PRIVATE REMEDIES IN COMPETITION LAW (Unfair Competition and Antitrust law)

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1 1 22 September 2002 [April 2005: unchanged] Common Core of European Private Law: Torts Third Draft of a Questionnaire on PRIVATE REMEDIES IN COMPETITION LAW (Unfair Competition and Antitrust law) Professor Dr. Thomas M. J. Möllers, University of Augsburg Professor Dr. Andreas Heinemann, University of Lausanne A. REMEDIES IN UNFAIR COMPETITION LAW Case 1 Risky bread: unlegal comparative advertisement - forbearance Case 2 Watch imitations: Exploitation - pre-trial measures, temporary relief, admonition Case 3 Whisky: Exploitation of good reputation (standing) - damages Case 4 Child labor: Disparagement (trade libel) Civil and crimininal law Case 5 Children`s swing: Attracting customers the different plaintiffs Case 6 Discontinued models: misleading advertisement the consumer as plaintiff Case 7 Misleading advertisement the different defendants B. REMEDIES IN ANTITRUST LAW Case 8 Predatory price undercutting agreements forbearance (cease and desist order) Case 9 Abuse of a dominant market position against a competitor - damages Case 10 Boycott pre-trial measures and temporary relief Case 11 Horizontal restraints of competition - consumer claims against general cartel effects Case 12 Horizontal restraints of competition - validity of subsequent contracts Case 13 Vertical restraints of competition - resale price maintenance Case 14 Selective distribution and refusal to deal

2 2 A. Remedies in Unfair Competition Law Case 1 Risky bread: unlegal comparative advertisement - forbearance A is a baker. He advertises his products as being particularly environmentally compatible. At the same time he claims that his competitor B sells bread with additional ingredients whose risks have not yet been analyzed sufficiently. Therefore, it would be very risky to eat the bread offered by B. In which way can you prevent A from this misleading advertisement in the future? Case 2 Watch imitations: Exploitation - pre-trial measures, temporary relief, admonition In a bakery belonging to the A chain colorable imitations of a reputed mark of Swiss watch, B, are offered as genuine. While the original B watches cost 2.000, the A imitations cost only 20. A has not only published an advertisement in a number of newspapers, but has decorated his shop display window with pictures of the imitation watch. B happens to find out that A is planning to sell the imitated watches the following week accompanied by an advertising campaign. The watches have already been ordered from the supplier, the advertising posters printed and TV spots booked. B wishes to prevent the advertising campaign. 1. Does B have material claims against A realizing his plans? To what extent can B undertake proceedings against advertising campaign before its publication? 2. Can or must B involve arbitrators or mediation procedures before bringing legal proceedings in pursuit of these claims? Indicate the special features of such procedures, in particular the degree to which the decision will be binding. Case 3 Whisky: Exploitation of good reputation (standing) - damages The whisky manufacturer A has engaged an advertising agency to create an advertising campaign. The agency has designed a poster with a bottle of whisky visible in the foreground and three men sitting on the wing of an very expensive English quality car manufactured by B, playing cards and drinking the whisky with evident enjoyment. Sales of A Whisky increase significantly as a result of the advertisement. B is unwilling to see A earn money on the back of his good reputation and demands compensation. Admittedly he cannot establish a loss of earnings on his own part, but he wants a license fee for the advertisement with his trademark and the profit from the sales increase. Has B a compensatory claim against A? How will the amount of the compensation be calculated?

3 3 Case 4 Child labor: Disparagement (trade libel) Civil and crimininal law Shop owner B sells teddy-bears. A intentionally spreads the untrue fact that B s teddy-bears are manufactured by child labor in Africa. Through this misrepresentation A hopes to gain a competitive advantage; B actually suffers a loss of profit amounting to ,-; A makes a profit of ,-. 1. Does this constitute an infringement of competition which B as a competitor can take action against? 2. Can a public authority also take steps against this conduct? 3. Can private or public law proceedings be combined? Case 5 Children`s swing: Attracting customers the different plaintiffs Consumer C reads in a newspaper advertisement of the supermarket chain owned by A, that A is going to sell a children s swing in his shops priced 400, instead of the usual 500. So as to make sure of this attractive offer, C goes to the nearest shop next morning immediately after opening. To his disappointment he sees that all swing available has already been sold to another customer. All A s other supermarkets had only five swing each, and it was impossible to order further swings. C is angry as this is not the first time that A has had not enough of the advertised articles in his shop following an advertisement, which C has tried to purchase. To prevent this conduct, C informs a consumer assocation. This association shall force A to desist from such advertising in the future. 1. Can C as a consumer take legal proceedings to force A to desist from such advertising in the future? 2. Are consumer associations entitled or under a duty to represent the interests of consumers as a whole? 3. To what extent can trade competitors take steps against the advertising? 4. What claims can public authorities or institutions pursue against it? Case 6 Discontinued models: misleading advertisement the consumer as plaintiff The car manufacturer A sells cars. He advertises his cars in the newspaper as the newest and cheapest cars in town, without pointing out that this applies exclusively to discontinued models. C buy such a car because he thought that he would have bought a new brand model. 1. To what extent can consumer C take legal proceedings against A? Which claims can he pursue, which not? 2. Are consumer associations entitled or under a duty to represent the interests of consumers as a whole? 3. To what extent can trade competitors take steps against the advertising? 4. What claims can public authorities or institutions pursue against the advertising? Case 7 Misleading advertisement the different defendants The paper manufacturer A, who supplies exclusively to shops specialized in ecologicallyfriendly products, produces papers with a maximum recycled paper content of 5%. In addition he sells this paper himself to consumers.

4 4 A engages D s advertising agency to create and conduct an advertising campaign for him. D conceives the advertising slogan ecologically friendly recycled paper. The paper is advertised under this slogan in E s newspaper. A, D and E are all aware that the recycled paper content is only 5%. Subject to which preconditions can D be joined in proceedings against A? Is it possible to bring proceedings against E? On what basis? B. Remedies in Antitrust Law Case 8 Predatory price undercutting agreements forbearance (cease and desist order) A, B and C all operate gas stations in town X. D opens a new gas station in X in which petrol is cheaper than A, B and C sell it. To protect themselves against the new competition, A, B and C regularly agree to undercut D s price so as to make him close down his gas station. Thus, D is brought to the point of ruin. 1. Can D claim to compel A, B and C to refrain from price undercutting? 2. Does D s claim require that an (antitrust) authority be engaged against the conduct of A, B and C? 3. Can the claim for an injunction also be pursued by an association? If yes, which associations are entitled to take legal action? 4. Does the conduct of A, B and C constitute an administrative or criminal offence? If yes, who is competent to prosecute the offence, what powers of investigation are there, and what sanctions can be applied? Case 9 Abuse of a dominant market position against a competitor - damages Airline F has a dominant market position for all inland flight routes. F sells the flight tickets through travel agencies. F agrees on loyalty discounts with the travel agencies. Where the turnover of the respective travel agent on tickets for flights with airline F reaches a certain threshold level, the travel agency receives a 5% discount from F for the entire sales volume. L is an airline competing with F, which has a relatively limited market share. F s discount policy is making it difficult for L to get travel agencies to increase the turnover on L s tickets. L suffers significant losses of turnover and profit. 1. Can L claim damages from F? What is the basis for calculation of the damages claim? Does the loss include loss of profit (lucrum cessans)? Can D also claim punitive damages, e.g. treble damages? 2. Is L s claim subject to the precondition that an (antitrust) authority is involved in the claim? 3. How is the burden of proof distributed? How is the level of profit loss to be established? Are the infringer's profits part of the damages ("restitutionary damages")? 4. Does L have claims to remedies in the enforcement of his compensatory claim, such as claims to discovery or rendering of accounts?

5 5 Case 10 Boycott pre-trial measures and temporary relief A has a dominant position on the textile retailing market in town R. When the clothing concern T wishes to open a branch in R, A publicly calls upon the citizens, companies and public institutions to have nothing to do with T so as to preserve the traditional structure of local retailing. 1 What claims does T have against A? 2. How must T actually proceed when bringing a claim? Is he required to give A notice of the claim? Will T have to bear his own pre-trial or trial costs, or can he (if successful) pass his costs on to A? 3. Can T pursue his claim by means of an temporary injunction? What are the preconditions for this? 4. Can the parties reach an out of court settlement? What requirements are to be observed in this? Case 11 Horizontal restraints of competition - consumer claims against general cartel effects A, B and C are competitors in the production and marketing of certain vitamin products. They each have a third market share. The vitamin products are disseminated to the ultimate consumer over various commercial levels. In a secret agreement A, B and C agree upon a 20% price increase. The consumer V pays a higher price than the otherwise competitive price because of the price cartel. What claims does V have against A, B and C? Case 12 Horizontal restraints of competition - validity of subsequent contracts A, B and C produce high tension cable. They each have a third market share. The cable is sold direct to energy producing companies with no intermediaries. A, B and C agree together to raise their prices by 10%. The energy producer E concludes a sales contract with A for 10,000 metres of cable at the new, increased price. Before delivery and payment E learns of the price agreement between A, B and C. He refuses to accept the 10,000 metres of power cable. Does he have a right to do this? What other claims does E have? Case 13 Vertical restraints of competition - resale price maintenance Company A produces skateboards and sells them under the trade mark "flash". A sells the skateboards through wholesalers who sell them on to retailers. B is one of these wholesalers. In a sales contract A and B agree that B has to sell the skateboards to retailers at a certain price. B experiences marketing difficulties because of the high set price and suffers losses amounting to 300,000. As a result, he starts to sell the skateboards at a lower price.

6 6 1. Can A prohibit the sale of the boards at a lower price? 2. What claims does B have against A? Are B's claims influenced by the fact that he participated in the restrictive agreement? Case 14 Selective distribution and refusal to deal A is the producer of several luxury perfumes which are well-known. A has a market share with his perfumes of 15%. The perfumes are only sold to perfumeries which maintain a certain high level in terms of location, interior decoration and presentation. Consumers expect a good perfumery to stock A s products. B operates a perfumery which A has supplied all perfumes ordered over a number of years. When B switches to a low-price policy A stops supplies even though B maintains the required qualitative level. B suffers losses thereby amounting to What claims does B have against A? Is it relevant that A s conduct has been prohibited by order of an antitrust authority?