consumers and foster fair competition in Malta and throughout the EU.
Effective competition law enforcement emerges as crucial in ensuring fair markets, consumer protection, and the vitality of competitive economic landscapes, particularly in Malta’s distinct small-market setting.
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Please note that the above is intended solely for general information purposes and should not be considered as a substitute for legal advice.