i Foreword Competition, Cooperation, Embeddedness and Internationalisation: Challenges to Comparative Competition Law Francis Snyder Competition and cooperation are the lifeblood of the economy and therefore of human society itself. As for competition, regardless of our intellectual starting point or disciplinary perspective, we usually point to competition for scarce resources among economic actors as the basic instinct and fundamental rule of the functioning of an economy. This applies regardless of which economic actor attracts our focus, whether individuals, governments, enterprises or other organisations. It also holds regardless of spatial scope, in other words whether we are considering the domestic economy of a specific region, country or distinct territory or transnational economic relations. Nor is competition restricted to a specific geographically delimited political and economic system. The evolution of transnational economic relations, even preceding the development of transnational legal relations such as the law of the World Trade Organization, testifies to the significance of cross-national arenas where competition plays a major role. Competition underpins not only capitalist economies and transition economies but also planned economies, even though the forms, processes, actors and implicit assumptions of competition may differ profoundly among these different economic forms and social settings. Competition and cooperation are often considered to be antagonists; certainly legal scholars have tended to focus more on the former than on the later. However, competition does not occupy our economic, social, political, cultural and legal spaces alone. It is inevitably accompanied by cooperation, even though this essential dimension of social relations is sometimes neglected. Many excellent books show how competition and cooperation are interconnected, for example in C.V. Starr Professor of Law, EU Jean Monnet Professor ad personam and Director, Centre for Research on Transnational Law, Peking University School of Transnational Law, Peking University Shenzhen Graduate School; Visiting Professor, College of Europe, Bruges; Adjunct Professor, University of Macau; Visiting Professor, Institute of European Studies of Macau.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law ii the making and contesting of restrictive practices, abuse of dominant economic position, mergers, and government-business relations. Competition and cooperation are inescapably intertwined. Any company is a good example; though competing with other companies in the same market for survival and profits, a company itself is built on cooperation. The market itself is a form of cooperation. More broadly, cooperation is at the heart of governance, entrepreneurship and citizenship. It is essential to mutually beneficial relations between business and government. It is a crucial element in the social glue holding together government, economic actors and consumers. Recent food safety scandals throughout the world reveal the consequences of a lack of cooperation, or more precisely a lack of balance between competition and cooperation. Cooperation is – or at least should be – the basis of institution building, transfer and reception of law, and the creation of transnational law. Competition and cooperation in normative form may be embedded in strikingly different social settings. Scholars of comparative law have long wrestled with the implications of what the heirs of Karl Polanyi call embeddedness. If law is so embedded in society, is real comparative law possible? Does ‘doing comparative law’ refer to comparing positive law, including legal rules, administrative regulations and judicial decisions? Or does it mean comparing the different solutions to practical social and economic problems by using law and legal processes as an instrument or as a justification? Or, further, does it mean exploring the social functions of similar parts of the legal and other normative configurations in law in different societies? Today the task of the comparative legal scholar has become more complicated. Globalisation has resulted, in most if not all jurisdictions, in the internationalisation of law in two different senses. On one hand, in most significant fields of positive law, so-called ‘domestic’ or ‘municipal’ law is the product of an extremely complex interaction of domestic and foreign norms and processes. On the other hand, our working practices nowadays, whether as legal scholars, government officials, practising lawyers or in-house counsel, blend craft knowledge and professional practice from many different legal systems. It is hardly an exaggeration to say that, today, all law is transnational law. This study by Tang Tat Weng exemplifies these themes of competition, cooperation, embeddedness and internationalisation. The author accepts the challenge of analysing a foreign legal system, that of the European Union, to identify the principal characteristics which make it distinctive. Yet, at the same his thorough analysis enables us to consider two more profound issues. The first is the
Foreword iii extent to which specific ideas and processes of EU competition law are already globalised, in the sense that elements of its specific culture have been exported to and adopted in other societies, in particular that of Macau. The second is the extent to which it is possible to imagine that particular aspects of EU competition law may provide a basis for reforming the competition law and institutions of Macau. Of these two issues, the second poses the greater challenge. As Dr. Tang points out, the two jurisdictions which are analysed in this book differ profoundly in history, society, culture, economy, and more specifically in market structure and political system. These are two elements which one might reasonably deem to be absolutely decisive in determining whether a foreign model, or parts of it, might be suitable candidates for legal transposition and in determining whether and how the normative and institutional reforms would work in practice. This important book provides a basis for considered practical reflection on these issues. It offers a detailed analysis not only of EU law but also of the core provisions of the competition-related laws of Macau S.A.R. concerning unfair competition. More specifically, it analyses the wide range of Macau legislation regarding restrictive practices, abuse of dominant position, unreasonable prices, mergers and monopoly. It contains an especially valuable discussion of existing regional and international cooperation arrangements, including those involving the WTO and the EU in relation to Macau, regarding fair competition. The author argues convincingly that these diverse elements do not add up to a competition law system. His very valuable study, based on thorough research, lays the foundation to begin the process of establishing what he calls ‘an over-arching competition law for Macau’. The book is essential reading for all interested in this challenge, as well for others concerned with competition law in Asia, including mainland China, and with the difficulties and rewards of creating a comparative law of competition law. 23 December 2016
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law iv
v Preface As a consequence of the reform and opening up of China in the late 1970s and abolishing the exclusive right of gaming after the reunification of Macao, the influx of human and financial resources brought necessary momentum to the sustainable development of Macao, giving impetus to the economy of Macao which has increased dramatically over this period. The businesses and trades that have grown and developed are not limited to Macao, but also involve the cross-border businesses and trades between MSAR and HKSAR, China, Taiwan, other Asiatic regions, and even western countries. In 2001, the Consumers Council of MSAR was aware of the importance of maintaining sound competition between enterprises so that the welfare of consumers was not jeopardised. Therefore the Council initiated a research project entitled a “Study report on the fair competition policy in Macao”. At the time, the economy of Macao was growing faster than neighbouring regions. Yet it was not a good time for Macao to launch a report on this issue. There was a lack of a positive response from society with the result that this research did not bring about any significant policy change. In contrast, the “Anti-monopoly Law” of China entered into effect in 2003 and the “Competition Ordinance” of HKSAR was promulgated in 2012 and completely enforced in December 2015. Although the Commercial Code of MSAR has provisions relating to unfair competition which have general applicability, and there are provisions related to the protection of fair competition set out in certain laws and regulations of specific businesses and trades, the former is not comprehensive and has insufficient coverage, and the latter is fragmented and abstract. Therefore, it is difficult to determine whether there has been an infringement of fair competition. Furthermore, given the cross-border trade activities after the reunification of Macao, with the signing of several bilateral agreements, it has become more urgent that the MSAR should establish a specific law relating to fair competition. This is both to guarantee that competition between enterprises in the region is carried out under the conditions of justice and impartiality, and to face the challenges of fair competition in cross-border business and trade activities of enterprises between regions. In this regard, the establishment of an all-rounded and comprehensive fair competition law of MSAR is necessary. Otherwise local enterprises engaged in business and trade activities will have a
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law vi negative impact on economic growth, and will also harm the interests of consumers. The task of creating a comprehensive and fair competition law for MSAR with general applicability has many challenges. It is hard to achieve this goal if it is only based on the limited experiences gained from the enforcement of the legislations related to fair competition of MSAR. Ideally this new legislation must refer to the regional and even international experiences in this area and be developed in harmony with the model of capitalist market economy of MSAR. Nevertheless, the competition laws of many neighbouring regions are still in a development phase. So it is more appropriate that this legislation should take into account the development of fair competition laws in the EU and the US. As the EU law has statute law, and the EU and MSAR have a special bilateral relation, EU competition law is very suitable and appropriate as a reference to draw on for the establishment of fair competition law in MSAR. Therefore, this text will discuss the modality of legislation and enforcement of the existing competition law of the EU, and discuss one-by-one its strategic scope. Specific attention will be focussed on restrictive competition, abuse of dominant position, cartels, concentration, liberalisation, state aid, and international cooperation etc. This will enable the MSAR to learn from the experience of the EU in order to establish a fair competition law which will assist the sustainable development of the local economy. TANG Tat Weng 08 April 2016
vii Acknowledgments This research project was conducted with support from the Asia-Europe Comparative Studies Research Project (AECSRP) – IEEM Academic Research Grant 2012-13 (IEEM AR Grant). I am grateful that they allowed me to extend the term of the project to accommodate my work and teaching commitments. I particularly thank Dr. José Luís de Sales Marques and Mr. Fong Keng Weng, Bentham for immense and valuable support during the research period. Furthermore, I must give my deepest thanks to Professor Kevin Forde who gave encouragement and valuable comments on the drafts of this project. TANG Tat Weng 09 February 2017
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ix Contents Foreword i Preface v Acknowledgements vii Abbreviations xix List of Cases xxiii List of Tables xxix List of Diagrams xxxi Chapter 1 – Introduction 1 1. Motive of the Study 3 2. Objective of the Study 4 3. Ambits of the Study 6 4. Organisation of this Study 7 PART I – THE PERSPECTIVE OF THE EU COMPETITION LAW 13 Chapter 2 – Background and Development of the EU Competition Law and Policy 15 1. Brief History and Evolution of Competition Law and Policy of the EU 15 1.1. Antitrust Law in US 15 1.1.1. Sherman Act 15 1.1.2. Clayton Act 16 1.1.3. Federal Trade Commission Act 17 1.2. Origin and Initial Evolution of Competition Law in the EU 17 2. Concept of Competition 19 3. Definition of the EU Competition Policy 20 4. Objectives of the EU Competition Policy 21 4.1. General Objectives of Competition Policy for which the TFEU Provides 21
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law x 4.2. Concrete Objectives of Competition Policy Developed pursuant to Annual Implementations 24 5. Legal Framework of the EU Competition Law 25 5.1. Fundamental Provisions of the TFEU 27 5.2. Secondary Legislation 28 5.2.1. Regulations 29 5.2.2. Directives 30 5.2.3. Decisions 30 5.2.4. Recommendations and opinions 31 5.2.5. Other acts 31 5.3. Hierarchical Relation of Secondary Legislation to Fundamental Provisions of the TFEU 31 6. Conclusion 32 Chapter 3 – European Institutions of EU Competition Policy 33 1. The European Commission 34 1.1. Cabinets 40 1.1.1. Secretariat-General 40 1.1.2. Legal Service 41 1.2. Organisation and Functions of Directorate-General for Competition 42 1.3. Mission of Directorate-General for Competition of the European Commission 47 2. European Parliament and the Council 48 2.1. European Parliament 50 2.2. Council 53 3. The Court of Justice of the European Union 55 3.1. Court of Justice 55 3.2. General Court 58 3.3. Civil Service Tribunal 60 4. Conclusion 60 Chapter 4 – EU’s Competition Policy I: Rules, Interpretation and Application on the Core Provision of Competition Law 63 1. Antitrust 64
Contents xi 1.1. Restrictive Practices 64 1.1.1. Prohibitions 66 1.1.2. De Minimis rule 73 1.1.3. Horizontal agreements and vertical agreements 75 1.1.4. Exemptions from prohibition 80 1.2. Abuse of Dominant Position 84 1.2.1. The concept of abuse 86 1.2.2. Relevant market 91 1.3. System for implementing Articles 101 and 102 of the TFEU 95 1.3.1. European Competition Network 97 1.3.2. Cooperation within the ECN and between ECN and national courts 101 2. Cartels 102 2.1. Leniency Programme 106 2.1.1. The purpose of introduction to Leniency Programme 106 2.1.2. Revised Leniency Notice in 2006 and its improvements 107 Chapter 5 – EU’s Competition Policy II: Rules, Interpretation and Application on Mergers, Liberalisation, State Aid and International Cooperation 109 1. Mergers 109 1.1. Origin of Rules on Mergers Control 110 1.2. Previous Regulations on Mergers Control 110 1.3. Statu Quo of Mergers Regulation 111 2. Liberalisation – Concession Granted by Member States 113 3. State Aid 116 3.1. General purposes of State Aid policy 116 3.2. The Structure and Applicability of Article 107 of the TFEU 118 3.2.1. Aids incompatible with the internal market 118 3.2.2. Exceptions ipso jure 122 3.2.3. Discretionary exceptions by the Commission 123 3.3. The Application of Article 107 of the TFEU 127 3.4. The Machinery of Articles 108 and 109 of the TFEU 128 4. International Cooperation 129 4.1. Cooperation with International Organisations 130
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xii 4.1.1. The World Trade Organisation 130 4.1.2. The Organisation for Economic Cooperation and Development 131 4.2. Bilateral Cooperation and the Extraterritoriality Principle 132 4.2.1. Brief bilateral relationships of EU with US, Canada and Japan 133 4.2.2. Bilateral cooperation with China 135 5. Conclusion 136 PART II – THE PRESENT LEGAL PROVISIONS RELATED TO FAIR COMPETITION IN MACAO 139 Chapter 6 – The Legal Provisions which maintain Fair Competition in various sectors in Macao 141 1. Brief Evolution of the Economic Situation of MSAR 141 2. The Economy-related Provisions in the Basic Law of Macao Special Administrative Region 144 3. The Present Legal Framework of MSAR 146 3.1. National laws 148 3.2. Basic Law of the Macao Special Administrative Region 148 3.3. Law 149 3.4. Administrative Regulation 151 3.5. Decree-Law 151 3.6. Executive Order 153 3.7. Resolution of the Legislative Assembly 153 3.8. Dispatch of the Chief Executive 154 3.9. Notice of the Chief Executive 154 3.10. Dispatches of the Principal Officials 155 4. Provisions regarding Unfair Competition in the Commercial Code 155 4.1. Objectives Defined in the Regulation of Competition 155 4.2. Subject Applicable to the Regulation of Competition 156 4.3. Provisions regarding the “Regulation of Competition between Entrepreneurs” 158 4.3.1. The meaning of “Legal Limits” 158 4.3.2. The meaning of “contractual limits” 163
Contents xiii 4.4. Regarding the Provision of “Unfair Competition” 164 4.4.1. Scope of subjects applicable to the provisions of unfair competition 164 4.4.2. Scope of objects applicable to the provision of unfair competition 165 4.4.3. Requirements comprise the behaviours of unfair competition and their category 165 4.4.4. Prescription to initiate judicial action for unfair competition and compensation of damage 173 5. Fair Competition-related Provisions, Existing in the Laws of Economic Sectors 173 6. Conclusion 175 Chapter 7 – Core Provisions I of Fair Competition of Macao: Restrictive Competition of Relevant Industries and Sectors 177 1. Government Procurement 183 1.1. Provisions related to the Protection of Fair Competition in the United Nations Convention against Corruption, which is applicable to MSAR 183 1.2. Locally Legislated Provisions related to Protection of Fair Competition in the Legal Regime of Government Procurement 184 1.2.1. Generalised provisions in relation to the protection of fair competition 185 1.2.2. Specific provisions in relation to the protection of fair competition 186 2. Protection of Consumers 189 3. Transport Industry 189 4. Advertising Activity 189 5. Insurance Industry 190 6. Postal Services 192 7. Aviation Industry 193 8. Food Labelling 202 9. Finance Sector 202 10. Imports and Exports 205 11. Freight Forwarding Industry 205 12. The Statistical Information System of MSAR 206 13. Activity of the Television Broadcasting by Satellite 207
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xiv 13.1. Licence Granted to the “Telesat – Satellite Communications Limited” 209 13.2. Licences Granted to the “China Satellite TV (Group) Limited Company” and “Satellite television MASTV, Limited Company” 209 13.3. Licence Granted to the “Macau Lotus Satellite TV Media Limited” 210 14. Private Notary 210 15. Intellectual Property Rights 212 15.1. Legal Regime of Industrial Property 212 15.2. Organisation and Functioning of Customs of MSAR 213 15.3. Protection of Copyright and related Rights 213 16. Motor Vehicles Tax 215 17. Road and Intercity Passengers Transport 216 18. Labour Relations 217 19. Integrity 218 20. Conclusion 219 Chapter 8 – Core Provisions II of Fair Competition of Macao: Abuse of Dominant Market Position in Relevant Industries and Sectors 221 1. Provisions which Prohibit the Abuse of Dominant Position of Market in the Present Legislation of MSAR 222 1.1. Public Health 225 1.2. Public Administration 227 1.3. Internet Services 228 1.4. Gaming Industry 230 1.4.1. Provisions guaranteeing fair competition in complementary regulations 234 1.4.2. Provisions protecting fair competition in contracts of grant of games of chance 237 1.5. Telecommunications Industry 240 1.5.1. Installation and operation of external telecommunications infrastructure 242 1.5.2. Regime of interconnection of public networks of telecommunications 244 1.5.3. Public networks of fixed telecommunications 245
Contents xv 1.5.4. Services of mobile telecommunications 246 2. Policies of Governmental Aids 250 2.1. Enterprises in the MSAR 250 2.2. Aids Provided to Enterprises 252 2.2.1. Scheme of “Subsidy for Interest of Corporate Financing Loan” 252 2.2.2. “Plan of Support to Young Entrepreneurs” 254 2.2.3. “Plan of the Development and Support to Fishery” 256 2.3. Aids Provided to SMEs 258 2.3.1. Definition of SMEs 258 2.3.2. The role played by the government for the development of industries and trades of SMEs 261 2.3.3. Favourable policies to SMEs: Internal trades in Macao 262 2.3.4. Policies and plans of aids to SMEs 263 2.3.5. Other policies assisting the development of SMEs 269 3. Conclusion 275 Chapter 9 – Core Provisions III of Fair Competition of Macao: Mergers of Companies 279 1. Core Provisions of the Merger of Company Regulated in MSAR 279 1.1. Meaning and Forms of Mergers 279 1.2. Process of Mergers 280 1.2.1. Elaboration of merger project 280 1.2.2. Supervision of the merger project 281 1.2.3. Registration of the merger project 281 1.2.4. Resolution of the merger project 282 1.2.5. Publication of the merger 282 1.2.6. Registration of the merger 282 1.3. The Legal Effect of Mergers 283 1.4. Nullity of the Merger 284 2. Branches of Law containing Merger Provisions 284 2.1. Insurance Industry 287 2.2. Rules of Mergers in Financial Service Industries 288 2.2.1. Merger of credit institutions 288 2.2.2. Merger of financial and insurance institutions 289
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xvi 2.2.3. Merger of banking institutions – the banking institutions established in Macao as examples 290 2.3. Regime of Concession of Construction and Operation of Ká Hó Harbour 293 2.4. Service of Telecommunications of Television Broadcasting via Satellite 294 2.5. Service of Terrestrial Mobile Telecommunications 295 2.5.1. Operator self-owned terrestrial mobile telecommunication network 295 2.5.2. Operator of mobile virtual network 296 2.6. Special Stamp Duty 297 2.7. Public Networks of Fixed Telecommunications 298 2.8. Provision of Specific Services by Companies Established by the Financing of the Government of MSAR 300 2.8.1. Provision of service of frequencies of television channel 300 2.8.2. Provision of support services to customers by a company established by the Government of MSAR 303 3. Conclusion 304 Chapter 10 – Regional and International Cooperation ensuring Fair Competition 307 1. International and Regional Instruments applicable to MSAR 307 1.1. International Treaties applicable to MSAR 307 1.2. Bilateral Agreements signed by MSAR 308 1.2.1. Bilateral agreements signed at the international level 308 1.2.2. Bilateral agreements signed at the regional level 308 2. International Cooperation in the Ambit of the Economy 319 2.1. Relationship between Macao, China and the WTO 319 2.1.1. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2001 319 2.1.2. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2007 320 2.1.3. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2013 322
Contents xvii 2.1.4. Concerns of WTO to the implementation of competition policy and its legislation of Macao, China 323 2.2. Relationship between Macao, China and the EU 324 3. Conclusion 326 PART III – THE CONCEPTUALISATION OF THE STATE‐OF-THE-ART COMPETITION LAW FOR MSAR 329 Chapter 11 – In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 331 1. Components of the Competition Law and Policy of the EU 332 1.1. Historical Background 332 1.2. Legal Framework 332 1.2.1. Core provisions 332 1.2.2. Peripheral provisions 334 1.3. Structure and Staff 334 2. International Characteristics of the Competition Policy of the EU 335 2.1. International Multilateral Cooperation Relations of the Competition Policy of the EU 336 2.2. International Bilateral Cooperation Relations of the Competition Policy of the EU 337 3. Turning Point of the Competition Law and Policy of the EU Entering the 21st Century 339 4. Examination of the legislative statu quo of the legal system of fair competition of MSAR before EU competition law 342 5. EU Competition Law Model implied for MSAR 347 5.1. Definition of All-encompassing Local Competition Law 347 5.2. Essential Elements in Competition Policy 348 5.2.1. The legislation is the subject of competition policy 348 5.2.2. The competition-related legal system acts as the key role in competition policy 351 5.2.3. The consciousness of fair competition is a power to motivate fair competition 352 5.2.4. The scope of competition policy 352 5.2.5. Implementing a sustainable development strategy 353
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xviii Bibliography 355 Annex I: Rules on Competition of the TFEU 361 Annex II: Legislations in force in respect of competition-related nature of the EU 367 Annex III: Fair competition-related provisions set out in the Commercial Code of MSAR 375
xix Abbreviations ASEAN Association of Southeast Asian Nations BER Block Exemption Regulation CFI Court of First Instance CJEU Court of Justice of the European Union CLP Competition Law and Policy CMLR Common Market Law Reports CPTTM Macau Productivity and Technology Transfer Centre DDA Doha Development Agenda DG Directorate-General DG Competition Directorate-General for Competition DGIV Directorate-General IV DOJ Department of Justice EC European Community EC Treaty Treaty establishing the European Community ECJ European Court of Justice ECN European Competition Network ECR European Court Reports ECSC European Coal and Steel Community EEA European Economic Area EEC European Economic Community EFTA European Free Trade Area EMU Economic and Monetary Union EP European Parliament EU European Union EUR Euro (Currency of the European Union) Euratom European Atomic Energy Community FDIC Industrial and Commercial Development Fund
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xx FDI Foreign Direct Investment FTC Federal Trade Commission GATS General Agreement on Trade in Services GATT General Agreement on Tariffs and Trade GC General Court GDP Gross Domestic Product GWB Gesetz gegen Wettbewerbsbeschränkungen HKSAR Hong Kong Special Administrative Region ICN International Competition Network IPIM Macao Trade and Investment Promotion Institute LDCs Least Developed Countries LS Legal Service M&As Mergers and Acquisitions MBSC Macao Business Services Centre MSAR Macao Special Administrative Region MEPs Members of the European Parliament MES Macao Economic Services MOP Pataca (Currency of MSAR) MS Member States OECD Organisation for Economic Cooperation and Development OJ Official Journal PRC The People’s Republic of China QVM Qualified Voting Majority R&D Research and Development SAR Special Administrative Region SEA Single European Act SEM Single European Market SG Secretariat-General SMEC Small and Medium-sized Enterprises Centre SMEs Small and Medium-sized Enterprises
Abbreviations xxi TEC Treaty establishing the European Community TEU Treaty on the European Union TFEU Treaty on the Functioning of the European Union ToR Terms of Reference TRIPS Trade-Related Aspects of Intellectual Property Rights UN United Nations UNCTAD United Nations Conference on Trade And Development US United States WTO World Trade Organization
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxii
xxiii List of Cases Court cases: [1957] Joint Cases 1/57 and 14/57, Société des usines à tubes de la Sarre v High Authority of the European Coal and Steel Community, [1957] ECR 105 [1959] Case 30/59, De Gezamenlijke Steenkolenmijnen in Limburg v Hight Authority of the ECSC, [1961] ECR 3 [1961] Case 13/61, Bosch v De Geus [1962] ECR 45, [1962] CMLR 1 [1963] Cases 90 and 91/63, Commission v Luxembourg and Belgium, [1964] ECR 625 [1964] Case 56 and 58/64, Établissements Consten S.À.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community, [1966] ECR 299 [1965] Case 54/65, Compagnie des forges de Châtillon, Commentry & Neuves-Maisons v High Authority of the ECSC, [1966] ECR 185, at 195 [1965] Case 56/65, Société Technique Minière (L.T.M.) v Maschinenbau Ulm GmbH (M.B.U.) [1966] ECR 235 [1969] Case 48/69, Imperial Chemical Industries Ltd v Commission of the European Communities (Dyestuffs), [1972] ECR 619 [1969] Case 5/69, Franz Völk v S.P.R.L. Ets J. Vervaecke, [1969] ECR 295 [1969] Cases 41, 44 & 45/69, ACF Chemiefarma NV v Commission, [1969] ECR 661 [1969] Joined Cases 6/69 and 11/69, Commission of the European Communities v French Republic, [1969] ECR 523 [1970] Case 40/70, Sirena Srl v Eda Srl, [1971] ECR 69 [1971] Case 93/71, Orsolina Leonesio v Ministero dell’agricoltura e foreste, [1972] ECR 287 [1972] Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission of the European Communities, [1973] ECR 215, [1973] CMLR 199 [1972] Case 8/72, Vereeniging van Cementhandelaren v Commission of the European Communities, [1972] ECR 977 [1973] Cases 40-48, 50, 54-56, 111, 113 & 114/73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission of the European Communities, [1975] ECR 1663
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxiv [1973] Cases 6 and 7/73, Istituto Chemioterapico Italiano SpA v Commission, [1974] ECR 223, paras 15 and 19 [1973] Joined Cases 40 to 48, 50, 54 to 60, 111, 113 and 114/73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission of the European Communities, [1975] ECR 1663 [1976] Case 27/76, United Brands Company and United Brands Continental BV v Commission of the European Communities, [1978] ECR 207, 14 February 1978 [1976] Case 52/76, Luigi Benedetti v Munari F.lli s.a.s., [1977] ECR 163 [1976] Case 78/76, Steinike & Weinlig v Federal Republic of Germany, [1977] ECR 595 [1976] Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461 para 41, [1979] 3 CMLR 211 [1976] Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461 [1977] Case 156/77, Commission of the European Communities v Kingdom of Belgium, [1978] ECR p 1881 [1978] Case 258/78, L. C. Nungesser KG and Kurt Eisele v Commission of the European Communities, [1982] ECR ECR 2015 [1979] Case 730/79, Philip Morris Holland BV v Commission of the European Communities, [1980] ECR 2671 [1980] Case 172/80, Gerhard Züchner v Bayerische Vereinsbank AG, [1981] ECR p 2021. [1980] Case 182/80, H.P. Gauff Ingenieure GmbH & Co. KG v Commission of the European Communities, [1982] ECR 799 [1981] Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities, [1983] ECR 3461 [1983] Cases 96-102, 104, 105, 108 and 110/82, NV IAZ International Belgium and others v Commission of the European Communities, [1983] ECR 3369 [1984] Case 122/84, Kenneth Scrivner and Carol Cole v Centre public d’aide sociale de Chastre, [1985] ECR 1027, 27 March 1985 [1984] Case 248/84, Federal Republic of Germany v Commission of the European Communities, [1987] ECR 4013 [1985] Case 247/85, Commission v Belgium, [1987] ECR 3029 [1985] Case 45/85, Verband der Sachversicherer e.V. v Commission of the European Communities, [1987] ECR p 405 [1985] Case 89/85, A. Ahlström Osakeyhtiö and others v Commission of the European Communities, [1998] ECR 5193
List of Cases xxv [1986] Case 66/86, Ahmed Saeed v Zentrale zur Bekämpfung unlauteren Wettbewerbs, [1989] ECR 803, [1990] 4 CMLR 102, para 35 [1986] Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359 [1986] Case C-62/86, AKZO Chemie BV v Commission, [1991] OJ C 201/3 ECR I-03359 [1987] Case 30/87, Bodson v Pompes Funèbres des Régions Libérées SA, [1988] ECR 2479, [1989] 4 CMLR 984 [1988] Case 322/88, Salvatore Grimakli v Fonds des maladies professionnelles, [1989] ECR 4407, 13 December 1989 [1989] Case T-1/89, Rhône-Poulenc SA v Commission of the European Communities, [1991] ECR p II-867 [1989] Case T-1/89, Rhône-Poulenc v Commission, [1991] ECR II-867, para 120; Case T9/89, Hüls v Commission, [1992] ECR II-499 [1989] Case T-30/89, Hilti v Commission, [1999] ECR II-1439 [1989] Case T-69/89, RTE v Commission, [1991] ECR II-485, para 65 et seq.; Case C-241/91P and C-242/91P, RTP and ITP v Commission, [1995] ECR I-743 [1989] Joined Cases 62/87 and 72/87, Exécutif regional wallon and SA Glaverbel v Commission of the European Communities, [1988] ECR 1573 [1989] Joint Cases T-68, T-77 and T-78/89, SIV v Commission, [1992] ECR II-1403 [1990] Case C41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH, [1991] ECR I-1979 [1991] Case C-320/91, Criminal proceedings against Paul Corbeau, [1993] ECR I-02533, 19 May 1993 [1991] Joined Cases C-72/91 and C-73/91, Firma Sloman Neptun Schiffahrts AG v Seebetriebsrat Bodo Ziesmer de Sloman Neptun Schiffahrts AG, [1993] ECR I-00887 [1992] Case C-431/92, Commission of the European Communities v Federal Republic of Germany [1995] ECR I-2189 [1992] Cases 16 and 17/92, Confédération nationale des producteurs de fruits et legumes and others v Council of the European Economic Community, [1962] ECR 471 [1992] Joined Cases 278/92, 279/92 and 280/92, Kingdom of Spain v Commission of the European Communities, [1994] ECR I-04103 [1993] Case T-504/93, Tiercé Ladbroke SA v Commission, [1997] ECR II-923 [1994] Case C39/94, Syndicat français de I’Express international (SFEI) and others v La Poste and others, [1996] ECR I-03547, 11 July 1996
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxvi [1994] Case T-141/94, Thyssen Stahl AG v Commission, [1999] ECR II-347 [1994] Case T-229/94, Deutsche Bahn v Commission, [1997] ECR II-1689 [1996] Case C-306/96, Javico International and Javico AG v Yves Saint Laurent Parfums SA (YSLP), [1998] ECR I-01983 [1996] Joined Cases T-132/96 and T-143/96, Freistaat Sachsen, Volkswagen AG and Volkswagen Sachsen GmbH v Commission of the European Communities, [1999] ECR II-03663 [1997] Case 61/79, Amministrazione delle finanze dello Stato v Denkavit italiana Srl., [1980] ECR 1205, para 31 [1997] Case C-256/97, Déménagements-Manutention Transport SA (DMT), [1999] ECR I-3913 [1997] Joined Cases C-52/97, C-53/97 and C57/97, Epifanio Viscido (C-52/97), Mauro Scandella and Others (C-53/97) and Massimiliano Terragnolo and Others (C-54/97) v Ente Poste Italiane, [1998] ECR I-02629 [1998] Case T-62/98, Volkswagen AG v Commission of the European Communities, [2000] ECR II-02707 [1999] Case C-319/99, Commission of the European Communities v French Republic, [2000] ECR I-10439 [1999] Case T-319/99, Federación Nacional de Empresas de Insstrumentación Científica, Médica, Técnica y Dental (FENIN) v Commisison of the European Communities [2000] Case C-338/00 P, Volkswagen AG v Commission of the European Communities. Visited on 25 February 2008 the website: http://eur-lex.europa.eu/Lex UriServ/LexUriServ.do?uri=CELEX:62000J0338:EN:HTML [2002] Joined Case C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P, and C-213/02 P Dansk Rørindustri A/S (C-189/02 P), Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH ao, 28 June 2005 [2005] ECR I-5425 Decisions: [1995] 95/145/EC, ECSC: Decision of the Council and the Commission of 10 April 1995 concerning the conclusion of the Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws, [1995] OJ L95, 27 April 1995 [1975] Commission Decision of 14 July 1975 relating to a proceeding under Article 85 of the EEC Treaty (IV/28.838 – INTERGROUP) (75/482/EEC), [1975] OJ L212/23, August 09, 1975
List of Cases xxvii [1976] 76/172/EEC: Commission Decision of 15 December 1975 relating to a proceeding under Article 85 of the Treaty (IV/27.073 – Bayer/Gist-Brocades), [1976] OJ L30/13, 5 February 1976 [1976] Commission Decision of 17 September 1976 (76/753/Euratom), Competition-related extracts from the Framework Agreement for commercial and economic co-operation between the European Communities and Canada, [1976] OJ L 260, 24 September 1976 [1984] Commission Decision of 6 August 1984 relating to a proceeding under Article 85 of the EEC Treaty (IV/30.350 – zinc producer group) (84/405/EEC), [1984] OJ L 220/27 [1986] Commission Decision of 23 April 1986 relating to a proceeding under Article 85 of the EEC Treaty (IV/31.149 – Polypropylene), [1986] OJ L230/1 [1987] Council Decision of 13 July 1987 laying down the procedures for the exercises of implementing powers conferred on the Commission (87/373/EEC), OJ L 197, 18.07.1987 [1998] Commission Decision of 28 January 1998 relating to a proceeding under Article 85 of the EC Treaty (Case IV/35.733 – VW) (98/273/EC), [1998] OJ L124/60. 25.04.98 [1999] Council and Commission Decision of 29 April 1999 (1999/445/Ec, ECSC), Agreement between the European Communities and the Government of Canada regarding the application of their competition laws, [1999] OJ L 175, 10 July 1999 [1999] Council and Commission Decision of 29 April 1999 concerning the conclusion of the Agreement between the European Communities and the Government of Canada regarding the application of their competition laws (1999/445/EC, ECSC), [1999] OJ L175, 10 July 1999 [1999] Council Decision of 28 June 1999 laying down the procedures for the exercise of implementing power conferred on the Commission (1999/468/EC), OJ L 184/23, 17.7.1999 [2003] Council Decision, of 16 June 2003, concluding the Agreement between the European Community and the Government of Japan concerning cooperation on anticompetitive activities (2003/520/EC), [2003] OJ L 183, 22 July 2003
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxviii [2003] Council Decision of 16 June 2003 concluding the Agreement between the European Community and the Government of Japan concerning cooperation on anti-competitive activities (2003/520/EC), [2003] OJ L183, 22 July 2003 [2004] Commission Decision of 24 March 2004 relating to a proceeding pursuant to Article 82 of the EC Treaty and Article 54 of the EEA Agreement against Microsoft Corporation (Case COMP/C-3/37.792 –Microsoft) (notified under document number C(2004) 900) (2007/53/EC), [2007] OJ L32/23, 6 February 2007 [2005] Commission Decision of 10.11.2005 imposing a periodic penalty payment pursuant to Article 24(1) of Regulation No 1/2003 on Microsoft Corporation (Case COMP/C-3/37.792 Microsoft)
xxix List of Tables Table 3.1 Comparison of changes of the functional structure of the DG Competition 45 Table 3.2 Members of the European Parliament by Member States, 8th parliamentary term 51 Table 4.1 Block exemptions adopted by the Council and the Commission in force (situation as at 1st July 2013) 83 Table 4.2 Cartels 1990 – 2014 in number of decisions and fine imposed 105 Table 6.1 Growth of GDP of Macao between 1982 and 2010 (thousand Patacas) 142 Table 6.2 Number of legislations in force in respect of competition-related provisions of MSAR 174 Table 7.1 Legislation of MSAR concerning provisions of the protection of fair competition 178 Table 7.2 The legal system related to civil aviation activity in Macao 194 Table 7.3 The relevant international conventions related to civil aviation activity in Macao applicable to MSAR 196 Table 7.4 Since the reunification of Macao, the air services agreements signed by the government of MSAR 197 Table 7.5 In MSAR, the companies granted licences of television broadcasting by satellite and the relative legislations 208 Table 8.1 Legislation of MSAR involving in dominant position listed chronologically by area of Activity 222 Table 8.2 Complementary regulations related to Law no. 16/2001 234 Table 8.3 Contracts of grant for the operation of games of chance and relevant instruments 237 Table 8.4 Dispatches of the Chief Executive which issued the operation of public networks of telecommunications and the provision of services of terrestrial mobile telecommunications for public use 248 Table 8.5 Between 2002 and 2013, the number of enterprises established in MSAR 251
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxx Table 8.6 Amount of aid and period of repayment, till to 2013 of the implementation of the Plan of Aids to SMEs 265 Table 9.1 Legislation of MSAR concerning provisions of merger for specific sectors 284 Table 9.2 Companies granted licences to install and operate the networks of the fourth generation of terrestrial mobile telecommunications and provide the relevant services 295 Table 9.3 Companies granted licence to install and operate public network of fixed telecommunications 299 Table 10.1 Regional agreements signed between Macao and the Mainland China, since the reunification of Macao 309 Table 10.2 Evolution of issues covered by the Mainland and Macao Closer Partnership Arrangement (CEPA) and its supplements 313 Table 11.1 Major elements of the EU Competition law compared with the relevant legislations of the MSAR in force 342 Table 11.2 Number of legislations in force in respect of competition- related nature of the EU 349 Table 11.3 Number of legislations in respect of the types of unfair competition in MSAR 351
List of Diagrams xxxi List of Diagrams Diagram 2.1 Pyramid of legal framework of EU competition law 26 Diagram 3.1 Organisation chart of Directorate-General for Competition 44 Diagram 4.1 Cooperation between Commission and the Member States (MS) 98 Diagram 6.1 GDP of Macao in the period between 1982 and 2010 (100 million of patacas) 143 Diagram 6.2 Annual variation rate of GDP of Macao in the period between 1982 and 2010 (Δ%) 144 Diagram 6.3 Legal framework of MSAR 148
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law xxxii
1 Chapter 1 Introduction Competition policy occupies a crucial position in the Treaty on the Functioning of the European Community (hereinafter referred to as TFEU), as it is one of the essential policies which controls and encourages competition in the internal market. The raison d’être of the Treaty is to allow undertakings to compete on a level playing field in all Member States of the European Union (hereinafter referred to as EU). The primary aim of competition policy is to encourage economic efficiency by creating a favourable atmosphere for innovation and technological progress. Competition policy allows for the development of a regulatory framework within which the EU and the Member States can maintain and encourage competition. It is in essence a negative policy, in that it seeks to prevent rather than to promote certain activities. Essentially it limits the extent of anti-competitive practice, rather than by more positive means, whereby competition is encouraged. It is clear that the rationale behind competition policy implies a desire to promote competition and, thus, consumer welfare. The fourth recital of the preamble of the TFEU recognises that the “removal of existing obstacles calls for concerted action in order to guarantee … fair competition”.1 ‘Fair competition’ refers more accurately to the type of unfair competition addressed in Germany by the UWG (Gesetz gegen den unlauteren Wettbewerb) (Lane, 2000, pp 25-6). In any event this recital helps to interpret one of the objectives set out in the Treaty and there have been limited Community transgressions in this particular part of competition law. In other words, of more significance is the inclusion amongst the activities of the Community of “the establishing of the competition rules necessary for the functioning of the internal 1 TFEU, 4th recital. In the Seventh Edition of Black’s Law Dictionary published by West Group, the terminology of “fair competition” is defined as “open, equitable, and just competition between business competitors”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 2 market”,2 and this addresses competition law as it is more generally understood and as one of the specified activities necessary to achieve the goals of the EU. The competition policy outlined by the TFEU is an essential subject contained in Article 3(1)(b), which provides for “competition rules necessary for the functioning of the internal market”, and Article 101, which does not contain a definition of either competition policy or its objective. However, the former is at least helpful in interpreting the term “competition”, and the latter is important as it applies to the agreements, decisions or concerned practices between undertakings, in order to prevent, restrict or distort competition. Basically, competition is a relationship between a number of undertakings which sell goods or provide services of the same kind at the same time to a group of consumers. Healthy competition between undertakings is beneficial to the entire economy and all customers. In this regard, the EU competition law is a necessary path to providing solutions to problems in order to achieve this goal. In order to retain fair competition in the free market of Europe, some forms of intervention must be adopted in the Member States. The EU is distinctly interventionist with regard to abuses of commercial activities to the detriment of consumers and the market. However, too much intervention can form an obstacle to economic growth, and results in an inefficient small scale of production instead of getting the benefit from economies of scale. Therefore, the EU must adopt the middle path to achieving its objectives. Competition law is an essential and an integral part of the EU and its policies. Its existence is to ensure the maintenance and sustainability of the internal market. One of the targets of the internal market is to establish and maintain European-wide competition to stimulate the entire economy of the EU in domestic and worldwide markets. Competition law is mainly based on this economic consideration. The major theory behind competition law is that market structure determines the conduct of commercial activities in the market and this conduct determines how the market operates. It is in the interests of society and/or community that markets operate efficiently. Therefore, the objective of competition law is, as far as is possible, to achieve that end. At present, the EU has achieved this aspect. It is achieved by laws influencing the market development and arrangements between commercial enterprises which affect the performance of market participants. It affects inevitably competition law. Although the problems are similar, competition law is called on to rectify situations in different jurisdictions. So, in order to interpret how the law is applied, it is necessary to understand the policy behind the law. Competition policy allows for the development of legal and regulatory frameworks within which governments of Member States can maintain and 2 TFEU, Art. 3(1)(b).
Introduction 3 encourage market competition. Such a policy is clearly based on the assumption that economic performance will ultimately benefit from this approach. 1. Motive of the Study The European Economic Community aimed to re-establish its economy by the alliance of six western countries following World War II. This has now evolved into the EU which is a regional and supranational system consisting of 28 Member States. The EU is ranked as the three strongest economy in the world. Competition policy is one of the core policies which helped develop this economy. Its legal prototype was stipulated in the ECSC Treaty in 1951 and completed in the EEC Treaty as the present Rules on Competition which must be complied with scrupulously. The Rules on Competition develop a power as an “Economic Constitution”. Although the Rules on Competition comprise several provisions, their far-reaching effects undoubtedly contribute to the current economic power of the EU. Certainly, the contents of the Rules on Competition fulfil the goal set out by the Treaty which guarantees that competition in the internal market is not distorted. The key point is how to appropriately apply and effectively implement the Rules on Competition. The EU uses precise and concrete provisions through a set of secondary legislations to ensure activities between Member States and within Member States are conducted under fair competition. Where any problems occur they are considered by the Commission or litigated before the Courts. Therefore, the main purpose of this study is to analyse the competition law and policies of the EU, to understand the development process of these laws, and how fair competition can be ensured in the EU. Since the economic reform and opening up of the domestic market in the People’s Republic of China in 1978, introduced by the former Prime Minister, Deng, Xiaopeng, a large number of people immigrated to Macao, which increased the internal demand for goods and services, on the one hand, and provided more manpower, on the another hand, so as to become the basis of contemporary socio-economic development of Macao. The Macao economy has increased dramatically by 3,211.76% as measured by Gross Domestic Product (GDP) from 6,756 million patacas in 1982 to 223,743 million patacas in 2010; GDP per capita increased 15 times from 25,814 patacas to 413,880 patacas over the same period. Meanwhile, the economy of Macao has pursued, in the long term, the policy of a capitalist free market, as the government of Macao does not interfere generally in the operation of markets, except for those involving peculiar industries and those involving some public interest. Since the opening up of the concession of gaming after the reunification of Macao, the economic environment of Macao has changed dramatically. A lot of foreign investment has entered the market, diverse industries have developed and the number of small and medium-enterprises (SMEs) has
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 4 increased significantly. In addition, many “brand name” enterprises with regional and international brands have located in Macao. Moreover, Macao and Mainland China signed a “Closer Economic Partnership Arrangement” in 2004, whereby both parties opened up certain goods and services markets which were subject to the terms of Arrangement, enabling enterprises of one party to provide services or sell goods to another party. In other words, there are more enterprises entering from China to compete with local enterprises, resulting in foreign investors replacing local enterprises and driving out local competitors. Under this fierce competition, local SMEs rely on governmental aid in order to survive. These are the problems hindering the sustainable development of the socio-economy of Macao that the government of Macao Special Administrative Region (hereinafter referred to as MSAR) has to face. Therefore, to further open up and solve these inherent and potential problems, it is necessary to improve the local legal system, and to open up dialogue with foreign economies and to establish bilateral and even multilateral cooperation. Whereas the Anti-monopoly Law of China, which entered into force in August 2008, is based mainly on the technical support by the EU, it was established in line with the national development of the economy, making the competition policy and law a “European model”; and the fair competition law of Hong Kong Special Administrative Region has been effective since December 2015. In contrast, the legal system of fair competition of MSAR is incomplete and has many defects, and does not have a comprehensive set of competition policies and legislations. Consequently, local enterprises find it hard to survive in a good and healthy environment of competition, and the interests of consumers cannot be guaranteed. 2. Objective of the Study The last three enlargements of the EU were on 1 May 2004, 1 January 2007 and 1 July 2013 when Member States were increased respectively from 15 to 25, 25 to 27 and 27 to 28. The new Member States were from Central and Eastern Europe and their economies are comparatively weaker than the original 15 Member States. However, they possess abundant natural and human resources facilitating the sustainable economic development of the EU as a whole. These enlargements which are recognised as significant by the Member States within the region, and also countries outside the region, form part of the general goals of the European integration. One of the original intentions of the establishment of a single European market was to preserve the unification of Europe, viz the establishment of the European Economic Community (hereinafter referred to as EEC), which contributes to the synthesising of the powers of different countries to establish an unique economic system, in order to maintain the economies of the Member States and
Introduction 5 give impetus to their development, with the objective of being able to compete with other powerful economic systems in the world economy. The principle purpose of the present Treaty on European Union (TEU) still contains the “gene” of the former EEC, which is that “[t]he Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy …”.3 Moreover, in this provision, the importance of economic activities to the Internal Market is even more highlighted. History shows that the EU has successfully established an internal market. It is a process of development that has passed through a governmental intervention economy, political economy and liberal economy, to the present market economy which is considered fairer and more efficient. This success relies on a sound economy guaranteed by the “competition rules necessary for the functioning of the internal market”, as provided for in Article 3(1)(b) of the TFEU. In that case, competition between firms is to be carried out under fair conditions and must be protected and not interfered with by illegal behaviours, such as antitrust, cartels, abuse of dominant position, etc. Ergo, these illegal behaviours are prohibited under the Rules on Competition of the TFEU and other legal acts. Presently, there are six policy areas under the competition policy of the EU, which are antitrust, cartels, mergers, state aid, liberalisation and international cooperation. This study aims at interpreting and discussing clearly the relevant provisions relating to these policy areas as well as analysing some typical cases illustrating how the EU realises its competition policy goals and ensures fair competition. Entering the 21st Century, the global economy has formed a triad of economic power with the US leading North America, China which is emerging economically in Asia, and the EU. Of these, the economic market of China is still in its infancy compared with other two and has to be developed in all aspects, including effective and long-term policies, regularisation and sound economic market structure, etc. Based on the normalisation of the relationship between the EU and China from 1998, China can use the experiences of the EU in implementing and enforcing competition policy and law, in order to improve its socialist economic market by enhancing its competition policy. The new Anti-monopoly Law of the PRC was promulgated on 30 August 2007. Notwithstanding MSAR is an integral part of China, based on the principle of “one country, two systems”, the administration, legislation and jurisdiction of MSAR are independent, maintaining its capitalist market economy, which is a micro-economic system. Following the development of the local economy of Macao, it has become a service-oriented economic system, led by the industries of gaming and tourism, therefore the domestic needs of goods and services rely on imports from the Mainland and the neighbouring regions. Apart 3 TEU, Art. 3(3).
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 6 from the local business and trade, Macao has frequent cross-border businesses and trade activities. However, under the present dramatic changes of local and regional economic situations, it is possible for profit-maximising enterprises to exercise unfair competition behaviours by different means, resulting in the detriment of the interests of consumers. Thus, effective and appropriate laws against unfair competition are needed to ensure the sustainability of the socio-economic development of Macao. In this regard, this study will address the fair competition policies and laws promoted by the EU in relevant and typical court cases, as well as analysing the existing legal provisions related to the protection of fair competition of MSAR, in order to examine the beneficial and successful factors of the EU experiences and whether they can be adapted to improve fair competition legislations of MSAR. 3. Ambits of the Study The objectives of this study are firstly to examine the competition laws and policies of the EU, secondly to analyse the fair competition-related provisions of MSAR, as well as to conceive how the competition policy and laws of MSAR should be developed under the European model, which has achieved huge success as it is recognised that fair competition can be safeguarded in the EU and the interests of consumers can be guaranteed. Furthermore, the role of the World Trade Organization (hereinafter referred to as WTO), which is to actively promote fair competition and trade to its member states and regions, thereby contributing to the protection of the interests of all incumbents and the effectiveness of economic activities and enabling the healthy development of global economy, is examined. This study also discusses the relationships between the EU and Macao, and between the WTO and Macao, as well as their impact on competition policy in Macao. With regard to the competition policy and laws of the EU, this study starts with its history and development, analysing several crucial statutes and provisions. Subsequently, the provisions of each policy area of competition policy, including antitrust, cartels, mergers, state aid, liberalisation and international cooperation, are discussed and analysed. The legal points of view of their enforcement are interpreted through analysing decisions of the Commission and judgments of European Courts, identifying their impact on the implementation of competition policy of the EU. With regard to the legislations of fair competition of MSAR, this study starts with the analysis of the “Regulation of Competition between Entrepreneurs”, stipulated in the Commercial Code, which has general applicability, interpreting its applicable scope and issues raised. The provisions containing the protection of fair competition, which are scattered in different legislations, are examined one-by-one,
Introduction 7 to enable, by a macro view and panoramic perspective, the understanding of the legislations of branch law related to the protection of fair competition, as well as bringing out the structure and modality of system of the fair competition and its normative directions. 4. Organisation of this Study The subject matter of this study concerns the competition laws and policies of the EU and their conceptualisation to MSAR. In fact, as is known to all, the EU has experienced more than six decades of competition law and policy, whose evolution during that period in terms of political, economic and social changes is different from MSAR. In addition, the existing competition legislations of MSAR were established in the beginning of a new economic order after the reform and opening up of China in 1978, so both Macao and the EU are in different economic phases and cannot be directly compared; or, they are not comparable due to the huge disparity of their economic scales. What can be done is to understand the origin and development of the EU in terms of competition policy and law. In addition, its implementation and enforcement and subsequent adjustments and revisions which allow the Member States of the EU to achieve an effective and fair trade domestically and between themselves can be analysed. Then, this study focuses on the conceptualisation of an EU modality of competition law to MSAR. In this regard, it is extremely important to understand the statu quo of legislation of fair competition of MSAR, as it is the only way, in reference with the constructive modality and normative issues of the EU competition law, to conceive a new fair competition law which is compatible with the socio-economic situation and sustainable development of MSAR. These laws have the objectives of guaranteeing, on one hand, that domestic trade in both the industrial and commercial sectors are conducted under sound and fair environments and to cooperate, on the other hand, with international societies to promote external trade under fair competition. This text is divided into 3 parts. The first part is “The perspective of the EU Competition Law”, comprising chapter 2 to chapter 5; the second part is “The Present Legal Provisions related to Fair Competition in Macao”, comprising chapter 6 to chapter 10; and the third part is “The conceptualisation of the State-of-the-Art Competition Law for MSAR”, comprising solely chapter 11. The first chapter seeks to comprehensively introduce the present study, indicating why the author selected the study entitled “The Conceptualisation of the Competition Legal System of Macao under the Perspective of EU Competition Law” as a research subject, as well as the motives, objectives, importance and coverage of study, so as to introduce precisely the theme, and lay out the expected research outcomes.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 8 Chapter two is the “Background and Development of the EU Competition Law and Policy”. This chapter examines the earliest and classic competition-related legislation and their respective evolution in the world, as well as its deep impacts on the formation of the competition law in the world. In this regard, the inherent relationship between the EEC and competition policy can be clearly explained, including how the latter acts as a motive power to promote the economic growth of the European Community in which the competition policy functions as a catalyst. In the meanwhile, the EU has enlarged to 28 Member States. Viewing radically the EU competition policy, this chapter states the general objectives defined to all Member States by the provision of the TFEU and the development processes in annual policy addresses, as well as the legal framework of the European competition law system. Chapter three is the “European Institutions of the EU Competition Policy”. This chapter aims at understanding the relationship between political entities, inter alia of supranational institutions, and between political entities, and their subordinated bodies, whose functions address competition law and policy. In addition, this chapter examines the competence delimitation of their legislation, implementation and enforcement, and jurisdiction, so as to discuss and analyse in the other parts of this research study the legal provision and strategic definition and relevant typical court cases. Chapter four is the “EU’s Competition Policy I: Rules, Interpretation and Application on the Core Provision of Competition Law” and chapter five is the “EU’s Competition Policy II: Rules, Interpretation and Application on Mergers, Liberalisation, State Aid and International Cooperation”. These chapters, which are the essential parts of this study, discuss the implementation of competition policy. Generally, this policy, which is a regional policy regulating the field in the entire EU, and within its Member States and among Member States, has specific characteristics which differ from the general domestic policies and has unique provisions, which these chapters explain by analysing the legal provisions and their meanings or objectives as implied in some typical judgments which resolve disputes in trade. Therein, it shows the EU is not a free-trade area, economic cooperative forum or association, but a political, economic, social and cultural integration of intergovernmental bodies. Materially, these chapters state several major ambits of the EU’s competition policy, which are currently antitrust, abuse of dominant position, mergers control, liberalisation (of public undertakings), state aid and international cooperation. Based on the Rules on Competition of the TFEU, Articles 101 and 102 are core provisions in competition law, so the author discusses the related ambits, namely antitrust and abuse of dominant position in chapter four and other ambits in chapter five, addressing the legislation in terms of analysis and application at the Union level, inter alia, of the trade, and fair competition provided
Introduction 9 for and between Member States. It enables, thus, to understand the general direction and objective of the EU competition policy as defined by law. Nevertheless, undertakings of each Member State intend to maximise their profits in commercial activities, and may also infringe deliberately or unintentionally the laws which provide the EU’s policies thereby damaging the profits of undertakings in other Member States, and damaging the practices of fair competition domestically. So, these are outlined in lawsuits in courts of the EU by undertakings of Member States. Indeed, it is not only by referring to the provision in writing mentioned above, but also looking for and analysing typical judgments of aforementioned major ambits of the competition policy that help the understanding and interpretation of its core directions and objectives. Chapter six is the “The Legal Provisions which maintain Fair Competition of various sectors in Macao”, which, firstly, expresses that the Basic Law of Macao Special Administrative Region does not contain any provisions relating to fair competition, and points out the provisions which orient the economic development of Macao. Secondly, this chapter explains, in a generalised way, the legal framework of MSAR and expounds one-by-one the respective legal forms, in order to discuss effectively the legislations related to fair competition contained in later chapters, and understand the legal relationships between them. Thirdly, the present legislation of fair competition is centered in the “Regulation of Competition between Entrepreneurs” stipulated in the Commercial Code, matched with the provisions of fair competition set out in the relevant regulations and laws of various industrial sectors, forming the entire system. Thus, this chapter analyses the general rules of competition between entrepreneurs, their subjective scope and objective scope, so as to analyse the relevant issues of the laws affecting fair competition in MSAR. Chapter seven is the “Core Provisions I of Fair Competition of Macao: Restrictive Competition of Relevant Industries and Sectors”. In order to promote the free market economy and regularise the activities of certain industries and sectors, provisions related to the protection of fair competition, where the competitive activities in certain industries are not restricted, are set out in the relevant laws and regulations. Thus, this chapter expounds each of the relevant provisions of those relevant industries and sectors, comprising: government procurement, protection of consumers, transportation, advertising activity, insurance, postal services, aviation, the finance industry, food labelling, imports and exports, freight forwarding, the statistical information system of MSAR, television broadcasting by satellite, private notary, intellectual property rights, motor vehicles, road and intercity passengers transport, labour relations and anti-corruption etc. Chapter eight is the “Core Provisions II of Fair Competition of Macao: Abuse of Dominant Market Position in Relevant Industries and Sectors”. The laws of
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 10 certain industries and sectors set out provisions to prohibit restrictive competition for the protection of fair competition, but also provide for the prohibition of abuse of a dominant position whereby enterprises intend to drive out their competitors and damage the interests of consumers. Thus, this chapter expounds each of the relevant provisions of those specific industries, comprising: public health, public administration, Internet services, gaming, and telecommunications etc. In the meanwhile, although the economy of MSAR has grown significantly under the stimulus of gaming and tourism industries, it still is a relatively small economy. Increased foreign investment has changed the inherent modality of socio-economic activities, but the local SMEs still account for the majority of enterprises, under the impulse in this new economic model, the continuous survival of SMEs is more difficult. The second half of this chapter discusses the governmental aids and plans provided to SMEs. Chapter nine is the “Core Provision III of Fair Competition of Macao: Mergers of Companies”. Commercial competition in a free market economy is extremely intense, and often does not just originate from the same industry but also from technological development. So, under the competition of the survival of the fittest, enterprises from different industries or sectors have to reinforce their capacities per se in order to survive. For this reason, some enterprises will, through mergers, strengthen their financial powers, enhance or broaden their technical abilities, and expand the scope of their businesses. If a merger is carried out between enterprises in the same industry, or a merger between competitors, the market share of the merged enterprise will be increased immediately; if a merger is carried out between enterprises from different industrial sectors, the size of the market will be expanded. Since a merger will influence the market in certain degrees, if enterprises of certain specific industries intend to initiate a merger, they must obtain an authorisation in advance from a competent body before undertaking the merger. In addition, they must comply with the provisions of the Commercial Code and the legal instruments of relevant industries. Thus, this chapter expounds on each of these provisions. Chapter ten is the “Regional and International Cooperation Ensuring Fair Competition”. Pursuant to the stipulation of the Basic Law of Macao Special Administrative Region, MSAR can use the identity “Macao, China” to participate independently in international organisations, as well as to establish trading relationships with other countries and regions. In this regard, the discussion of this chapter divides into two aspects. The first part expounds on the “Mainland and Macao Closer Economic Partnership Arrangement” and its supplementary protocols. The second part discusses the agreements in the ambit of business and trade signed between MSAR and Hong Kong SAR, as well as trying to understand which agreements relate to the protection of fair competition and stating the legal basis
Introduction 11 and conditions of both parties which facilitate the establishment of the regional protection of fair competition. In the aspect of international cooperation, this chapter outlines the relationships of Macao with the WTO and with the EU, and their intentions to assist Macao to establish policies and laws encouraging fair competition. Chapter eleven is “In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development”. It observes the direction of the recent development of the new EU’s competition policy and its evolution in international cooperation. This chapter discusses the background and legal practices of the competition policy of the EU, and the institutional structure which deals with the competition affairs of the EU. In this regards, this chapter affirms the essential efforts of competition law and policy in contributing to the efforts made for integration of the EU, and establishing the relationship between economic power and the sustainable development of the EU. By virtue of the EU strengthening international operation, especially in bilateral relations with different countries, MSAR and the EU have started communications and meetings related to trade relations and policy, in which the EU aims to assist the economic development of Macao by helping to establish an over-arching competition law for Macao.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 12
13 PART I THE PERSPECTIVE OF THE EU COMPETITION LAW
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 14
15 Chapter 2 Background and Development of the EU Competition Law and Policy To appreciate the development and effective functioning of the EU competition law and policy, it is essential to understand firstly the origin and development process of competition law, as well as how it applies to the EU, and in turn the general purpose and maintenance of competition law. This chapter begins with the origin of EU competition law as it relates to the Antitrust Law of US and the establishment of the European Coal and Steel Community (hereinafter referred to as ECSC) by the Original Six. It then discusses the intrinsic value of EU competition law and policy, probing into, and clarifying, its concept, definition and objectives, and explaining the structure of the legal system which is the basis of EU competition. One conclusion is that the development of competition policy which improves the economic situation of the EU per se and its Member States, occurred at the same pace as the entire evolution and the continuous enlargement of the EU, after the establishment of the Union. 1. Brief History and Evolution of Competition Law and Policy of the EU 1.1. Antitrust Law in US Before entering into a discussion of competition law of the EU, the antitrust law and policy of United States first needs to be outlined as it has a profound influence on the development of the competition legal system and policy in Europe. The US was the first jurisdiction in the world to adopt a proper “modern” system of competition law, known as “antitrust” in the US. The essential and substantive provisions are set out in three statutes: the Sherman Act of 1890, the Clayton Act and the Federal Trade Commission Act both of 1914. 1.1.1. Sherman Act The US Congress passed the antitrust law that was set by the Sherman Act in 1890, which is still in force. It responded to the vast agglomeration in a number of
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 16 sectors of American industries, in particular the “trusts”, in the latter half of the 1880s. It had become common for the owners of stocks held in competing companies to transfer those stocks to trustees who then controlled the activities of competitors and consequently lessened competition between them. The most popular explanation for the passing of the Sherman Act was that it was to combat the power of the “trusts”. This is why the act has become known as “antitrust” law (Jones, 2001, p 19). The Sherman Act covers price fixing and market sharing agreements between independent firms, so-called cartels (“trust”), in Section 1,4 as well as monopolisation practices by individual companies, but not mergers, in Section 2,5 but none of the expressions, such as “in restraint of trade” or “monopolise” were defined. Therefore, firms wishing to coordinate prices had the option of merging into a single firm and, by so doing, they put themselves beyond the reach of the Sherman Act. The Clayton Act of 1914 was therefore introduced to extend the antitrust legislation to cover mergers capable of reducing competition (Motta, 2004, p 5). 1.1.2. Clayton Act The Clayton Act also explicitly forbids other practices to strengthen the provision of antitrust implemented by the Sherman Act. It sets out in further detail five aspects: the first aspect is the prohibition of price discrimination, lessoning competition by discount, rebate, allowance or advertising service charges, etc., tending to monopoly; the second aspect is the conduct of exclusive trade engaged in by enterprises. The Clayton Act also prevented enterprises being the sole sellers of determined products, which restricts the choice of purchasers buying quality products from other competing sellers; the third aspect is the extension of the ability of individuals to begin actions for damages. The possibility of recovering treble damages and court and attorney fees incurred are included in the Clayton Act; the fourth aspect is to include striking workers in lawsuits of antitrust. This provision aims at combating labour unions which might organise and agree on their salaries not being subject to price fixing; the fifth aspect is to prevent anti-competitive mergers, not permitting enterprises to buy their competitors, and by merger, reaching monopoly. 4 Sherman Act 15 USC, Section 1 provides that “[e]very contract, combinations in the form of trust or otherwise, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal … . Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony …”. 5 Sherman Act 15 USC, Section 2 provides that “[e]very person who all monopolize, or attempt to monopolize or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations shall be deemed guilty of a felony …”.
Background and Development of the EU Competition Law and Policy 17 This Act has subsequently been amended by several acts: the Robinson-Patman Act of 1936 amended its provisions on prices discrimination; the Celler-Kefauver Act of 1950 amended its provisions relating to mergers by extending the cross-ownership prohibition among competitors to asset transactions; the Hart-Scott-Rodino Act of 1976 amended its merger provisions by giving the Department of Justice (DOJ) and the Federal Trade Commission (FTC) the power to review all mergers of firms above a certain size threshold; the Internet Freedom and Non-discrimination Act of 2006 made a change to prohibit certain kinds of discrimination, by broadband network providers, which are the discrimination against any content, applications or services, or the refusal to connect to other broadband network providers. 1.1.3. Federal Trade Commission Act The Federal Trade Commission Act also dates from 1914. As stated in its name, FTC was created as an independent agency, to enforce the Act that would regulate unfair trade practices. It shares this function with the Antitrust Division of DOJ of the US, which is a government agency responsible for enforcing antitrust law in the US at the federal level and promoting competition in the marketplace. For those injured by antitrust infringements, attorneys general can act at the state level (Motta, 2007, pp 4-5). This Act was amended in 1966. Congress passed the Federal Trade Commission Act to protect consumers from unfair methods of competition. 1.2. Origin and Initial Evolution of Competition Law in the EU The present competition law of the EU is incarnated from its fons et origo in the Sherman Act 1890 in the US. This supranational competition law in European started from a series of pro-competition measures adopted by France, Germany, Italy and the Benelux countries (Belgium, Netherlands and Luxembourg) in the Treaty of Paris, 1951, which created the European Coal and Steel Community. This Treaty prohibited barriers to trade as well as discriminatory and other restrictive practices capable of distorting competition among the six countries, the so-called “Original Six”, which are the founding members of the European Economic Community (hereinafter referred to as EEC). There were two main reasons behind the introduction of competition policy measures in the Treaty of Paris: the first reason related to the desire to diminish the danger of German power by making available to the other European countries essential inputs such as coal and steel. The prohibition of discriminatory practices might also be seen as a way to guarantee equal access to these fundamental natural resources; the second reason was that the principle of free competition was beginning to be appreciated as the only viable way to attain an efficient functioning of the market system, also in view of the success of the US economy which had
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 18 continuously relied upon antitrust rules (Goyder, 1993, p 19). Free competition was thus preferred to a centralised organisation of markets, even though the High Authority (the then body in charge) was authorised to intervene in cases where serious market imbalances arose (Motta, 2004, p 113). Nevertheless, another major reason behind the protection of market integration (Article 4 of Treaty of Paris) was the adoption of competition rules (Article 60 of Treaty of Paris) to market integration and was aimed at avoiding discrimination on national grounds (Article 7 of Treaty of Rome). The earliest Community competition controls were introduced in the Treaty establishing the European Coal and Steel Community (hereinafter referred to as ECSC Treaty), or so-called Treaty of Paris. The objectives of the Treaty were set out in Articles 1 and 2 which defined the task of the Community as “to contribute, in harmony with the general economy of the Member States and through the establishment of a Common Market …, to economic expansion, growth of employment and a rising standard of living in the Member States”. Article 4 listed practices as incompatible with the new market and therefore to be abolished and prohibited, as especially provided “restrictive practices which tend toward the sharing or exploiting of markets”. Article 5 continued that the Community should take intervention measures to guarantee the compliance with the abovementioned provision with a positive obligation placed upon the Community to “ensure the establishment, maintenance and observance of normal competitive conditions …”. It shows clearly, therefore, the earliest provisions of the Community and its institutions should take responsibility for identifying any anti-competitive practices and eliminating them. The institutions of the Community were the High Authority, the Common Assembly, the Special Council of Ministers and the Court of Justice.6 There was a specialised set of rules in the ECSC Treaty, namely Articles 65 and 66 which were related to agreements and industry concentrations, and Article 67 which related to interference with conditions of competition, pertaining only to those particularly limited markets as an essential element of on-going process of European integration. Nevertheless, when the ECSC Treaty was signed, on 18 April 1951 in Paris, and entered into effect on 24 July 1952, it was expected to lapse on 23 July 2002,7 at the expiry of its 50-year term, with its achievements and programmes incorporated into the Treaty establishing the European Community (hereinafter referred to as TEC), or so-called Treaty of Nice. In 1956 the Spaak Report,8 which laid the groundwork for the Treaty of Rome, said that: 6 The functions of the High Authority were set out in Articles 8 to 19 of the Treaty of Paris. The functions of the Common Assembly were in Articles 20 to 25, the Council in Articles 26 to 30 and the Court of Justice in Articles 31 to 45 of the Treaty. 7 The information is available in the official website of the European Union, consulted on 2 May 2006. http://europa.eu.int/scadplus/treaties/ecsc_en.htm. 8 “Brussels Report on the General Common Market” is commonly referred as the Spaak
Background and Development of the EU Competition Law and Policy 19 “The treaty should provide the means to avoid situations in which monopoly practices block the fundamental objectives of the common market. In this regard, it is appropriate to prevent: - market division by agreement among firms; - agreements to limit output or restrict technical progress; - the absorption or domination of the market for a product by a single firm.” After that, the main competition provisions were introduced in the Treaty of Rome of 1957, establishing the European Economic Community (as the well-known EEC). Articles 85 and 86 are still in force as Articles 101 and 102 of TFEU. De facto, the earliest “competition law” enacted in Europe was in Germany in 1923 in order to tackle the post-war inflation crisis (Jones, 2004, p 31). However, the influential laws for Europe which were introduced and put into force in 1947, earlier than the Treaty of Paris entering into force, were anti-cartelisation statutes in Germany which helped establish German democracy by US-style competition laws during the American occupation in German after the Second World War. Moreover, a new German Competition Law system (GWB, Gesetz gegen Wettbewerbsbeschränkungen) was initiated on 1 January 1958, on which date the Treaty of Rome also entered into force. The GWB played a crucial role in the German economic and legal system. As a consequence, its experience and influence were extremely important for the development of EU competition law starting from the mid-1960s (Jones, 2004, p 30). For instance, the introduction of Regulation No. 17 in 1967 marked a turning point of the enforcement of the EU competition law. So, it can be simply inferred that the US antitrust influenced German competition law, and then German law influenced the EU. Therefore, it is logically said that the EU competition law has been linked and shaped by the US antitrust law. 2. Concept of Competition It is not sufficient to refer merely to the rules and policies of competition. It needs still to state precisely what competition is and how it will be organised within the Union. Therefore, Protocol (No 27) annexed to the TEU and TFEU refers to “the internal market as set out in Article 3 of the Treaty on European Union includes a system ensuring that competition is not distorted” for achieving the Report. In April of 1955, the foreign ministers of the Original Six (Belgium, France, Germany, Italy, Luxembourg, Netherlands), meeting in Messina, resolved to work together towards closer economic integration. Paul-Henry Spaak, the Belgian Minister for Foreign Affairs, was named head of a committee charged with preparing a report on the topic. This report, which was delivered in May of 1956, recommended the creation of a common market for all goods and services, based on a customs union with a common external tariff.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 20 general purposes set out in Article 3 of the TEU. It shows that competition is a function and status to moderate the normal operation of the internal market. And fair competition is guaranteed in the Union, by provisions set out by the Rules on Competition, from Articles 101 to 109, of the TFEU and further legal acts. Moreover, it means that the TFEU does not define competition, as indeed neither the Commission nor the Courts have tried to define what is meant by this term. The Treaty may have been discouraged by two considerations. On the one hand, the pragmatism of the TFEU does not fit well with the theoretical economic concepts, but is in line with classical liberalism, whether in pure competition where prices are fixed by the market, or in perfect competition where prices result from complete information and from the total autonomy of each operator; on the other hand, the amplitude and multi-sector nature of economic activities affected by competition policies are incompatible with one single economic concept. In these circumstances, it is understandable why the Courts are content with some general ideas instead of taking the risk of precisely defining “competition”. These general ideas have a common point, which is to find out the criteria which indicate practicable and effective competition. These expressions mean that competition is not absolute, but satisfies its goal, through a series of “rules of the game”, to protect consumers and between rivals, alongside with the evolution of the socio-economy. In the end, it is necessary that the market works in a spontaneous way, without artificial barriers and takes into account its diversified sectoral components. 3. Definition of the EU Competition Policy Although the concept of competition is not defined in the TFEU and previous treaties, the achievement of competition is set out in Protocol (No 27) annexed to the TFEU and its Article 101 after the fourth recital9 of the TFEU. However, it is helpful to have at least a general idea on how the word “competition” is used in the Treaty. Furthermore, it is important to realise that Article 101 has no application unless the agreement, decision, or practice concerned has either the object or the effect of preventing, restricting, or distorting competition. In that case, it is not an easy task to define competition policy (or so-called antitrust policy in the United States), especially for the European Union until the latest enlargement in 2013. Motta (2004, p 30) defines competition policy as “the set of policies and laws which ensure that competition in the marketplace is not restricted in such a way as to reduce economic welfare”. Economic welfare indicates the standard concept used in economics to measure how well an industry performs. It is a measure which aggregates the welfare of different groups in the 9 The fourth recital of the TFEU expresses that “[r]ecognising that the removal of existing obstacles calls for concerted action in order to guarantee … fair competition”.
Background and Development of the EU Competition Law and Policy 21 economy (Motta, 2004, p 18). In this regard, economic welfare serves as an indicator telling us that society is growing healthily under fair competition; otherwise, competition policy rectifies voluntarily the distortion that affects economic efficiency. In view of the aforementioned definition and the scope of the Rules on Competition, the author of this research study recognises that competition policy of the EU must be defined as “a set of policies that allows that the market competition operates under the circumstances of fairness, justice and openness, based on that public undertakings and private undertakings do not infringe the competition rules and provisions, and their secondary legislations, pursuant to the ambit of the Treaty on the Functioning of the European Union”. The author considers that this definition does not only fulfil the objectives of competition policy infra citato, but also achieves the final goals of sustainable development and economic growth of the EU, as well as addressing concerns of consumers’ welfare. 4. Objectives of the EU Competition Policy EU competition law and policy was defined with objectives and frameworks established since the signing of the Treaty of Rome. Its preamble states that the signing Member States recognise, inter alia, “that the removal of existing obstacles calls for concerted action in order to guarantee … fair competition”. This recognised purpose pursued by the Union is stated in the Protocol (No 27) annexed to the TFEU which has not been changed. Ergo, it turns out to be the fundamental basis of the general purposes set out in Article 3 of the TEU, making the development of all policies of the EU, especially of competition policy, dependent on those general goals, such as fair competition, that can be ensured under the consideration stated in the first recital of the above Protocol. 4.1. General Objectives of Competition Policy for which the TFEU Provides The long-term implementation of competition law stipulates the essential intention of competition policy. Even so, competition policy is one of the least understood of all the policies of the EU. Despite the fact that competition policy is established by activities included in the EU according to the recital of the Protocol (No 27), in the inception of the Community which was established by the Treaty of Rome in 1957, it did not receive close attention until Regulation No. 17 entered into force. Its precise role is, however, contestable. The reason is that a number of its objectives may lie in the kernel of competition policy, but not all of which are mutually compatible. Still, there is no unanimous consensus regarding the ultimate objective of EU Competition policy. As stated in Article 119 of the TFEU the economic policy “is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 22 conducted in accordance with the principle of an open market economy with free competition”. The logical connection between the objectives to be pursued by the Union and competition is, however, not settled. Article 120 of the TFEU says that “[t]he Member States and the Union shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources, …”. So, among the objectives of competition policy are as follows: i) Enhancing efficiency. This means to maximise consumer welfare and to achieve optimal resources allocation. The former is a technical function of competition policy which assumes a direct and formal relationship between the promotion of competition and improved economic performance (Cini, 1998, p 4). The latter is that the Member States and the Community shall act in accordance with the principles of an open market economy with free competition, leading to achieving the best resources allocation. Jones (2004, p 2) has an identical view of that “the prime purpose of competition policy is … to promote and maintain a process of effective competition so as to achieve a more efficient allocation of resources”. In traditional economic theory, goods and services will be produced in an efficient way under perfect competition conditions. But, there are a large number of matters relating to competition policy about which economists disagree. Notwithstanding this diversity of opinions, there is also a considerable consensus that certain types of agreements or attitudes can have a deleterious influence on the market (Craig, 2003, p 936). However, competition encourages undertakings to improve their performance via competing against each other. It also has the innovation function, by encouraging the introduction of new products. ii) Protection of the consumer. This is to defend the individual from the damage caused by undertakings, such as protection against price-fixing, excessive charges and unfair trading conditions, etc., on the part of undertakings. This objective relating to competition policy is also one of the objectives provided for, in clear expression, in Article 12 of the TFEU which refers to that “[c]onsumer protection requirements shall be taken into account in defining and implementing other Union policies and activities”. At the same time, there is also one specific article, Article 169, in the TFEU which is set out in the TITLE XV (CONSUMER PROTECTION) of Part Three (UNION POLICIES AND INTERNAL ACTIONS) regulating the respected contents, making consumer protection an integral objective of trans-policies and activities of the EU. iii) Protection of small and medium-sized enterprises (SMEs). This objective has two aspects: the first is to protect infant industries against the threat of large enterprises or from aggregation of economic power; the second is to
Background and Development of the EU Competition Law and Policy 23 avoid the threat from the monopolistic dominance of a single firm or of agreements between rival firms coordinating their activities so as to act as one single entity, or to avoid being “devoured”, thereby enabling their development and growth (Craig, 2003, p 937). This objective of protection encourages the healthy development of laissez-faire in the circumstances of liberty, fairness and openness. iv) Market integration. This is one of the key objectives of the EU competition policy. This is a political objective which is not necessarily consistent with economic welfare. Competition policy is used to break down the barriers to trade, such as tariffs, quotas and the similarities constructed particularly by Member States, which can impede the creation of a Single European Market (SEM) (Cini, 1998, p 4). Otherwise, the internal market would be partitioned along national borders and form the respective national markets of Member States. It would infringe the spirit providing for the enhanced cooperation in the TFEU. The competition law de facto and de jure forbids price discrimination across national borders. There is no economic rationale for such a prohibition. v) Regional, social and industrial considerations. These are used as secondary aims of the competition policy which reflects its functions to be used as an instrument working for non-competition policy ends that helps the developing or non-developed regions, societies and industries, and, further, reduces unemployment and under-employment in these regions, so as to attain the European-wide presence in a particular sector (Cini, 1998, p 4). Consequently, there are many different objectives of competition policy, so there is not only one competition policy. Empirically, it is clear that a variety of policy responses is required to tackle various forms of anti-competitive practices. Thus, there are policies often named as restrictive practices or so-called antitrust, cartels, monopoly and merger, and state aid, etc. However, the main objectives of competition policy as enforced by the EU are promoting economic efficiency and European market integration (Commission, 1999, p 19). It is difficult to see exactly what the objectives of competition policy were for those who drafted the Treaty of Rome. It is probably safe to say that competition was not an end in itself, but was intended as a way to promote the economic progress and the welfare of European citizens. Economic progress is regulated in the first point of the objectives of the EU stated in the Article 3 of the TEU, as stated that “[t]he Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, …”; “[i]t shall promote
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 24 economic … cohesion, … among Member States”, which implies the importance of economic progress among all objectives that the EU shall follow. 4.2. Concrete Objectives of Competition Policy Developed pursuant to Annual Implementations Since competition law is a crucial part of EU Law, it is practically related to many other policies. Therefore, the Directorate-General for Competition publishes an annual report on competition policy. It re-examines from time to time the objectives of competition policy, which the Union implements in accordance with the economic changes among the Member States, the development of the EU as a whole and the progress of globalisation, to determined ambits in competition policy. Early in 1993, the 23rd Report on Competition Policy discussed, in point 10, inter alia, the relationship between competition policy and industrial policy. In its forward to the Commission’s 1997 Report on Competition Policy the then Competition Commissioner, Karel van Miert, considered competition policy pursuant to the forthcoming circulation of the single currency (Commission, 1997, §7 and 10). In 1998 the Commission further discussed the role of competition policy in the age of the Economic and Monetary Union (EMU) (Commission, 1998, pp 24-5) (Jones, 2004, p 37). In 2000, the Commission stressed the importance of competition policy as one of the pillars of the European Commission’s action, in the economic field, which was founded on the principle enshrined in Article 4 of the TEC, the principle of “an open market economy with free competition and it acknowledges the fundamental role of the market and of competition in guaranteeing consumer welfare, in encouraging the optimal resources allocation and in granting economic agents the appropriate incentives to pursue productive efficiency, quality and innovation” (Commission, 2000, p 21, §1). It reflects the conceptual objectives abovementioned being fundamental to market integration and economic growth. Due to the re-shaping economic environment, information technology becomes an agent of change. In 2003 the Commission emphasised that competition policy plays an important role in achieving the competitive goals set out in the Lisbon agenda. Efforts in Europe to encourage growth, should not only encompass antitrust and merger rules, which are fundamental to any well-functioning market economy, but also the application of an efficient and firm State-aid discipline (Commission, 2003a, p 15, §4). Despite the Reports cited supra the objectives were achieved per annum, but they do not express definitely what the objectives are. However in the 1999 Report (Commission, 1999a, p 19, §2 and §3), the objectives are more concrete and defined. They refer to: “2. The first objective of competition policy is the maintenance of competitive market. Competition policy serves as an instrument to
Background and Development of the EU Competition Law and Policy 25 encourage industrial efficiency, the optimal allocation of resources, technical progress and the flexibility to adjust to a changing environment. …”; and “3. The second is the single market objective. An internal market is an essential condition for the development of an efficient and competitive industry. As the Community has progressively broken down government-erected trade barriers between Member States, companies operating in what they had regarded as ‘their’ national markets were, and are for the first time, exposed to competitors able to compete on a level playing field. …”. The Report on Competition Policy 2010 outlines the merits of competition policy implemented by the EU for the previous 40 years. Notwithstanding the objectives of competition policy are not stated in it, two aspects are clearly identified throughout the entire history of EU competition policy: the first is the contribution of competition policy to the construction and preservation of the internal market; the second is the contribution of competition policy to consumer welfare. Meanwhile, competition policy has also supported the major objectives of the EU as set out in the Treaties, namely a competitive market; economic, social and territorial cohesion; and sustainable development (Commission, 2010, p4, §9). Albeit this statement is in the Report, it can be recognised that the objectives of competition policy are in line with the objectives set out in the Treaties, or it can be interpreted that these objectives are the main objectives of competition policy. The objectives of competition policy defined in reports on competition policy depend on changes in economic circumstances of the Union, and the correspondent implementing measures adopted that are certainly diversified and dissimilated. However, these objectives aim to approach the provisions set out in the Protocol (No 27) annexe and Article 119 of the TFEU mentioned in previous section, and are abiding scrupulously by the general purposes set out in Article 3 of the TEU as their attributions. 5. Legal Framework of the EU Competition Law The concept, definition and objectives aforementioned are not expressed in the legal system of the EU competition, but are reflected in its legislation, enforcement and jurisdiction. It is, ergo, necessary to understand clearly the legal system facilitating the precise formulation of the general purposes of the competition policy per se. In this regard, the author has interpreted the relevant legal system summarised it in Diagram 2.1, insofar as illustrating the legal characteristics of each type of legislation and their relationship.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 26 Diagram 2.1: Pyramid of legal framework of EU competition law Competition law can be divided into two major categories, which are respectively fundamental provisions of the TEU and the TFEU, and secondary legislation, which is set out by the TFEU, even though the Rules on Competition of the EU are, in expression, only laid down by Articles 101 to 109 of the TFEU. In the category of fundamental provisions of the TFEU, there are 5 hierarchical levels of competition-related provisions which are, from higher to lower, preamble level, purpose level, principle level, rule level and protocol level. In the category of secondary legislation, it includes acts with binding force and non-binding force. The former includes regulations, directives and decisions; the latter includes recommendations, opinions and others acts.10 In the narrow view, competition law only lays down the Rules on Competition set out in the TFEU, which can be divided into two sections. The first section can be further sub-divided into three groups or provisions: the first group of provisions deals with the substantive law; the second sets out procedures to follow; and the third empowers the adoption of implementing legislation. They are to be construed pursuant to the objectives of the TFEU and the principles set out in its preamble. 10 Article 288 of the TFEU.
Background and Development of the EU Competition Law and Policy 27 Nevertheless, there is another even narrower view, the main provisions of EU competition law are merely contained in Articles 101 and 102 of the TFEU, as twin pillars of the Treaty of competition law system, and their related secondary legislation. No matter which view is taken, they cover materials that EU competition law regulates. But, it is easier to understand their true significance intrinsically at the macro level. 5.1. Fundamental Provisions of the TFEU In the preamble level of fundamental provisions of the TEU and the TFEU, the principal part of the Treaty which relates to competition policy is cited in the very beginning and this expresses an intention and interpretation of provisions in its content. The 4th recital in the preamble of the TFEU recognises that the creation of the internal market “calls for concerted action in order to guarantee … fair competition”, in which the preamble level of the fundamental provisions of the TFEU is laid down. In the purpose level, as part of competition law, Article 3 of the TEU outlines the direction and goals to be achieved by competition policy which has been mentioned above, which is that “[t]he Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy… It shall promote economic … cohesion … among Member States”. To achieve this purpose, this Article relates directly to Article 119 of the TFEU, which defines the directions of economic policy and sets out that “the activities of the Member States and the Union shall include … the adoption of an economic policy which is based on the close coordination of Member States’ economic policies, on the internal market and on the definition of common objectives, and conducted in accordance with the principle of an open market economy with free competition”. In the principle level, Article 3(1)(b) of the TFEU refers to the exclusive competences of the Union in certain areas, specifically “the establishing of the competition rules necessary for the functioning of the internal market”. Meanwhile, Article 120 says that “Member States shall conduct their economic policies with a view to contributing to the achievement of the objectives of the Union … The Member States and the Union shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources …”. In this regard, Article 5 of the TEU delimits that, “under the principle of conferral, the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein. Competences not conferred upon the Union in the Treaties remain with the Member States”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 28 In the rule level, as part of competition law, although the competition policy is taken in a broad sense, there is an exclusive part of the Treaty regulating the Rules on Competition, which are from Articles 101 to 109 of the TFEU.11 These articles can be divided into 2 sections: the first section contains Articles 101 to 106, which cover the rules applying to undertakings; the second section is Articles 107 and 109 which apply to state aid, since competition is not distorted by undertakings. Articles 101 and 102 which apply to undertakings are “two central rules” set out in the TFEU, or have been called the “twin pillarsª of the Treaty of competition law system. Article 101 prohibits undertakings making anti-competitive agreements, decisions and practices, and Article 102 prohibits dominant undertakings abusing their position of dominance in the market; Article 103 requires the Council of the EU to lay down regulations or directives to give effect to the principles in Articles 101 and 102; Articles 104 and 105 specify the respective powers of the Commission and the authorities of the Member States to apply Articles 101 and 102 during the transitional period; Article 106 applies to specific sectors, such as energy, postal services, telecommunications, transport, etc. Under this article, the Member States grant special and exclusive rights to public undertakings and entrusted undertakings being subject to the provisions of competition rules, except where their applications obstruct the performances of their public tasks. In the protocol level, the Protocol (No 27) relates to protection of fair competition in the EU. Its unique recital indicates that “the internal market as set out in Article 3 of the Treaty on European Union includes a system ensuring that competition is not distorted”. This suggests that economic activities must be exercised in fair competition in the internal market. In this regards, the Union shall take action, such as certain appropriate measures of economic policy, within its competences conferred by the Treaties, if necessary. 5.2. Secondary Legislation Secondary legislations are on two levels, based on their attributive binding force, which are formed by various categories of acts, and by provisions common to the European Institutions as set out in Article 288 of the TFEU. The level of acts with binding force includes regulations, directives and decisions; the level of acts without binding forces includes recommendations and opinions and other acts whose forms have no binding force – for instance, notices, communications, agreements and guidelines, etc. The forms of legal acts adopted by the European Institutions depend on the determination of powers conferred by provisions in the TFEU. The principle of conferral of attributed competences is firmly defined in Article 5 of the TEU, its no. 11 The Rules on Competition of the TFEU are referred to in Annex 1.
Background and Development of the EU Competition Law and Policy 29 1 stipulates expressly that “[t]he limits of Union competences are governed by the principle of conferral. The use of Union competences is governed by the principles of subsidiarity and proportionality”. Nevertheless, “[u]nder the principle of conferral, the Union shall act only within the limits of the competences conferred upon it by the Member States in the Treaties to attain the objectives set out therein. Competences not conferred upon the Union in the Treaties remain with the Member States”, pursuant to the provision of its no. 2. If the provisions of the TFEU do not mention the name of the three categories of acts abovementioned, the interpretation of these provisions will be based on the determination of whether an act adopted may have either one of the characteristics of these legal instruments. Furthermore, the meaning of “measures” under no. 1 of Article 114 of the TFEU comprises law, regulations or administrative action. Provided that the Commission can prove that these legal acts are distorting competition in the internal market and that the resultant distortion needs to be eliminated, “appropriate measures” contained in Article 116 of the TFEU may be adopted. However, certain cases which have various characteristics are not possible to be deemed as one of those categories of acts. So the category of acts implied in general provisions is not exhausted.12 They are usually denominated as acts sui generis (Kapteyn, 1998, p 322). 5.2.1. Regulations Pursuant to the 2nd paragraph of Article 288 of the TFEU, there are three characteristics of a regulation which are: general application, binding character in its entirety, and direct applicability in each Member State. The regulation, which is designed to apply to abstract situations, has a normative and legislative feature rather than being an individual act. In Cases 16 and 17/62,13 the ECJ held that “a regulation, being essentially of a legislative nature, is not addressed to restricted number of persons, defined or identifiable, but applies to objectively determined situations. It involves immediate legal consequences in all Member States for categories of persons viewed in a general and abstract manner.” As the regulation is “binding in its entirety and direct applicable in all Member States”, its effect does not need further implementation. So, rights and obligations for state and individuals may arise. In Case 93/71,14 the ECJ held that the rights raised by the regulation “are complied with and it is not possible at a national level to render the exercise of them subject to implementing provisions other than those which might be required by the regulation itself”. 12 Cases 90 and 91/63, Commission v Luxembourg and Belgium, [1964] ECR 625. 13 Cases 16 and 17/92, Confédération nationale des producteurs de fruits et legumes and others v Council of the European Economic Community, [1962] ECR 471. 14 Case 93/71, Orsolina Leonesio v Ministero dell’agricoltura e foreste, [1972] ECR 287.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 30 5.2.2. Directives Pursuant to the 3rd paragraph of Article 288 of the TFEU, a directive has a binding force, “as to the result to be achieved, upon each Member State to which it is addressed”, but it leaves discretion to the States to choose the form and methods of its implementation. Obviously, directives are binding on the Member States but not on individuals unless they have been transposed into national law. The objective of directives is to set a general and common goal for all Member States and which, in their own legal system, can use legislative formats and adopt methods, which they are considered appropriate, for achieving the goal. Hence, the transposed directive into national law does not need to use the same words as used in the directive per se.15 In other words, it gives an easy way for national law to harmonise in line with the EU law in enacting specific legal provisions in its own expression (Arnull, 2000, p 89). The succinct definition and nature and effect of this legal act has caused a conflict between national law and international law, which has resulted in different legal opinions. Particularly, the unclear legal definition of nature and effect of directives implies the limitation of competence of European institutions may be higher than that to which the specific article of the TFEU confers. It cannot be denied, however, that comparing the definitions of legal acts, the effect of a directive is less far-reaching than that of a regulation (Kapteyn, 1988, pp 326-7). 5.2.3. Decisions Pursuant to the 4th paragraph of Article 288 of the TFEU, decisions are binding and enforceable acts which are addressed to Member States and to specific individuals. In addition, decisions are the way by which the Union adopts individual administrative acts. In this case, the EU law can be applied in specific cases by way of decisions. Consequently, the ECJ has frequently dealt with the problem of these decisions as distinguished from non-binding acts. The ECJ held expressly in Case 54/6516 that “[a] decision must in fact appear as a measure emanating from the competent authority, intended to produce legal effects and constituting the culmination of procedure within that authority, whereby the latter gives its final ruling in a form from which its nature can be identified” (Kayteyn, 1988, p 332). In respect of decisions adopted by European institutions, the positive or negative responses made by judgments of the ECJ have a function of legal protection to specific individuals concerned in these decisions, irrespective of whether these decisions are maintained. 15 Case 247/85, Commission v Belgium, [1987] ECR 3029 para 9. 16 Case 54/65, Compagnie des forges de Châtillon, Commentry & Neuves-Maisons v High Authority of the ECSC, [1966] ECR 185, at 195.
Background and Development of the EU Competition Law and Policy 31 5.2.4. Recommendations and opinions Whereas the binding force of an act is deemed as a criterion of the source of EU law, recommendations and opinions are not regarded as sources of EU law. They have no binding force, as listed in Article 288 of the TFEU. Nonetheless, both are types of acts set out in the Treaty. In the first paragraph of which, the European institutions have attributive powers to make recommendations or deliver opinions to execute their tasks and carry out diversified functions, some of which need legislation and others which need guidance.17 In this regard, the role of recommendations and opinions is constructive and persuasive in the formation and implementation of EU policies. Thus, they ought to be examined even though they are not cited formally as sources of EU law. In this case, recommendations still have certain legal effect, conceded by the ECJ in Case 322/8818 (Lasok, 2001, pp 157-8). 5.2.5. Other acts Apart from the non-binding acts listed in the TFEU, there are various other non-binding acts not listed, so-called “non-treaty acts”, such as notices, communications, memoranda, deliberations, guidelines, resolutions, reports, Community frameworks and Community approaches etc. They have essentially administrative purposes which are descriptive and undertake various actions and procedures in the life of the EU. Generally, they do not have any binding effect if, and only if, they fulfil the criteria laid down in the binding acts listed in the TFEU. Ergo, the Court held, in Case 182/80,19 that the exercise of such acts, “upon the conclusion of an internal procedure laid down by law, of a power provided for by law which is extended to produce legal effects of such a nature as to affect adversely the interests of the applicant by modifying its legal position …”. 5.3. Hierarchical Relation of Secondary Legislation to Fundamental Provisions of the TFEU The links between the fundamental provisions of the TEU and the TFEU and the secondary legislation, supra citato, are established in the provisions of Rules on Competition, inter alia, in Articles 103 and 109 of the TFEU. Provided in both Articles, the Council is entrusted with the principal legislative power, and the Commission is merely the administrative authority responsible for the application of 17 Joint Cases 1/57 and 14/57, Société des usines à tubes de la Sarre v High Authority of the European Coal and Steel Community, [1957] ECR 105 at 115. 18 Case 322/88, Salvatore Grimakli v Fonds des maladies professionnelles, [1989] ECR 4407, 13 December 1989. 19 Case 182/80, H.P. Gauff Ingenieure GmbH & Co. KG v Commission of the European Communities, [1982] ECR 799, para 18.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 32 Rules on Competition in the TFEU and any other implementing legislation. The implementing legislation falls essentially into four parts: (i) legislation of a general procedural nature; (ii) block exemption regulations that are legislations exempting categories of agreements from the prohibition in Article 101(1) of the TFEU and defining the conditions under which such exemption apply; (iii) directives and decisions adopted by the Commission under Article 106(3) of the TFEU; (iv) there is still “soft law”, such as recommendations, opinions and notices, etc., giving non-legal binding obligations to undertakings aiming to maintain and govern the healthy economic order in the European market. The detailed interpretation and application of the Rules on Competition of the TFEU are discussed in following chapters. 6. Conclusion This chapter examined the real purpose of EU competition law and policy starting from its source, as well as analysing and decomposing its inherent and fundamental significance from different points of view. Hence, it discusses the origin – the reasons and functions established in the antitrust law of US – to be used for reference by the Union in order to provide a preliminary discussion for its competition law during its establishment. Furthermore, it outlines the development of the competition legal system, provided with the Community characteristics, with the experiences obtained from its Member States, especially the sound results from Germany, and the policy in question is contained in the provision of that system and enforced and implemented through its corresponding measures. To this end, the author of this research considers that the concept of competition and the definition and objectives of the competition policy per se need to be clarified, so as to enable an understanding of a further discussion of enforcement and jurisdiction of the EU competition law in later chapters. It is emphasised that the objectives of competition policy seek to obtain the benefits of economic development and growth of the Union, and protection of consumers’ welfare, as the final goals. As a result of the parallelism of its changing objectives observed with the changing situation of economic development of the Union, its intention is to keep pace with the development pace of the EU as a whole. Nevertheless, no matter how and when the objectives change, the implementation of competition policy is stipulated in its particular legal system. Thus, this chapter explains the structure of that system and its internal relationships as a preparation for understanding relevant legal applicability during the discussion of implementation and jurisdiction, related to competition policy.
33 Chapter 3 European Institutions of EU Competition Policy The European Economic Community, European Community and the European Union have been in existence for more than half a century. Compared with its governance and range of concerns, their institutional structures are not very complicated and their functioning is well-developed and allows for progressive improvement of the EU. To a certain extent, this is based on the fact that the administrative authorities of its Member States put their trust in the enforcement of European law and policies, and this is secured primarily by the courts of the Member States rather than the Union. Focusing on the European Union, the tasks entrusted to the Union are carried out by seven institutions, pursuant to Article 13(1) of the TEU, there are the European parliament, the European Council, the Council, the European Commission (so-call “the Commission”), the Court of Justice of the European Union, the European Central Bank and the Court of Auditors. It is expressly provided in Article 13(2) that “[e]ach institution shall act within the limits of the powers conferred on it in the Treaties”. This implies that the European institutions are in a system of attributed powers and their powers are only given expressly and implicitly by the Treaties. The Parliament was one of the earliest institutions referred to as the “Common Assembly” and established on 10 September 1956. It was merely a consultative assembly of parliamentarians drawn from national parliaments of the then member states. In 1962, it was renamed to the current European Parliament before the European Atomic Energy Community (Euratom), the European Coal and Steel Community (ECSC) and the European Economic Community (EEC) merged to the European Communities in 1967. The European Council differs from the Council of the European Union. The heads of the then European Communities met firstly in summits in 1961, then the European Council was established as an informal body in 1975 and the meetings were chaired by its president. The European Council became officially an institutional body of the EU by the Treaty of Lisbon. The existence of the Council and the Court of Justice of the European Union dates back to the Treaty
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 34 of the ECSC. The Commission has been established since the Treaty of the EEC. The Commission and the Council, at the European level, share the political tasks of making and administering Union Law. The Court of Justice of the European Union is the judicial body of the Union, setting up the CFI in 1987, which has been renamed the General Court since the Treaty of Lisbon entered into force. The European Central Bank is the bank originally established by the Treaty of Amsterdam in 1998, which is the central bank of the European Union for the euro currency and is the responsible body for the administration of the Eurozone. When the Treaty of Lisbon entered into force, the European Central Bank became officially one of the institutions of the EU. The Court of Auditors was established by the Treaty amending Certain Financial Provisions of 1975, to replace the former Audit Board, in order to monitor the Community’s accounts and financial management.20 The kernel of the supranational enforcement of competition policy is held in the hands of the European Commission and the European Courts (presently the General Court and the Court of Justice of the European Union). The relationship between these institutions is pivotal both in the day-to-day administration and for the broader development of policy. However, whilst the interaction between the Commission and the Courts makes for a fascinating case study of European decision-making, it also poses important normative questions about the accountability of governance in the competition sphere (Cini, 1998, p 38). This chapter investigates the functions of the European Parliament, the European Commission, the Council and the Court of Justice of the European Union and their relationship in terms of power in the Union, in order to understand clearly the far-reaching effects of the functioning of major institutions addressing to the European competition law. 1. The European Commission The Juncker Commission 21 , starting from 1 November 2014, currently consists of 28 commissioners,22 including a President, a high representative, 7 20 Visited on 25 February 2014 the official website of EU: http://europa.eu/scadplus/treaties/ecsc_en.htm 21 Visited on 06 March 2016 “European Commission: COLLEGE (2014-2019)” available on the official website of EU: http://ec.europa.eu/commission/2014-2019_en 22 Pursuant to Article 17(4) of the TEU, it provides that “[t]he Commission appointed between the date of entry into force of the Treaty of Lisbon and 31 October 2014, shall consist of one national of each Member State, including its President and the High Representative of the Union of Foreign Affairs and Security Policy who shall be one of its Vice-Presidents”. Pursuant to its paragraph 5, provided that “[a]s from 1 November 2014, the Commission shall consist of a number of members, including its President and the High Representative of the Union for Foreign Affairs and Security Policy, corresponding to two
European Institutions of EU Competition Policy 35 vice-presidents and 20 commissioners,23 who are appointed by the agreement of the Governments of the Member States. The President of the Commission is proposed by the European Council, and then approved by the European Parliament.24 This dual legitimacy gives the President political authority, which is exercised in a variety of ways. Only nationals of Member States may be Members of the Commission,25 but they are required to be “independent beyond doubt”.26 The President entrusts each of the Commissioners with particular policy responsibilities that cover all EU policies, including competition policy.27 The President of the thirds of the number of Member States, unless the European Council acting unanimously, decides to alter this number”. 23 Pursuant to Article 17(6)(c) of the TEU, it provides that “[t]he President of the Commission shall …. appoint Vice-President, other than the High Representative of the Union for Foreign Affairs and Security Policy, from among the member of the Commission”. The number of vice-presidents is not limited both in TEU and TFEU, which is subject to the designation of president of the Commission. 24 Pursuant to Article 17(3) of the TEU, it provides that “[t]he members of the Commission shall be chosen on the ground of their general competence and European commitment from persons whose independence is beyond doubt”. The present President of the European Commission, of period between 2014 and 2019, is Jean-Claude Juncker, of Luxembourg. 25 Pursuant to Article 17(4) of the TEU, it provides that “[t]he members of the Commission shall be chosen from among the nationals of the Member States …”. 26 Pursuant to 17(7) of the TEU, it provides that “the European Council, acting by a qualified majority, shall propose to the European Parliament a candidate for President of the Commission. This candidate shall be elected by the European Parliament by a majority of its component member”. For the members of the Commission, “[t]he Council, by common accord with the President-elect, shall adopt the list of the other persons whom it proposes for appointment as members of the Commission, they shall be selected, on the basis of the suggestions made by Member States …”. 27 This table shows all Commissioners on competition since the establishment of the European Economic Community in 1958. Competition CommissionerState Period Commission Hans van der Groeben (EEC) Germany 1958 – 1966 Hallstein Commission Emanuel Sassen Netherlands 1966 – 1970 Rey Commission Albert Borcheet Luxembourg 1970 – 1976 Malfatti Commission Mansholt Commission Ortoli Commission Raymond Vouel Luxembourg 1977 – 1980 Jenkins Commission Frans Andriessen Netherlands 1980 – 1984 Thorn Commission Peter Sutherland Ireland 1985 – 1989 Delors Commission I Leon Brittan United Kingdom 1989 – 1993 Delors Commission II Karel van Miert Belgium 1993 – 1998 Delors Commission III Santer Commission Mario Monti Italy 1999 – 2003 Prodi Commission Neelie Kroes Netherlands 2004 – 2010 Barroso Commission I Joaquín Almunia Spain 2011 – 2014 Barroso Commission II Margrethe Vestager Denmark 2014 – present Juncker Commission
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 36 Commission serves a five-year term.28 The Maastricht Treaty brought the terms of office of the European Parliament and the Commission into close alignment: “Colleges” serve a five-year term and take up office six months after European Parliament elections, which are held on a fixed basis in the June of years ending in four and nine.29 Albeit the Treaty generally speaks of the Commission, acting as a collegiate body, adopting the various acts required under or in implementation of the Treaty, it is expressly provided that the Commission may act by a majority.30 The quorum is determined on its rules of procedure in force.31 Article 1732 of the TEU provides that in order to ensure the sound functions of the internal market, the Commission shall: - “promote the general interest of the Union and take appropriate initiatives to that end”; - “ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them”; - “oversee the application of Union law under the control of the Court of Justice of the European Union”; - “execute the budget and manage programmes”; - “exercise coordinating, executive and management functions, as laid down in the Treaties”; - “ensure the Union’s external representation”, “with the exception of the common foreign and security policy”; Source: 1. See Cini, M.& McGowan, L. (1998). Competition Policy in the European Union. London: MacMillan Press Ltd., p 44; 2. Visited on 06 March 2016 the official website of the EU: http://ec.europa.eu/archives/commission_2010-2014/index_en.htm; 3. Visited on 06 March 2016 the official website of EU: http://ec.europa.eu/commission/2014-2019_en 28 Pursuant to Article 17(3) of the TEU, it provides that “[t]he Commission’s term of office shall be five years”. 29 Visited on 19 June 2005 the available official website of the Barroso Commission, http://europa.eu.int/comm/commission_barroso/president/role/index_en.htm 30 Article 250 of the TFEU. 31 Article 250, paragraph 2, of the TFEU. The rules of procedure in force are, to which the Article 250 refers, promulgated in the OJ 2000 L308/26, Rules of Procedure of the Commission (C(2000) 3614), amended, respectively, by 2010/138/EU, Euratom: Commission Decision of 24 February 2010 amending its Rules of Procedure and 2011/737/EU, Euratom: Commission Decision of 9 November 2011 amending its Rules of Procedure. 32 It is clear, de jure, to what extent of the general obligations that set out by Article 17(1) and to what areas of that obligations empowered the Commission to take actions. Furthermore, it is also clear that the duties imposed on the Commission by Article 17(1) appear failures to act and infringing the Treaties that shall be brought before the Court of Justice of the European Union under Article 265 of the TFEU.
European Institutions of EU Competition Policy 37 - “initiate the Union’s annual and multiannual programming with a view to achieving interinstitutional agreements”. The Commission has a variety of duties connected directly to the Treaties. Hence, one of its roles is often described as that of “guardian” of the Treaty,33 for it has a general responsibility mentioned in the first point cited supra, and it has the rights, not obligations, to bring infringement proceedings against a Member State before the Court under Article 258 of the TFEU. So, the Commission is an initiator of EU policies. In this regard, the Commission consists of an executive wing and administrative wing. The executive wing combines with the “College” of Commissioners and the personal staff of the Commissioner, known as the Cabinet. Regarding competition policy, the Commission acts preliminarily as the executive wing of the Community, applying the rules laid down in Articles 101 and 102 of the TFEU in individual cases. So, under the TEC or the Treaty of Nice, the Commission, on behalf of the Union, had a high degree and direct control of the regulation and administration of the Rules on Competition34 other than most Union law which was administered through the medium of competent national authorities. 33 Case C-431/92, Commission of the European Communities v Federal Republic of Germany [1995] ECR I-2189, at para 22 refers that “given its role as guardian of the Treaty, the Commission alone is therefore competent to decide whether it is appropriate to bring proceedings against a Member State for failure to fulfil its obligations and to determine the conduct or omission attributable to the Member State concerned on the basis of which those proceedings should be brought”; White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme 99/27, OJ 1999 C 132/1, para 83. 34 The Commission works as the “executive wing” of the Community and exercises powers conferred on it directly by the Council. The Council Regulation No. 1184/2006 of 27 July 2006 applies certain rules of competition to the production of, and trade in, agricultural products, which amended the Council Regulation No. 26 in 1962. The latter decided that the rules on competition applied to the agricultural sector. So, the former provides that Articles 101 and 102 of the TFEU (ex Articles 81 and 82 of the TEC) apply to the production of, and trade in, agricultural products. In accordance with the provisions of the Council Regulation, in the case of the Commission finds competition of agricultural products is excluded or the objective of Article 39 of the TFEU (ex Article 33 of the TEC) are jeopardised, Article 101(1) of the TFEU shall apply to agreements, decisions and practices of related farmers, farmers’ associations or associations of such associations belonging to a single Member States. And, the Commission shall have sole power to determine by decision, subject to review of the ECJ. The Council not only conferred, pursuant to Article 211 of the TEC (Treaty of Nice), power to the Commission to implement rules laid down by the former, but also, the secondary legislation supra citato was a good example to explain, the Council conferred specific powers to the Commission, by means of Council Regulation, to supervise the production of, and trade in, agricultural products of and between Member States, so as to maintain fair competition and the objectives of agricultural policy not to be swayed.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 38 As we can see the “executive hand” on Union authority has been conferred on the Commission, that implies two levels of its functioning: (1) At the level of inherent responsibility of the Commission, the Commission shall adopt appropriate formal acts, inter alia, of regulations, directives, decisions, recommendations and opinions, to exercise the competences of the Union, pursuant to the first indentation of Article 288 of the TFEU. In the Treaties, relevant acts are provided for determined matters. Moreover, the Commission may delegate to its single Commissioner under circumscribed conditions the authority to deal with managerial and administrative matters, but the Commission must act collectively, as the “College” of Commissioners, in accordance with the Rules of Procedure of the Commission in compliance with the political guidelines laid down by the President,35 provided for by Article 250 of the TFEU. The functions of the Commission consist of classified areas, one of which oversees competition policy and affairs. Directorates-General for Competition (hereinafter referred to as DG Competition) of the Commission is an administrative service of competition policy and affairs. Prior to the restructuring of the Prodi Commission in 1999, it was known as DGIV which was responsible for competition. The responsibility of DG Competition is to enforce the Rules on Competition of the EU Treaties in order to ensure that competition in the internal market is not distorted, thereby contributing principally to the welfare of consumers and the competitiveness of the European economy. Albeit this Commissioner under a delegated procedure can make some decisions individually, all potential controversial and high profile decisions must be made by the College of Commissioners. (2) At the level of EU as a whole in the field of competition, the Commission has been conferred the power to make regulations, issue directives, take decisions, make recommendations or deliver opinions and implement them for exercising the Union’s competences, as well as shaping proposals of legal acts with binding force to be adopted by the European Parliament and the Council. The first three kinds of instruments have a legislative nature, and the latter two kinds of instruments have an administrative or quasi-judicial nature36. In this sense, directives and decisions are legal acts addressed to undertakings which create legal obligations for their addressees,37 and are the legal means by which the Commission identifies and 35 Article 1 of the Rules of Procedure of the Commission, (C(2000) 3614), OJ L 308/26, 8.12.2000, amended respectively by Commission Decision of 24 February 2010 amending its Rules of Procedure (2010/138/EU, Euratom), OJ L 55/60, 05.03.2010 and Commission Decision of 9 November 2011 amending its Rules of Procedure (2011/737/EU, Euratom), OJ L 296/58, 15.11.2011. 36 Article 288 of the TFEU. 37 Due to the directive and decision are legally bound in their entirety upon those to whom they are addressed, it is restricted, in the field of competition, to the area of public undertakings and undertakings to which Member States grant special or exclusive rights,
European Institutions of EU Competition Policy 39 condemns infringements of the Rules on Competition. It is important to note that, under Article 263 of the TFEU, if a decision is reviewed as illegal before the Court of Justice of the European Union, or the General Court, it is not the final decision. At this time, the Commission must seek to extended interpretations and analogue applications of the secundum legem and praetor legem. The Commission is also the “guardian” of the Competition law of the EU. It has the power to impose fines and penalties on undertakings which infringe Articles 101 and 102 of the TFEU under the Regulation No. 1/2003, as it is empowered to grant both individual and block exemptions pursuant to Article 101(3) to restrictive practices. Ergo, the Commission can formulate appropriate strategies regarding restrictive practices in line with the economic development of the entire EU. On the other hand, the former ECJ (presently the Court of Justice of the European Union) had summarised that the Commission also has a supervisory mission. 38 Nevertheless, journalists reckoned that the Commission is a “watchdog” of EU competition whose leash should be kept tighter.39 The Commission is empowered to prohibit practices against the Rules on Competition and to fine undertakings40 pursuant to Regulation No. 1/2003. Under paragraph 1 of Article 299 of the TFEU, pursuant to the provisions of civil procedures in force of the Member States, the acts of the Council, the Commission or the European Central Bank imposing pecuniary obligation, i.e. fines on persons, both natural persons and legal persons, are enforceable. However, Regulation No. 1/2003 provides that the Commission has sole power to levy fines or penalties on undertakings, and no power to judge damages or some other form of compensation, i.e. pecuniary compensation, of person injured by prohibited practices. Due to its limited resources, the DG Competition is not able to deal with all cases that come to under the Article 106(1) and (3) of the TFEU and to the area of State aid, under the Article 108 of the TFEU. 38 Joined Case C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P, and C-213/02 P Dansk Rørindustri A/S (C-189/02 P), Isoplus Fernwärmetechnik Vertriebsgesellschaft mbH ao, 28 June 2005 [2005] ECR I-5425. 39 “Antitrust in the European Union – Unchained watchdog”, The Economist, 18 February 2010. Consulted on 03 March 2014 at the website: http://www.economist.com/node/15546333/print. 40 Microsoft Case is a typical one to understand the implementation of Decision in both prohibition of tying and imposition of fines. The Commission issued a Decision, Commission Decision of 10.11.2005 imposing a periodic penalty payment pursuant to Article 24(1) of Regulation No 1/2003 on Microsoft Corporation (Case COMP/C-3/37.792 Microsoft). Microsoft was concluded as not complying with its obligation, pursuant to the Decision: (1) supply complete and accurate interoperability information; (2) make that information available on reasonable terms. The Decision ruled that if Microsoft did not comply with this obligation before 15 December 2005, it would be starting to be imposed a daily penalty payment of up to EURO 2 million.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 40 its attention. In consequence, it can only concentrate on important cases which have great economic significance. 1.1. Cabinets Each of Commissioners is assisted by personal staff or its cabinet, headed by chef de cabinet. Cabinet plays an important role in liaison between the executive wing and the administrative wing of the Commission. On one hand, it filters all information provided by the executive wing; on the other hand, it transmits the priorities and position of the Commissioners to the staff responsible for the competition enforcement under the Commission hierarchy. Thus, the cabinet assists the Commissioner in dealing with the daily affairs of the DG Competition. Its staff must brief the Commissioners and maintain connections of the Commission with national authorities. The cabinet acts for the Commissioners supervising Directorates-General (DGs), promptly providing political reliability, technical expertise and administrative experiences. In the administrative wing, the most pivotal horizontal services are the Secretariat-General and Legal Service. 1.1.1. Secretariat-General Secretariat-General (hereinafter referred to as SG) is another crucial horizontal Commission service, which is essential in the regulation of competition. The SG is a coordination body of the Commission, serving as a formal department for liaison between the Commission and the other institutions. It is also a coordinator of activities within the Commission, so as to ensure the emission of Commission policy priorities defined by the president of the Commission, and to enforce proactively strategic planning and programming to guarantee an effective internal coordination, and manage collegial decision-making. If possible, it may even solve inter-departmental disputes, so as to ensure consistency of Commission policies, avoiding the occurrence of conflicts. In sum, the SG serves the College of Commissioners and other institutions, possessing a cohesive power of the Commission.41 In competition policy, all formal notifications to the DGs must be received and registered by the SG. This allows monitoring of centralised policies. Whereas competition policy is multidisciplinary across all policy responsibilities of several DGs, competition policy must combine with other policies, not being purely the responsibility of the DG Competition. It is very important and implies the enforcement of competition policy on the day-to-day tasks of the SG. In this way, 41 Visited on 15 June 2006 the webpage of Secretariat-General of the Commission: http://europa.eu.int/comm/dgs/secretariet_general/mission/index_en.htm, and visited on 06 March 2016: http://europa.eu.int/comm/dgs/secretariet_general/mission/index_en.htm.
European Institutions of EU Competition Policy 41 the disputes among DGs, and even between the Commissioners and the cabinets, may be reduced (Cini, 1998, p 41). 1.1.2. Legal Service The Legal Service (Service Juridique) (hereinafter referred to as LS) of the Commission is composed of lawyers of all Member States and offers legal advices, assistances and representations of all activities of the Commission under the Treaties. So, the LS is familiar with all Union legal systems and all Union working languages. In this flexible structure of the LS, there are several teams of lawyers leaded by senior staff with experiences (chef d’equipe) working in particular fields, such as telecommunications, transport, agriculture, competition and trade etc. As the LS is a constant liaison between the teams dealing with competition affairs and the DG Competition throughout almost the entire procedure of a case, the LS will make formal opinions on it. One important point has to be emphasised, the LS is independent of the DG and the responsible Commissioners, but is directly responsible to the President of the Commission. It provides comprehensive in-house assistance to the Commission and its subordinated departments. Hence, its resources have to be deployed to cover all activities and responsible fields of the Commission. In each of the fields, it must be able to assist Commissioners in their functional areas by drafting legislation and conducting international negotiations, such as a “guardian” of treaties,42 and by using the powers conferred by the Community legislators or the Treaties. They imply a role of general advisor by the LS. For the effectiveness of this role, LS must check all documents submitted before to the Commission. Its opinions will be transmitted to the whole Commission. In the context of competition cases, the opinion of LS must be delivered before the occurrence of the matters in question, such as before a statement of objections, or so-called indictment, is sent to an undertaking concerned. Before a complaint is formally rejected, a preliminary draft decision is submitted to the Advisory Committee, or before a draft decision is submitted to the Commission. The LS assists all meetings of the Commission for the competition responsibility or the meetings decided formal legislation by the Commission itself. The LS represents the Commission in proceedings, specifically the competition cases, through agents, who are civil servants specialing in EU litigation, before the Court of Justice of the European Union (CJEU) and the General Court (GC), European Free Trade Area (EFTA) Court, judicial panels of GATT and WTO, and even all other judicial bodies. The President of the Commission designates one 42 Case C-431/92, Commission of the European Communities v Federal Republic of Germany [1995] ECR I-2189.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 42 or more members of the LS as the agent for Commission. In certain occasions, the agent is seconded by external lawyer, e.g. practitioner, academic, etc. The Commission may be plaintiff or defendant, and it may intervene in actions brought against another institutions. It has also the right to take part in all proceedings for preliminary rulings – questions put to the CJEU by the national courts, in which it systematically acts as amicus curiae. The agent is responsible to the Commission for the handing of the case, may prepare and sign the written pleadings and may act as advocate at the oral stage of the proceedings. Because the LS is responsible for defending Commission decisions in competition cases before the Court, it may look at whatever is proposed by the DG Competition from a different perspective in the case. Particularly, the LS will try to ensure that the Court would uphold any such proposals. Occasionally, outside law firms are instructed to assist the Commission in major merger or cartels cases (Kerse, 1998, p 40). 1.2. Organisation and Functions of Directorate-General for Competition The European competition policy is de facto the Commission policy. It is the Commission that decides what policies and how to implement them. It is also the Commission that identifies breaches of rules and whether or not it adopts decisions through investigation and determination, and defines the level of any penalties (Cini, 1998, p 41). Thus, the Commission is not a huge or even a single body. It is composed of 33 Directorates-General in the Juncker Commission, each of which is responsible for particular competence and sectoral policy,43 and has its different goals and value systems. Therefore, the potential conflict among them is immense. It makes for sensitive decision-making and high politicisation within the 43 In accordance with the European Commission: Juncker Commission 2014 – 2019, there are 33 Directorates-General, are responsible for all EU economy and society policies, which, alphabetically and respectively, are: (1) Agriculture and Rural Development (AGRI); (2) Budget (BUDG); (3) Climate Action (CLIMA); (4) Communication (COMM); (5) Communications Networks, Content and Technology (CNET); (6) Competition (COMP); (7) Economic and Financial Affairs (ECFIN); (8) Education and Culture (EAC); (9) Employment, Social Affairs and Inclusion (EMPL); (10) Energy (ENER); (11) Environment (ENV); (12) Eurostat (ESTAT); (13) Financial Stability, Financial Services and Capital Markets Union (FISMA); (14) Health and Food Safety (SANTE); (15) Humanitarian Aid and Civil Protection (ECHO); (16) Human Resources and Security (HR); (17) Informatics (DIGIT); (18) Internal Market, Industry, Entrepreneurship and SMEs (GROW); (19) International Cooperation and Development (DEVCO); (20) Interpretation (SCIC); (21) Joint Research Centre (JRC); (22) Justice and Consumers (JUST); (23) Maritime Affairs and Fisheries (MARE); (24) Migration and Home Affairs (HOME); (25) Mobility and Transport (MOVE); (26) Neighbourhood and Enlargement Negotiations (NEAR); (27) Regional and Urban Policy (REGIO); (28) Research and Innovation (RTD); (29) Secretariat-General (SG); (30) Service for Foreign Policy Instruments (FPI); (31) Taxation and Customs Union (TAXUD); (32) Trade (TRADE); (33) Translation (DGT). Visited website on 06 March 2016: http://ec.europa.eu/about/ds_en.htm
European Institutions of EU Competition Policy 43 Commission, due to the Commission is observed as a micro European Union as a whole. As mentioned above, the DG Competition is committed to deal with competition-related affairs within the Commission, so that it dominates the competition regulation within it. It has a distinctive sectoral identity and a clearly defined set of policy responsibilities, though it is still trying to extend its competence into sectors previously untouched by any competition ethos. The DG Competition is headed by a Director-General.44 The number of its staff rose dramatically from 153 personal staff in 199845 to 608 personal staff in 2002,46 and at the end of 2014, the number of staff members had increased to 792.47 Obviously, by virtue of a lack of staff in 1998 to tackle appropriately and promptly competition-related affairs which were diversified and varied, it needed and was required to recruit more personnel. Among 608 officials in 2002, 344 and 264 officials were in Grade A and supporting staff respectively. The Grade A staff was responsible for case handling, policy development and management. Among the Grade A, 184 staff have received basic training in law, 83 in economics and 77 in other professions. Nevertheless, all of them were to deal with all aspects of competition policy, for instance, antitrust, cartels, mergers, state aid and liberalisation, etc. If there were inappropriate staff resources, the enforcement capacity of the DG Competition could be weaken. Indeed, over the history of the DG Competition or former DGIV, it has passed through a series of reorganisations, 44 The present Director-General is Johannes Laitenberger, visited the website on 06 March 2016: http://ec.europa.eu/dgs/competition/index_en.htm. 45 European Commission, White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme No. 99/027, OJ 1999/C 132/01, footnote no. 44. 46 Distribution of staff of the Directorate-General for Competition in accordance with the working activities: Staff per activity area 2002Antitrust 129Cartels investigation 48Liberalisation 32Merger control 116State aid 136International cooperation 23General policy, strategy and coordination 70General administrative support 54TOTAL 608Source: The official website of European Union (http://www.europa.eu.int/comm/dgs/competition/index_en.htm) 47 European Commission. 2014 Annual Activity Report, DG Competition, p 5. Available on: http://ec.europa.eu/atwork/synthesis/aar/doc/comp_aar_2014.pdf
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 44 Diagram 3.1: Organisation chart of Directorate-General for Competition Source: The official website of EU, http://ec.europa.eu/dgs/competition/directory/organi_en.pdf, visited on 23 February 2016
European Institutions of EU Competition Policy 45 thereby forming broader policy responsibilities, as well as striving for greater policy effectiveness. Diagram 3.1 represents the organisational structure of Directorate-General for Competition of the Juncker Commission reformed and updated on 1 February 2016, with the Merger regulation reforms and the modernisation programme of implementation on competition rules. Table 3.1: Comparison of changes of the functional structure of the DG Competition Barroso Commission II Juncker Commission Activity areas of DG Competition at 2014* Activity areas of DG Competition at 2016† Directorate Responsible function Directorate Responsible function A Policy and Strategy A Policy and Strategy B Market and case I – Energy and Environment B Market and case I – Energy and Environment C Market and case II – Information, Communication and Media C Market and case II – Information, Communication and Media D Market and case III – Financial services D Market and case III – Financial services E Market and case IV – Basic Industries, Manufacturing and Agriculture E Market and case IV – Basic Industries, Manufacturing and Agriculture F Markets and case V – Transport, Post and other services F Markets and case V – Transport, Post and other services G Cartels G Cartels H State Aids – Cohesion, R&D&I and Enforcement H State Aid – General Scrutiny and Enforcement R Registry and Resources R Registry and Resources Remarks: * The organisation chart of DG Competition updated on 01/01/2014; † The organisation chart of DG Competition updated on 01/02/2016. Generally, the structure of DG Competition reflects its functional needs in line with the implementation of its obligations. Acting on behalf of the Commission in the application and enforcement of Articles 101 and 102 of the TFEU, including the merger regulation as well, it has functions which can be divided into administrative, legislative and decision-making. Its administrative function includes investigation procedures and executive control of the 9 activity areas, after a significant reorganisation of the DG Competition in November 2007 within the period of the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 46 Barroso Commission I. For the Juncker Commission, the latest update of which was on 1 February 2016, the organisation of DG Competition has almost no changes except the change of functions of the Directorate H. However, each area has specific operations and the functional structure of DG Competition is shown in Table 3.1. Presently, the DG Competition concerns the 9 activity areas which address issues in relation to the 6 major policy areas of EU, which are antitrust, mergers, cartels, liberalisation, state aid and international cooperation. The DG Competition is not only led by a Director-General, but is also assisted by three Deputy Directors-General who are responsible for the three essential functions, which are “Antitrust”, “Mergers” and “State Aid”, as shown in Diagram 3.1. Nevertheless, in dealing with the huge amount of competition-related affairs, there are 9 different specific subordinate directorates responsible for particular tasks under the Director-General and the three Deputy Directors-General. Their responsible functions are listed as below: (1) Directorate A, which is subordinated to the Deputy Directors-General of Antitrust and of Mergers, deals with affairs related to Policy and Strategy, including Antitrust case support and policy, Mergers case support and policy, State aid strategy, European Competition Network and private enforcement, and International Relations. (2) Directorate B, which is directly responsible to the Director General and also subordinated to the three Deputy Directors-General, deals with affairs related to Markets and cases I – Energy and Environment, in policy areas of antitrust (in sectors of Energy, Environment), state aid and mergers. (3) Directorate C, which is directly responsible to the Director General and also subordinated to the three Deputy Directors-General, deals with affairs related to Markets and cases II – Information, Communication and Media, in policy areas of antitrust (in sector of Telecoms), antitrust (in sector of Media), antitrust (in sectors of IT, Internet and Consumer electronics), state aid, and mergers, as well as being equipped with a task force of digital single market. (4) Directorate D, which is directly responsible to the Director General and also subordinated to the three Deputy Directors-General, deals with affairs related to Markets and cases III – Financial Services, in policy areas of antitrust (in sector of Payment systems), antitrust (in sector of Financial services) and mergers, as well as being equipped with a task force of financial crisis concerning the state aids. (5) Directorate E, which is directly responsible to the Director General and also subordinated to the three Deputy Directors-General, deals with affairs related to Markets and cases IV – Basic Industries, Manufacturing and
European Institutions of EU Competition Policy 47 Agriculture, in policy areas of antitrust (in sectors of Pharmaceutical and Health services), antitrust (in sectors of Consumer goods, Basic industries, Agriculture and Manufacturing), state aid (in sectors of Industrial restructuring) and mergers, as well as a task force on the food industry. (6) Directorate F, which is directly responsible to the Director General and also subordinated to the three Deputy Directors-General, deals with affairs related to Markets and cases V – Transport, Post and other services, in policy area of antitrust (in the sectors of Transport, Post and other services), state aid (in the sector of Transport), state aid (in the sector of Post and other services) and mergers. (7) Directorate G, which is directly responsible to the Deputy Director-General of Antitrust, deals with affairs related to Cartels, including six teams, one of which is a team of cartels settlements. (8) Directorate H, which is directly responsible to the Deputy Director-General of State Aid, deals with affairs related to General Scrutiny and Enforcement, in the policy area of Infrastructure and Regional aid; Access to finance, R&D&I and Environment; Fiscal Aid; and Enforcement and Monitoring, as well as being equipped with a task force of tax planning practices. (9) Directorate R, which is directly responsible to the Director General, deals with affairs related to Registry and Resources, in the policy area of Document Management; Resources, Ethics and Security; and Information Technology. Antitrust is covered in Articles 101 and 102 of the TFEU and Article 65 of the ECSC Treaty. For merger control, it applies to the Council Regulation (EC) No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) within the area of the EEA Agreement. For the liberalisation and state intervention, they apply to Articles 37 and 106 of the TFEU. For the state aid, it applies to Articles 107 to 109 of the TFEU and Articles 4, 56 and 95 of the ECSC Treaty. Ergo, the DG Competition oversees competition-related activities in the EU based on these legal instruments whether they are breached. 1.3. Mission of Directorate-General for Competition of the European Commission Under the authority of the Commissioner responsible for Competition Policy, the mission of DG Competition is to enforce the Rules on Competition of TFEU in order to ensure that the internal market as set out in Article 3 of the Treaty on
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 48 European Union includes a system ensuring that competition is not distorted,48 thereby contributing to the welfare of consumers and the competitiveness of the European economy.49 In another prospect, the DG Competition involves setting the EU-wide rules to guarantee fair competition, as well as enforcing the rules in a just and vigour manner, in order to prevent and punish any infringements. Precisely, the DG Competition, lead by the present commissioner, Margrethe Vestager, who is the responsible to competition, adopts measures and practices to: (1) mobilise competition policy tools and market expertise to contribute, where appropriate, to creating jobs and promoting growth; (2) develop the economic and legal approach of assessing competition issues and monitor the market; (3) enforce effectively rules on competition in the areas of antitrust, cartels, state aid and mergers; (4) strengthen the Commission’s reputation worldwide and promote international cooperation in competition issues.50 The DG Competition also deals with competition policy at the international level, such as in International Competition Network (ICN), World Trade Organization (WTO), Organisation for Economic Cooperation and Development (OECD), United Nations Conference on Trade And Development (UNCTAD) etc. and participates generally in their international fora, as well as cooperates with other third countries and regions in bilateral relationship, i.e. China, Association of Southeast Asian Nations (ASEAN), etc. The cooperative activities related to competition between the EU and other third countries vary from country to country, such as coordination of enforcement, dialogue on issues of competition policy, sharing information and intelligence on cases of mutual interests, as well as capacity building.51 2. European Parliament and the Council Within the framework of the European Union, the Council is made up of the Ministers of Member States of the European Union and meets for specific subjects. 48 Recital of Protocol (No 27) on the Internal Market and Competition, annexed to the TEU and to the TFEU. 49 In the Chapter 2 have been indicated the objectives of the competition policy, which are established on the purpose to achieving the mission set out by the European competition. Albeit both the mission and objectives are superficially similar, it can be seen that the welfare of customers and competitiveness of the EU, which possess a long-term character, is the maximum promise made to its Member States and their populations. So, the mission of the EU is being a consistent form and constantly evolving. However, the objectives have been adjusted from time to time, as those mentioned in the annual reports on competition policy. 50 Visited on 7 March 2016 the official website of EU : http://ec.europa.eu/commission/2014-2019/vestager_en 51 Visited on 11 March 2014 the official website of the European Commission: http://ec.europa.eu/competition/international/overview/index_en.html
European Institutions of EU Competition Policy 49 The Council exercises the primary legislative power,52 and it shares the power with the European Parliament through the introduction into the TEU and the TFEU of legislative procedure requiring the participation of both bodies. However, the Council and the European Parliament play only a peripheral role in the regulation of European competition. Albeit both have been keen to see their participation and oversight of competition matters enhanced, both of these legislative bodies are clearly on the margins of competition policy-making, as the instruments of decision-making are almost exclusively in the hand of the Commission. The reason for this is that the Commission formulates proposals to the Council to start legislative procedures in order to make regulations or directives to give effect to the principles set out in Article 101 and 102 of the TFEU.53 Moreover, the TFEU confers the power to the Commission to adopt regulations relating to the categories of agreement in respect of which the Council has adopted a regulation or a directive in comply with Article 103(2)(d). Before the Lisbon Treaty entered into force, the Council delegated part of the legislative power to the Commission, pursuant to Article 202, indentation 3, of the TEC, as well as the Council made a decision laid down the procedures for the exercise of implementing powers conferred on the Commission.54 52 Article 16(1) of the TEU. 53 Article 103(1) of the TFEU. 54 The delegation of Council’s power to the Commission can be traced back to 1987, which was earlier than the empowerment provision laid down by the TEC, in the Council Decision of 13 July 1987 laying down the procedures for the exercises of implementing powers conferred on the Commission (87/373/EEC), OJ L 197, 18.07.1987. In which, the Council confers on the Commission powers for the implementation of the rule which it lays down other than in specific cases where it reserves the right to exercises directly implementing powers itself. Moreover, the Council may impose requirements in respect of the exercise of these powers in accordance with the procedures set out in the Decision. In 1999, the Decision was repealed and replaced by the Council Decision of 28 June 1999 laying down the procedures for the exercise of implementing power conferred on the Commission (1999/468/EC), OJ L 184/23, 17.7.1999. The purposes of this Decision, as mentioned in its recitals, are: to provide for criteria relating to the choice of committee procedures including advisory procedure, management procedure, regulatory procedure and safeguard procedure; to simplify the requirements for the exercise of implementing powers conferred upon the Commission; to improve the involvement of the EP in those cases where the basic instrument conferring implementation powers on the Commission was adopted according to the procedure stipulated in Article 251 of the TEC; to improve information to the EP by providing that the Commission should inform it on a regular basis of committee proceedings; to improve information to the public concerning committee procedures and to make applicable to committees the principles and conditions on public access to documents applicable to the Commission; to provide for a list of all committees which assist the Commission in the exercise of implementing powers; and to provide for all references to documents related to committees which have been transmitted to the EP to be made public in a register.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 50 2.1. European Parliament Article 14 of the TEU provides that: “1. The European Parliament shall, jointly with the Council, exercise legislative and budgetary functions. It shall exercise functions of political control and consultation as laid down in the Treaties. It shall elect the President of the Commission. 2. The European Parliament shall be composed of representative of the Union’s citizens. They shall not exceed seven hundred and fifty in number, plus the President. Representation of citizens shall be degressively proportional, with a minimum threshold of six members per Member State. No Member State shall be allocated more than ninety-six seats. The European Council shall adopt by unanimity, on the initiative of the European Parliament and with its consent, a decision establishing the composition of the European Parliament, respecting the principles referred to in the first subparagraph. 3. The members of the European Parliament shall be elected for a term of five years by direct universal suffrage in a free and secret ballot. 4. The European Parliament shall elect its President and its officers from among its members.” According to these provisions, the European Parliament (hereinafter referred to as EP), as a supranational institution, is formed democratically and elected by direct universal suffrage for a term of five years. In the 8th parliamentary term of the EP, there are 751 Members of the European Parliament (MEPs), as shown in Table 3.2, elected in the 28 Member States in the EP, which are grouped by political group but not by nationality.55 The number of seats of each Member State is shared pro rata according to population, so each Member State has between 6 and 96 seats, as a general rule.56 55 The European Parliament is grouped politically into 8 parties with different number of seats. The total number of 751 seats are divided into: 215 seats in the Group of the European People’s Party (Christian Democrats), 189 seats in the Group of the Progressive Alliance of Socialists and Democrats in the European Parliament, 74 seats in the European Conservatives and Reformists Group, 70 seats in the Group of Alliance of Liberals and Democrats for Europe, 52 seats in the Confederal Group of the European United Left - Nordic Green Left, 50 seats in the Group of the Greens/European Free Alliance, 46 seats in the Europe of Freedom and Direct Democracy Group, 39 seats in the Europe of Nations and Freedom Group, and finally 16 seats to non-attached Members. The above information is based on the information available in the official website of the EU, visited on 07 March 2016, http://www.europarl.europa.eu/meps/en/crosstable.html 56 Visited on 07 March 2016 the official website of the EU:
European Institutions of EU Competition Policy 51 Table 3.2: Members of the European Parliament by Member States, 8th parliamentary term Austria Belgium Bulgari a Croati a Cyprus Czech Republic Denmark Estoni a Finland France Germany Greece Hungary Ireland Italy Latvi a Lithuani a Luxembourg Malt a Netherlands Poland Portugal Romani a Sloveni a Slovaki a Spain Sweden United Kingdom 18 21 17 11 6 21 13 6 13 74 96 21 21 11 73 8 11 6 6 26 51 21 32 8 13 54 20 73 Source: Visited on 07 March 2016 the official website of the EU: http://europa.eu/about-eu/institutions-bodies/european-parliament/index_en.htm Currently, the MEPs have more and more power to influence the daily life of Europe in different areas, including consumer protection, transport, environment, education, health, culture and so on. Moreover, the EP also lays down the regulations and other general conditions to govern the performance of the duties of its Members.57 In this regard, the EP and, specifically, its Committee on Economic and Monetary Affairs, have been intervening increasingly in the development of competition policy, though it has always had the capacity to influence Commission policy. Presently, the Committee has a specific rapporteur to deal with competition matters. Even before its direct election in 1979, the Assembly imposed pressure on the DGIV (now DG Competition) to open up its regulatory process. Thus, it was de facto the EP that convinced the Commission to publish the annual report on competition firstly in 1972. Presently, there are two formal ways in which the EP can influence the Commission. Firstly, the resolution of the EP on the annual report on competition policy prepared by the Commission is undoubtedly most important. The resolution is not only a response to the content of the report, but also a response to the broader developments in the enforcement of European competition.58 It is comprehensive http://europa.eu/about-eu/institutions-bodies/european-parliament/index_en.htm 57 Article 223(2) of the TFEU. 58 For instance, the Report on Competition Policy 2003 indicates that a number of cartels, which were still included in antitrust policy, was investigated and punished increasingly and successfully based on the trend of the previous three years. It relied on the setting up of a specialised cartel unit, in the administrative reorganisation of the Commission in 1998, which dealt mostly with cartel cases tackled by the DG Competition. A second cartel unit was set up in 2002. Since 2003, in line with the entering into force of Regulation No. 1/2003, all antitrust units of the DG Competition have been dedicating more and greater efforts and resources to detect, investigate and prosecute cartels cases within their responsible areas. Therefore, cartels enforcement has become a priority in antitrust activities of the DG
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 52 and taken seriously by the DG Competition. The Competition Commissioner informs the EP annually in order to discuss both the annual report and the activities that are carried out. Secondly, the EP puts pressure on the Commission using written or oral questions. These are not superficial interrogations, but reflect the judgments of the general concerns of the EP and the concerns of sectoral interests. This is an opportunity for parliamentarians to ask detailed competition policy questions to the Commission before its emission of the annual report on competition (Cini, 1998, pp 39-40). Notwithstanding the relationship between the EP and the DG Competition is judged to be constructive, it implies the systematic parliamentary control, or even scrutiny, over competition enforcement. Over the years, the EP has criticised the Commission in many aspects, especially in the case where the Commission has not consulted completely with the MEPs. Therefore, the pressure that has been put on the Commissioner leads the Commissioner to report to the Committee on Economic and Monetary Affairs of the EP on a regular basis in order to maintain the most updated policy developments. It leads the Commission to allow the EP to become Competition in the Commission. The disposition of resources and efficient administrative reorganisation enable a better outcome in fighting against cartels. So, its uniqueness for fair competition fostered the DG Competition to delimiting it as an individual policy rather than a part of antitrust policy, and reorganising the administrative structure of the DG Competition and reallocating resources in 2007. In respect of the cartels policy, Chapter 4 has discussion in detail. In the European Parliament resolution on the Commission’s XXXIIIrd Report on Competition Policy – 2003 (2004/2139(INI)), [2005] OJ 304E, pp 114-6, the European Parliament congratulated “the Commissioner on maintaining constant and vigorous monitoring of distortions in competition, while undertaking far-reaching reorganisation and renewal of the anti-trust, … and internal reorganisation of the Competition Directorate-General”, as well as praising “the reinforcement of the cartel unit, which will reduce the time required to conclude cartel cases”. Meanwhile, the EP also welcomed “the progress towards implementing Commissioner Monti’s programme for modernising the Commission’s anti-trust rules, with its increased focus on investigation and penalising hard-core cartels, …” and “the reorganisation of the Competition Directorate-General of the Commission in the context of the merger control, particularly the restructuring along sectoral lines, the strengthening of economic assessment and greater definition concerning the role of consumers”. This response to the Report fostered the structural reorganisation of the DG Competition in February 2005. There were two more crucial guiding responses indicated in the Resolution which the EP urged the Commission “to continue to cooperate with OECD countries, Asian countries (with a particular focus on China) and …” and “to pursue negotiation with the WTO on the interaction between trade and competition policy, in the spirit of the Doha Declaration of November 2001”. The former gave an impetus to accelerate the close cooperation between the EU and China in the area of competition policy. The latter enabled the EU acting pro-actively in the WTO forum with respect of the issue of competition policy and law worldwide.
European Institutions of EU Competition Policy 53 involved in competition policy in a proactive way. It certainly allows the EP to contribute significantly to competition policy. 2.2. Council Article 16(1) of the TEU provides that to ensure the major competence set out in the Treaties is attained, “[t]he Council shall, jointly with the European Parliament, exercise legislative and budgetary function. It shall carry out policy-making and coordinating functions as laid down in the Treaties”. This article provides for the jurisdictions and competences of the Council. Concerning its execution, the empowerment of the Council to the Commission in the treaty could be traced back to the Maastricht Treaty in 1992. Before that year, the Council conferred power on the Commission initially in 1987 by the Council Decision No. 87/373/EEC, which was repealed and replace by the Council Decision No. 1999/468/EC.59 Presently, albeit the legislative power, by the ordinary legislative procedure, has fallen into the hands of the Council and the European Parliament, the joint adoption shall be based on a proposal from the Commission. Since legal acts adopted by legislative procedure shall constitute legislative acts, a legislative act may delegate to the Commission the power to adopt non-legislative acts of general application to supplement or amend certain non-essential elements of the legislative act, as described in Article 290(1) of the TFEU. Regarding the competition-related matters, even though the Council lays down the appropriate regulations or directives to give effect to the principles set out in Articles 101 and 102 of the TFEU, on a proposal from the Commission and after consulting the European Parliament, the Commission may adopt regulations to lay down detailed rules for the application of Article 101(3) of the TFEU in order to ensure effective supervision and to simplify administration to the greatest possible extent.60 It implies that the Treaties confer the competition-related powers of the Council on the Commission, as supervising and administering body, to engage in competition law and policy. In order to execute the abovementioned competences, the Council must be composed by Ministers of each Member States of the EU. It meets in different “Council configurations”, 61 based on the subject being discussed, which are 59 See note 54, supra. 60 Articles 103(1) and 105(3) of the TFEU. 61 Pursuant to Article 16(6) of the TEU, albeit the Council is a single legal entity, there are presently 10 different “council configurations”, depending on the subject being discussed: (1) General Affairs Council (GAC); (2) Foreign Affairs Council (FAC); (3) Economic and Financial Affairs (EcoFin); (4) Justice and Home Affairs Council (JHA); (5) Employment, Social Policy, Health and Consumer Affairs Council (EPSCO); (6) Competitiveness Council (COMPET); (7) Transport, Telecommunications and Energy Council (TTE); (8) Agricultural
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 54 attended by Ministers of Member States, pursuant to Article 16(6) and (9) of the TEU, and relevant European commissioners for the fields concerned. As the Council is a single legal entity, the Council configurations are not hierarchically subordinated, but the General Affairs Council is in a coordination role responsible for institutional, administrative and horizontal matters, as well as the Foreign Affairs Council is assuming a special remit. The Ministers are authorised to commit the government of that Member State, voting in the name of their Member State according to the State’s relative population size. Competitiveness Council is one of the configurations, in which competition is covered within the Internal Market which is one of three strands of activity committed to the Competiveness Council.62 Hence, there are several Ministers of Member State who come together as the Council for specific configurations. So, the Council can discuss different specialised subjects, reacting disposition flexibly, hearing specific opinions from relevant aspects and discussing mutually before an appropriate decision that achieves the benefit of each Member State. Therefore, it is not surprising that the Council also has a peripheral role in the issues of competition policy. The Council is not involved in the day-to-day managerial and executive aspects, but, essentially, the technocratic and administrative aspects. This framework was largely formed since the 1960s, when the legislative function was empowered to the then DGIV by the Council, by virtue of the Council Decision No. 87/373/EEC, supra citato. Since then, the legislative function of the Council is only limited to the occasional regulations exempting, en bloc, classes of agreements of the Treaty establishing European Economic Community (EEC), the Council adopted these regulations by a qualified voting majority (QVM) after consulting with the EP. Hence, it is fairly rare for the Council delivering regulations under Articles 101 and 102 of the TFEU (ex Articles 81 and 82 of the TEC), and even on the State aid. After the establishment of this legal framework and the implementation of the Regulation No. 16, the centrality of the competition policy has been weakening (Chapter 4 has a discussion regarding decentralisation of competences). By virtue of the delegation of power to the Commission, its power in decision-taking has been increased accordingly, as well as allowing the Commission to develop politically a policy-making function, which is used to protect the Internal Market. Notwithstanding that the enforcement role of the Commission is independent of the Council, the Commission has increasingly and Fisheries Council (AGRIFISH); (9) Environment Council (ENV); and (10) Education, Youth and Culture and Sport Council (EYCS). Visited on 15 March 2014 the official website of the EU: http://www.consilium.europa.eu/council/council-configurations 62 Visited on 15 March 2014 the official website of the EU: http://www.consilium.europa.eu/policies/council-configurations/competitiveness?lang=en
European Institutions of EU Competition Policy 55 involved the Council in its policy-making, that shows a perceived need to ensure approval of Member States (Cini, 1998, pp 40-1). In sum, when both the Council and the EP are not the principal actors in regulation of European competition, the Commission has to pay attention to the inter-institutional context of all European policies. Even though the Commission is not formally required, its initiatives still rest on informal and ad hoc practices, so the Commission encourages the EP and the Council to be involved in the European competition in the view of ever-present demands for openness and transparency. 3. The Court of Justice of the European Union The Court of Justice of the European Union (hereinafter referred to as CJEU), which was denominated as the European Court of Justice (ECJ) before the Lisbon Treaty entered into force, was founded in 1952 as the European Coal and Steel Community (ECSC) Court, and was strengthened in 1957 to cover all three European Communities after the Treaty establishing European Economic Community (EEC Treaty) and Treaty establishing the European Atomic Energy Community (Euratom Treaty) of 1957. Since the 1950s, the European legal system has undergone a process of constitutionalisation, entailing the gradual evolution of European legal principles and precedents on a case-by-case basis. Article 19(1) of the TEU requires the CJEU to “ensure that in the interpretation and application of the Treaties the law is observed.” It sets out the essential role of the CJEU as a Union’s institution.63 Its value and effectiveness are based on the importance of law and legal order to create, function and develop the Union, and also the complete autonomy of courts. The jurisdiction of the CJEU is wide and varied and is capable of judging proceedings against the provisions under the Treaties. In practice, competition cases were sentenced in the then CFI (now the General Court), since 199164 and can be appealed to the CJEU on questions of law. The CJEU is divided into 3 bodies: Court of Justice, General Court and Civil Service Tribunal. 3.1. Court of Justice The jurisdiction of the CJEU has been clearly defined in order to enable it to complete its tasks. The jurisdiction focuses on two areas: the first is the exercise of 63 Article 13(1) of the TEU. 64 The first case which was sentenced by the CFI on 24 October 1991 was Case T-1/89, Rhône-Poulenc SA v Commission of the European Communities, [1991] ECR p II-867. Visited on 12 January 2008 the website: http://curia.europa.eu/en/content/juris/index.htm
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 56 reference for preliminary rulings; the second is the various categories of proceedings.65 With respect to the references for preliminary rulings, under Article 267 of the TFEU, the CJEU may have jurisdiction to give preliminary rulings concerning, inter alia, “the interpretation of the Treaty; the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union”. Preliminary rulings can only be requested by any court or tribunal of a Member State where such a question is raised before it which “considers that a decision on the question is necessary to enable it to give judgment”, where such questions are pending in a court or tribunal of a Member State where there is no judicial remedy under the national law, as well as where a question is pending in a court or tribunal of a Member State where the case relates to a person in custody. Undoubtedly, this provision has been used by the courts and tribunals of different Member States to request preliminary rulings relating to the Rules on Competition and other matters.66 Practically, the reply of the CJEU is not only in the form of a judgment, but also can be a reasoned order and/or opinion. In this case, several essential principles of European competition law have been created by preliminary rulings. Thus, in the national court, all parties to the proceedings before that court can make reference for preliminary rulings. Any European citizen can also look for clarification of the Union rules, including Rules on Competition, which affect him/her, through references to preliminary rulings. With respect to the proceedings, they comprise five categories:67 (1) The first category is actions for failure to fulfil obligations. If there is a complaint against a Member State as to whether that Member State has fulfilled its obligation under the EU law, the Commission conducts a preliminary procedure in which the Member State has a chance to reply. In case that procedure does not terminate the failure, an action for violation of EU law may be brought before the Court of Justice by the Commission or by a Member State. If the Court of Justice finds that the Member State has not fulfilled its obligation, the Member State must rectify the failure immediately. If the Member State has not complied with the judgment, it may be given a fixed or periodic financial penalty. (2) The second category is actions for annulment. A Member State can bring actions against the European Parliament and/or the Council, but not against the actions of the Council measures regarding State aid, dumping and implementing 65 Visited on 15 March 2014 the website of the Court of Justice of the European Union: http://curia.europa.eu/jcms/jcms/Jo2_7024/ 66 Case 13/61, Bosch v De Geus [1962] ECR 45, [1962] CMLR 1, which is the first reference under Article 234 of the TEC involved the question of the application by national courts of the Community competition rules. 67 Visited on 15 March 2014 the website of the Court of Justice of the European Union: http://curia.europa.eu/jcms/jcms/Jo2_7024/
European Institutions of EU Competition Policy 57 powers. One European institution can bring actions against another. The Court of Justice has exclusive jurisdiction over these actions. In sum, the applicant may seek to annul a measure, such as a directive, regulation or decision adopted by a European institution by taking actions for annulment. Individuals can bring actions to the General Court which has jurisdiction. Regarding the mentioned measures, they can be in the scope of competition-related issues except the state aid. (3) The third category is actions for failure to act. By these actions, the failure to act of the European institutions can be reviewed lawfully, but such an action may only be brought after the European institution has been requested to act. The Court of Justice and the General Court have jurisdiction to hear actions for failure to act in accordance with the identical criteria required as for actions for annulment. Certainly, these actions can be competition-related. (4) The fourth category is appeals. Appeals are only the judgments and orders of the General Court may be brought, on a different point of law, before the Court of Justice. If the appeal is accepted, the Court of Justice revokes the judgment or order of the General Court and sentences the case. Until January of 2008, 815 judgments or orders have been appealed to the then European Court of Justice (hereinafter referred to as ECJ).68 In this regard, competition-related judgments can be brought before the Court of Justice. (5) The fifth category is reviews. In very exceptional circumstance, the Court of Justice reviews decisions of the General Court on appeals against decisions of the European Union Civil Service Tribunal. This category has no relation to the competition-related issues. It means that the jurisdiction of the Court of Justice to this category is not related to competition. Practically, the Court of Justice has been a crucial and far-reaching influence on competition policy. Since the Grundig case in 1966,69 the competition policy enforced by the Commission, inter alia, depends on its broader and deeper willingness to interpret the provisions of European competition law (Goyder, 1993, p. 493). As in the approach of judgment in Continental case in 1973,70 it allows the Commission’s competition policy a substantial freedom in manoeuvre. It is for this reason that the Court of Justice believes in the standing of market integration of the European Union and, simultaneously, persists with the principle of equity between the economic effectiveness and the consumer’s rights and protections, achieving the goal of a single market (Goyder, 1993, p. 72). So, the Court of Justice recognises that competition policy is a sound tool during the process of European integration 68 Visited on 25 January 2008 the website: http://curia.europa.eu/en/content/juris/index.htm 69 Case 56 and 58/64, Établissements Consten S.À.R.L. and Grundig-Verkaufs-GmbH v Commission of the European Economic Community, [1966] ECR 299. 70 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission of the European Communities, [1975] ECR 495.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 58 and functions in catalysis. In this regard, the Commission is given more competence in the enforcement of competition policy. 3.2. General Court Since the mid-1980s, the European legal system displayed inherent weaknesses. The nature of the “judicial architecture” became the focal point of discussion in the field, so some discourses regarding the juridical institutional reform had emerged. Hence, in the force of the Single European Act (hereinafter referred to as SEA), there was an important institutional reform, which produced the effect in 1987 and created the Court of First Instance (hereinafter referred to as CFI) [now the General Court in the Lisbon Treaty], which was subordinated to the then ECJ [now the Court of Justice of the European Union in the Lisbon Treaty], on the request of the then ECJ. So, it was not an independent institution of the Union (Kerse, 1998, p 43). It was established in November 1987. Since then, the European court system became a two-tier court system, intending to tackle cases of litigations that were backlogged and overcoming delays in their processing. In the meanwhile, it reduced the workload and burden of the then ECJ. It apparently redeemed the confidence in the European rule of law. The initial jurisdiction of the CFI comprised only three subject matters: staff cases; certain cases under the ECSC Treaty; actions against the Commission relating to the enforcement of the EC competition rules, save actions related to state aid (Cini, 1998, p 57). The object was to improve the judicial protection of individual interests, particularly in cases requiring the examination and investigation of complex facts. Since then, most competition-related cases were transferred to the CFI from the ECJ to reduce its burden of severe backlog. In June 1993, state aid cases also started to be transferred. Thereafter, the CFI had constructed certain capability to cope with antitrust cases. Before the restructuring the CJEU, the former CFI had jurisdiction to hear:71 “(1) actions brought by private parties directly against acts of Community institutions or acts against a failure to act on the part of those institutions; (2) actions brought by the Member States against the Commission; (3) actions brought by the Member States against the Council relating to acts adopted in field of State aids, dumping and acts by which it exercises implementing powers; (4) actions seeking compensation for damage caused by the Community institutions or their staff; 71 Visited on 12 January 2008 the website: http://curia.europa.eu/en/instit/presentationfr/index_tpi.htm
European Institutions of EU Competition Policy 59 (5) actions based on contracts made by the Communities which expressly give jurisdiction to the CFI; (6) actions relating to Community trademarks.” Therefore, its jurisdiction was not as extensive as the jurisdiction of the ECJ. So, the judgment given by the CFI was subject to a right of appeal lies on point of laws only to the ECJ, by virtue that the CFI had jurisdiction to hear and determine, at the first instance, actions and proceedings instituted by natural or legal persons.72 However, such persons brought most of the competition cases and Member States did not bring cases in which the CFI had no jurisdiction. The CFI had handled, in inquisitional manner proactively, questions of significant and diversified procedural and substantial laws concerning the application of Articles 81 and 82 of the TEC [now Articles 101 and 102 of the TFEU] (Kerse, 1998, p 43). The CFI had been commended for the quality of its judgments and for its influence on the enforcement of the Rules on Competition, especially the willingness to defend individual rights in several controversial areas, as well as its thoroughgoing preparation, and the conduct of its hearings. Meanwhile, it had forced the DG Competition to respond and correct its deficiencies in terms of the scrutiny of the Commission fact-finding. For example, the Commission took seriously the kinds of practices related to vertical agreement in Case IV/35.73373 and imposed fines of ECU 102 million on Volkswagen in infringement of ex Article 85(1) of the TEC [now Article 101 of the TFEU], with respect to diversified contractual practices formulated to restrict distributors selling solely inside of their contractual territory. In the judgment74 of the CFI, the Commission Decision was annulled and the fine was reduced to ECU 90 million based on the fact that the Commission did not find the complete period of the breach established. Even though there was an appeal75 to the ECJ, it was dismissed. Currently, the jurisdiction of the General Court is slight different from the CFI, which are: The point (1) of the jurisdictions of the CFI has changed to “actions brought by natural or legal persons against acts of the institutions, bodies, offices or agencies of the European Union (which are addressed to them or are of direct and 72 Article 225(1) of the TEC [now Article 256(1) of the TFEU]. 73 Commission Decision of 28 January 1998 relating to a proceeding under Article 85 of the EC Treaty (Case IV/35.733 – VW) (98/273/EC), [1998] OJ L124/60. 25.04.98. 74 Case T-62/98, Volkswagen AG v Commission of the European Communities, [2000] ECR II-02707. 75 Case C-338/00 P, Volkswagen AG v Commission of the European Communities. Visited on 25 February 2008 the website: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62000J0338:EN:HTML
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 60 individual concern to them) and against regulatory acts (which concern them directly and which do not entail implementing measures) or against a failure to act on the part of those institutions, bodies, offices or agencies; for example, a case brought by a company against a Commission decision imposing a fine on that company”. Point (2) of the jurisdiction remains unchanged. Point (3) of the jurisdiction remains unchanged, but the term “dumping” is changed to “trade protection measures (dumping)”. Point (4) of the jurisdiction remains unchanged, but the wording “Commission institutions” is clearly extended to “institutions or the bodies, offices or agencies of the European Union”. Point (5) of the jurisdiction principally remains unchanged, but the wordings “Commission” altered to “European Union” and “CFI” altered to “General Court”, in line with the Lisbon Treaty. Point (6) of the jurisdiction is changed to be more generalised, which is “actions relating to intellectual property brought against the Office for Harmonisation in the Internal Market (Trade Marks and Designs) and against the Community Plant Variety Office”. A new point (7) of jurisdiction is added, which is that “appeals, limited to points of law, against the decisions of the Civil Service Tribunal”, making the General Court to be a court of appeal to the jurisdiction of the Civil Service Tribunal. 3.3. Civil Service Tribunal The Civil Service Tribunal was created under the CJEU established by the Lisbon Treaty. Its competence is to solve the disputes raised between the EU and its staff. In fact, the Tribunal assumes the jurisdiction to tackle the disputes involving the EU civil service, which are not only workplace relations, such as salaries, career promotion, disciplinary measure, etc., but also includes the social security system, such as sickness, work accidents, family allowance, etc. 4. Conclusion Within the EU as a supranational body, some institutions have their functions conferred upon them by the Treaties. Among those institutions, the Commission, the European Parliament, the Council and the European Courts play crucial roles in respective ways to implement the competition policy of the EU in order to achieve the objectives stated in the previous chapter and the goals of the EU. These institutions assume the functions of legislation, enforcement and jurisdiction of the European competition law to ensure the application of that law to all Member States
European Institutions of EU Competition Policy 61 with consistent interpretation and effects, facilitating trade within the EU with fair competition and orderly and effective functioning of the Internal Market. Although the functions of each institution are conferred upon it by the Treaties, institutions may refer their functions to another institution. For instance, the function of the Commission is provided for in Article 17(1) of the TEU. Albeit the legislative power is conferred on the Council and the European Parliament, the legislative acts of the EU may only be adopted on the basis of a Commission proposal. 76 The Commission still may adopt regulations, by the Treaties, concerning competition-related issues, having a positive effect on the legislation and enforcement to competition policy. In respect of establishing certain important regulations, the Commission still has to obtain the approval of the Council before their promulgation, or the Council promulgates them by itself, such as the Regulation No. 17, Regulation No. 1/2003 and Regulation No. 139/2004 were promulgated by the Council. The next chapter analyses these regulations. Nevertheless, we still can find that, in secondary legislation, certain regulations which established competition-related issues in the last few decades were established and enforced by the Commission. There was a sound effectiveness regarding the protection of fair competition of the development of the Union. The reasons for this can be simply pointed out as: (1) the Commission is a body establishing laws related to competition; (2) the Commission per se is a body enforcing those laws; (3) the Commission, in the meanwhile, makes decisions on undertakings which infringe those laws. From these points, the functions of legislation, enforcement and quasi jurisdiction concentrate on a unique body, the Commission, which makes a tremendous contribution to the development of the EU. From another point of view, the Commission possesses diversified functions related to competition issues, so it must be controlled and supervised. Therefore, as provided in Article 249(2) of the TFEU, since 1972 the EP has required the Commission to submit an annual report on competition policy. This report established that the EP has a more detailed knowledge of the content and development of competition issues. The EP shall make a correspondent resolution on the report which the Commission submits, engaging in not only discussion and confirmation of what has been done by the Commission, but also giving directions for the development of competition affairs to the Commission. With respect to decisions made by the Commission to undertakings which infringe competition-related provisions, the undertakings in question may appeal to the GC which judges the cases. If the undertakings in question do not agree with the judgments, they may take the appeal on questions of law to the CJEU. These decisions possess an administrative character and also a quasi judicial binding force, coercing the defeated party in the decision to fulfil obligations. The Commission 76 Article 17(2) of the TEU.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 62 plays a role in this situation as the competition enforcement authority of the EU and the GC and the CJEU forms a two-tier judicial system, both assuring a solid guarantee to trade within or between Member States and fair competition in the Internal Market. This shows that the Commission is placed in the centre of the establishment and implementation of competition policy and law, but does not have absolute decisive power and discretion. One thing is certain the Commission is an “executive hand” in competition affairs of the European institutions. The next two chapters will analyse some decisions made by the Commission, and of judgments of some typical cases of the CFI [now General Court], in relation to infringement of competition rules.
63 Chapter 4 EU’s Competition Policy I: Rules, Interpretation and Application on the Core Provision of Competition Law With regard to the open market economy, competition exists or should exist among rivals; thereby competition can help innovation in technology to flourish. Effective competition is extremely important, which may reduce the price, increase quality and extend the choices to consumers, etc. To realise these objectives, it is essential that fair trade is implemented in both the private and public sectors. For the EU, the Commission plays a vital role in achieving this goal. This is because the Rules on Competition were enacted early in the establishment of EEC (European Economic Community) and the Commission possesses sufficient broad powers to ensure that the fair trade transactions of goods and services, enshrined in the provisions of EU law, especially the competition law, are respected. The competition law is, de jure and in lato sensu, a set of legally-binding and non-binding rules set out to ensure free and fair trade in promoting and protecting rivalry and competition in the marketplace. Currently, the EU’s competition policy is based on the present legal and political measures and a framework newly and recently delimited, which includes the following six policy areas: (i) Antitrust, including restrictive practices and abuse of dominant positions; (ii) Cartels; (iii) Mergers; (iv) State aid; (v) Liberalisation; and, (vi) International Cooperation. This policy is set out in the recital of the Protocol (No 27) annexed to the TEU and the TFEU as the fundamental principal which requires that “the internal market as set out in Article 3 of the Treaty on European Union includes a system ensuring that competition is not distorted”, and is provided for principally in Articles 101 to 109 TFEU, as well as secondary legislation, inter alia, of the Merger Regulation. Meanwhile, competition policy sets up the connection between the application of Rules on Competition for firms and the cooperation with economic policy, which
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 64 means that competition policy contributes to the positive integration of the EU (Kapteyn, 1988, p 840). This can be implemented in the context of Article 101(3) of the TFEU and is discussed later in this chapter. Based on the structure, functioning and goals of competition policy per se, the discussion is divided into two chapters. This chapter analyses the practices provided for in Articles 101 and 102 TFEU, known as the core provision of the Competition Law in stricto sensu. The following chapter comprises the peripheral practices, related to other provisions and secondary legislation of competition law. 1. Antitrust Antitrust is a policy area named officially and currently by the Commission and is the most crucial one in competition policy. This area covers two prohibition rules set out in the TFEU: firstly, agreements between two or more undertakings (this terminology is discussed later) which restrict competition in the marketplace are prohibited by Article 101 TFEU; secondly, an undertaking in a dominant market position may not abuse its position in the marketplace, which is provided for by Article 102 TFEU. Ergo, Articles 101 and 102 of the TFEU are the cornerstones of the Union’s competition law. Both are characterised by “direct applicability”, which means that they are not only enforceable by the Commission, namely the Directorate-General for Competition, at the Union level, but also are part of the law of each Member State and are directly enforceable by national competition authorities and national courts at the Member State’s level. This section will discuss respectively their theoretical bases and provisions, as well as analysing typical cases. 1.1. Restrictive Practices Article 10177 TFEU is the operative provision of the TFEU implementing the core Union activity provided for by the recital of the Protocol (No 27) annexed to 77 Article 101 of the TFEU reads: “1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 65 the TEU and the TFEU attaining a system included in the Internal Market “ensuring that competition is not distorted”. The major task of this non-distorted competition system is to ensure that all commercial practices of undertakings that create trade barriers or channels formed between different national markets are prohibited at the Union level. These commercial practices include specific market sharing agreements, collective exclusive dealing agreements between national producers and their distributors, agreements to adapt import prices to national price levels, collective rebates or discounts concerning the total turnover within one Member State, and import or export restrictions or bans in whatever form, etc. In this context, it is sufficient to point to the parallel with Articles 3478 and 3579 TFEU (Kapteyn, 1988, p 840). The conditions laid down in Articles 101 and 102 of the TFEU point out the direct effective prohibition of the prevention, restriction or distortion of competition within the Internal Market. Therefore, both these articles represent a system of prohibition. The constant case law of Courts represents that the functions of Articles 101 and 102 TFEU are to guarantee the non-distorted competition system laid down on the recital of the Protocol (No 27) annexed to the TEU and the TFEU, which in its turn ensures the establishing of the competition rules necessary for the functioning of the internal market stated in Article 3(1)(b) of the TEU (Kapteyn, 1988, p 837). (e) make the conclusion of contracts subject to 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. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: – any agreement or category of agreements between undertakings, – any decision or category of decisions by associations of undertakings, – any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.” 78 Article 34 of the TFEU reads: “Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States”. 79 Article 35 of the TFEU reads: “Quantitative restrictions on export, and all measure having equivalent effect, shall be prohibited between Member States”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 66 If an anti-competition agreement, decision or concerted practice affects, or may affect, trade between Member States, it is prohibited by Article 101 TFEU. In this regard, Lane (2000, p 68) pointed out that a restrictive practice, or even a cartel (which is discussed in Section 2 of this Chapter), is not prohibited if the effect only occurs in the territory of a single state. In this case, the restrictive practice will only be governed by the national competition rules in force. Likewise, a restrictive practice which affects trade between a Member State and one or more Non-Member States will also not be prohibited, as it does not affect trade between Member States. The wording used in Article 101 TFEU indicates specific undertakings’ behaviour, which restricts or distorts competition, being prohibited, and all forms of restriction of competition within the Internal Market by means of agreements between undertakings, decisions by association of undertakings, or concerted practices of undertakings. Ergo, Article 101 does not only ban the market-sharing and restriction on imports and exports, but also catches the competition deployment of those market-sharing and other restrictions which are hidden. The restriction of such categories of competition must be appreciable and have cross-border effects, including, for example, international pricing agreements and international agreements of other trades, and cartels of production and distribution as mentioned in Article 101. In addition, cooperative agreements in the specialised field of joint purchase and sale, sales-promoting agreement, joint research and technical cooperation, with restrictive competition side-effects are covered by the prohibition. However, the cooperative agreements intrinsically useful in this category that are not in the list of examples of prohibited agreements in the provision of Article 101, will be qualified easier than other examples under the exemption criteria set out in Article 101(3).80 1.1.1. Prohibitions (A) Undertakings There is no definition for the term “undertakings” in any provision of the TEU and the TFEU. In Articles 101 and 102 TFEU, the concept of an “undertaking” is not defined by reference to any legal status nor form of any entity under public and private law, as well as by reference to any natural or legal persons engaged in 80 The Commission expressed an opinion on a number of forms of cooperation. Albeit they are related to the importation and exportation between Member States, since they fall outside the provision of Article 101(3) of the TFEU and do not intend to restrict competition, so they do not need exemption. See Notice concerning agreements, decisions, and concerted practices in the field of cooperation between undertakings, [1968] OJ, C 75/3, 29 July 1968, with correlations in C 84/14, Dutch and French texts, and C 93/3, German and Italian texts.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 67 commercial and economic activities, such as the provision of goods and services, including cultural or sporting activities81, banking82, insurance83 and transport84. Undertakings are not necessarily profit-driven entities engaged in economic activities. In general terms, the most obvious meanings referred to “undertakings” are “companies or firms”. Paragraph 2 of Article 54 TFEU provides that “ ‘[c]ompanies or firms’ means companies or firms constituted under civil or commercial law, including cooperative societies, and other legal persons governed by public or private law, save for those which are non-profit-making.” This right of establishment does not express all meanings of undertakings. In Polypropylene,85 the Commission stated, for instance, in paragraph 5 of point 99, that: “[t]he objects of [EU] competition rules are undertakings, a concept which is not identical to the question of legal personality for purposes of company law and fiscal law. The term ‘undertaking’ is not defined in the Treaty. It may, however, refer to any entity engaged in commercial activities …”. After this rather broad interpretation was given by the Commission, the former ECJ has confined it and held, in paragraph 21 of Höfner and Elser v Macrotron GmbH Case,86 that: “… the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed …”. The meaning of “undertaking” was reconsidered in 1999 by the former CFI in FENIN Case.87 FENIN was an association of the majority of the undertakings which marketed medical goods and equipment in Spain, which are used in health organisations, especially hospitals. The Spanish national health system (SNS) 81 9th Report on Competition Policy, p 116; Case C415/93, Union royale belge des sociétés de football association ASBL v Jean-Marc Brosman, Royal club liégeois SA v Jean-Marc Bosman and others and Union des associations européennes de football (UEFA) v Jean-Marc Bosman, [1995] ECR I-04921. 82 Case 172/80, Gerhard Züchner v Bayerische Vereinsbank AG, [1981] ECR p 2021. 83 Case 45/85, Verband der Sachversicherer e.V. v Commission of the European Communities, [1987] ECR p 405. 84 Case 156/77, Commission of the European Communities v Kingdom of Belgium, [1978] ECR p 1881. 85 Commission Decision of 23 April 1986 relating to a proceeding under Article 85 of the EEC Treaty (IV/31.149 – Polypropylene), [1986] OJ L230/1. 86 Case C41/90, Klaus Höfner and Fritz Elser v Macrotron GmbH, [1991] ECR I-1979. 87 Case T-319/99, Federación Nacional de Empresas de Insstrumentación Científica, Médica, Técnica y Dental (FENIN) v Commisison of the European Communities.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 68 bodies purchased medical goods and equipment through FENIN which complained that they abused their dominant position by delaying payment for goods and equipment. The complaint was first rejected by the Commission and FENIN appealed to the former CFI, which also dismissed the claim as the SNS was not acting as an undertaking. The former CFI stressed, in paragraph 35, that: “… in Community [Union] competition law the concept of an undertaking covers any entity engaged in an economic activity, regardless of its legal status and the way in which it is financed”. SNS exercised activities based on the principle of national solidarity in that it was funded from social security contributions and other State funding, and it provided free service generally to the public, which was not an economic activity. Furthermore, it was non-profit-making. In paragraph 19 of the judgment, the former CFI highlighted that “the SNS is managed by State bodies in no way implies that, when they purchase medical goods and equipment, they are not carrying on an economic activity.” The SNS was therefore not classified as an undertaking. (B) Agreements between undertakings The prohibition stated in Article 101 TFEU concerns agreements, decisions and concerted practices. Agreements that have more far-reaching severity than decisions and concerted practices. The agreement is not only confined to a written form or in a binding one as a contract, but also in a contractual type which suffices, such as in form of a “gentleman’s agreement” held by the former ECJ in Quinine Cartel Case.88 Informal agreements also fall within the prohibition of Article 101(1) TFEU. The Court will examine the facts carefully, even if the parties claim that the agreements have terminated, in order to determine whether it was economically plausible, based on the presumption that the joint behaviour among parties have been reached in the absence of formal collusion (Craig, 2003, p 941). Since the approach of the former ECJ has been clear, the Commission, the former CFI (now the General Court) and the former ECJ (now the Court of Justice) have defined an “agreement” broadly. Therefore, more informal contractual types of agreements have been conceived, such as, mere meeting of minds,89 and the emergence of a command intention 90 (Lasok, 2001). It is concluded that if the Rules on Competition defined agreements only in explicit and formal ways, they would be less practical in terms of use. 88 Cases 41, 44 & 45/69, ACF Chemiefarma NV v Commission, [1969] ECR 661. 89 Case T-1/89, Rhône-Poulenc v Commission, [1991] ECR II-867, para 120; Case T9/89, Hüls v Commission, [1992] ECR II-499, para 291. 90 Case T-141/94, Thyssen Stahl AG v Commission, [1999] ECR II-347, para 262.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 69 (C) Decisions by associations of undertakings Decisions, including resolutions or recommendations, of trade associations may aim at coordinating behaviours among undertakings with anti-competitive effects. It is not necessarily a real and actual agreement, but it also falls foul of Article 101(1) TFEU. Trade associations are not confined to having legal status, and decisions are not confined to being binding under the broad interpretation of that provision. The latter was held in NV IAZ International Belgium Case,91 that a non-binding recommendation of a trade association which was normally complied with could constitute a decision within Article 101(1) (Steiner, 2003, p 407). Steiner (2003) cited, in Wouters (C-319/99),92 that the constitution of the Dutch Bar Association on multi-disciplinary partnerships was held as a decision by an association of undertakings by reason that it related more to economic activities of its members, rather than the functions of public law which the Dutch Bar Association implemented. Ergo, the constitutions of an association of undertakings and any rules made thereunder are deemed to be decisions. Consequently, a series of decisions was held by the Court: fixing of a discount by an association of undertakings; making rules for exhibitions; recommending prices and restrictive contract clauses to protect interests of dealers, etc. (Lasok, 2001). On the basis of the judgments of cases supra citato, Article 101(1) TFEU also applies to decisions by associations of undertakings. (D) Concerted practices The terminology of concerted practices had existed in the Treaty of Paris, but it had not been defined in that Treaty and its consequent treaties. Until 1969, it was defined by the former ECJ in ICI Case,93 in paragraph 64, as: “… a form of coordination between undertakings which, without having reached the stage where an agreement properly so-called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition”. Moreover, the Court enlarged the concept of concerted practice in the Sugar Cartel Case,94 holding, in paragraph 174, that: 91 Cases 96-102, 104, 105, 108 and 110/82, NV IAZ International Belgium and others v Commission of the European Communities, [1983] ECR 3369. 92 Case C-319/99, Commission of the European Communities v French Republic, [2000] ECR I-10439. 93 Case 48/69, Imperial Chemical Industries Ltd. V Commission of the European Communities, [1972] ECR 619. 94 Cases 40-48, 50, 54-56, 111, 113 & 114/73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission of the European Communities, [1975] ECR 1663.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 70 “[a]lthough it is correct to say that this requirement of independence does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors, it does however, strictly preclude any direct or indirect contact between such operators, the object or effect whereof is either to influence the conduct on the market of an actual or potential competitor or to disclose to such a competitor the course of conduct which they themselves have decided to adopt or contemplate adopting on the market”. Thus, there must be a conscious effort by the undertakings acting in a collective way to constitute a concerted practice. Moreover, the existence of a concerted practice can only be determined by referring to undertakings which fulfil those alleged concerted practices. But that determination requires evidence of a high standard (Lasok, 2001, p 656). This allows, in practice, that it is not necessary to have a preparatory plan to constitute a concerted practice. It is enough to have a contemplated attitude that each stakeholder should communicate with others, so that each stakeholder adjusts its attitude and other stakeholders would act in the same way. (E) “Which may affect trade between member states” According to the application of Article 101(1), agreements, decisions and concerted practices must have an effect on trade between Member States. Otherwise, such agreements, decisions and concerted practices will remain within the jurisdiction of the relevant Member State (Craig, 2003, p 962). The restrictive practice which affects trade between Member States is firstly set out in the Société Technique Minière Case95 by the former ECJ in 1965: “[i]t is in fact to the extent that the agreement may affect trade between Member States that the interference with competition caused by that agreement is caught by the prohibitions in Community law found in Article 85 [now Article 101 TFEU], whilst in the converse case it escapes those prohibitions. For this requirement to be fulfilled it must be possible to foresee with a sufficient degree of probability on the basis of a set of objective factors of law or of fact that agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States”. 95 Case 56/65, Société Technique Minière (L.T.M.) v Maschinenbau Ulm GmbH (M.B.U.) [1966] ECR p 235, at p 249.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 71 Hence, the most common effect on trade between Member States occurs when the restrictive practice involves undertakings from more than one Member State. These undertakings compete in one or other national market, or in a market including several Member States, or in the market of the entire Union in which trade with each other stretches across national borders within the Union. Such as in the Consten & Grundig Case,96 the former ECJ held that: “[i]n the present case, the contract between Grundig and Consten, on the one hand by preventing undertakings other than Consten from importing Grundig products into France, and on the other hand by prohibiting Consten from re-exporting those products to other countries of the Common Market [now Internal Market], indisputably affects trade between Member States. These limitations on the freedom of trade, as well as those which might ensure for third parties from the registration in France by Consten of the GINT trade mark, which Grundig places on all its products, are enough to satisfy the requirement in question”. In its literal and linguistic meaning, that provision states clearly that if all parties to the agreement are from one Member State, they are not liable under Article 101(1). Practically, such agreements may be prohibited in the spirit of that provision as they have caused increasing compartmentalisation of markets on a national basis, resulting in undertakings of other States being unable to penetrate that national market. Pursuant to the concept of Article ex 81(1) [now Article 101(1)], the former ECJ held in Vereeniging van Cementhandelaren,97 in paragraph 29, that: “[a]n agreement extending over the whole of the territory of a Member State by its very nature has the effect of reinforcing the compartmentalization of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about the protecting domestic production.” Thus, potentially all significant national cartels and national vertical price-fixing systems hinder importation, even national exclusive dealing agreement falls within the ambit of Article 101(1). Agreements with or between undertakings of third countries which restrict or distort Union competition fall also under Article 101(1). In short, Article 101(1) covers all significant national and international cartels which restrict or distort competition in the Internal Market. 96 Cases 56 & 58/64, Établissements Consten S.À.R.L. and Grundig-Verkaufs-GmbH v Commission, [1966] ECR p 341. 97 Case 8/72, Vereeniging van Cementhandelaren v Commission of the European Communities, [1972] ECR 977.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 72 (F) “Which have as their object or effect the prevention, restriction, or distortion of competition within the internal market” Agreements, decisions and concerted practices which have their object or effect of preventing, restricting or distorting competition in the Internal Market are the core of Article 101(1) TFEU. Meanwhile, the application of Article 101(1) is deemed as having a crucial impact on the interpretation of Article 101(3) which provides for exemptions. But the premise to apply for Article 101(3) is the ground which fulfils that agreements, decisions and concerted practices being prohibited under Article 101(1). It should be noted, as a preliminary issue, that the Court concluded in the Société Technique Minière Case,98 that: “… for the agreement at issue to be caught by the prohibition contained in Article 85(1) [now Article 101(1) TFEU] it must have as its ‘object or effect the prevention, restriction, or distortion of competition within the Common Market [now Internal Market]’ ”. It may occur that an agreement is not intended to prevent, restrict or distort competition, but, however, it does and is caught under this provision. This was established in the same case by the former ECJ: “[t]he fact that these are not cumulative but alternative requirements, indicated by the conjunction ‘or’, leads first to the need to consider the precise purpose of the agreement, in the economic context in which it is to be applied. This interference with competition referred to in Article 85(1) [now Article 101(1) TFEU] must result from all or some of the clauses of the agreement itself. Where, however, an analysis of the said clauses does not reveal the effect on competition to be sufficiently deleterious, the consequences of the agreement should then be considered and for it to be caught by the prohibition …”. Afterwards, in Javico International v Yves Saint Laurent Parfums,99 the former ECJ held, in paragraph 22, that: “[a]lthough the contested provisions of those agreements do not, by their very nature, have as their object the prevention, restriction or distortion of competition within the internal market within the meaning of Article 98 Case 56/65, Société Technique Minière (L.T.M.) v Maschinenbau Ulm GmbH (M.B.U.) [1966] ECR 235, p 249. 99 Case C-306/96, Javico International and Javico AG v Yves Saint Laurent Parfums SA (YSLP), [1998] ECR I-01983.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 73 85(1) [now Article 101(1) TFEU], it is, however, for the national court to determine whether they have that effect.” Contrarily, if the purpose of an agreement is to prevent, restrict or distort competition, but that agreement does not produce the intended effect, it still might come under this provision. In the Commission Decision100 (IV/30.350 – zinc producer group), it points out, in paragraph 71, that: “[i]n any case, for Article 85(1) [now Article 101(1) TFEU] to be applicable, it is sufficient for there to have been the intention to restrict competition; it is not necessary for the intention to have been carried out, in full or only in part, that is to say, for the restriction of competition to have been put into effect”. In practice, the words “object or effect” are not necessarily fulfilled at the same time. It means that, ergo, if the object of an agreement’s terms is to prevent, restrict or distort competition, there is no need to examine its effects.101 Then, certain agreements containing hardcore restraints, for instance hardcore cartel agreements which fix prices or outputs, vertical agreements which fix minimum resale prices, are deemed to have as their object the restriction of competition and are prohibited, unless they fulfil the exemption provided for by Article 101(3). 1.1.2. De Minimis rule Nevertheless, some agreements are excluded from the prohibitions of Article 101(1). In this category, agreements of a “minor importance” which fall into the rule of de minimis will be automatically cleared, such as they have no serious impact on the European markets, or they do not have an appreciable impact on competition or on inter-state trade. The de minimis rule was established by the former ECJ in 1969 in a ruling which stated that: “… an agreement falls outside the prohibition in Article 85(1) [now Article 101(1) TFEU] where it has only an insignificant effect on the market, taking into account the weak position which the persons concerned have on the market of the product in question”.102 This insignificant effect escapes prohibition under Article 101(1). In the Case 5/69 Völk v SPRL Tes J. Vervaecke, Völk whereby a German washing machine 100 Commission Decision of 6 August 1984 relating to a proceeding under Article 85 of the EEC Treaty (IV/30.350 – zinc producer group) (84/405/EEC), [1984] OJ L 220/27. 101 Cases 56 & 58/64, Établissements Consten S.À.R.L. and Grundig-Verkaufs-GmbH v Commission, [1966] ECR p 229, p 342. 102 Case 5/69, Franz Völk v S.P.R.L. Ets J. Vervaecke, [1969] ECR 295, p 5/7.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 74 manufacturer and Vervaecke, which was a Dutch electrical goods distributor, reached an agreement granting the latter exclusive rights to distribute the former’s washing machines in Belgium and Luxembourg. That agreement also highlighted that parallel imports into these countries were not allowed by third parties of Völk’s washing machines. De facto, Völk’s washing machines merely occupied 0.2% to 0.5% in the marketplace of Germany and occupied an even smaller share in the Belgian and Luxembourg markets. Therefore, the former ECJ held that there was insignificant effect on competition relating to the position of parties in the Belgian and Luxembourg markets. Albeit Völk and Vervaecke intended obviously to restrict competition in these markets, the agreement was found to fall within the de minimis rule, resulting that there was no breach of ex Article 85(1) [now Article 101(1) TFEU]. Consequently, this principle has been expressed in the Commission’s notice. The earliest Commission notice was issued in 1986.103 After that, the Commission has been revising the threshold and conditions of agreement of Minor Importance in 2001.104 In any cases covered by the Notice, proceedings are not instituted nor will fines be imposed on parties that assume, in good faith, that the Notice covers their agreement. The de minimis rule is extremely important as it means that small-scale agreements will be excluded from the Rules on Competition. In the other words, it marks a dividing line of agreements which operate at the European level. If agreements are delimited in the upper part of the dividing line, they fall foul of Article 101(1); otherwise, they are excluded from Article 101(1) and/or subject to the national competition law if they have an impact on the national market of a Member State. Hence, the de minimis rule acts as a measure of the dimension of an agreement, based on the market share held by undertakings involved in the agreement, whether they fall within the prohibition of Article 101(1) TFEU. For example, anti-competitive agreement will not be judged by the Courts if the agreements between undertakings of trade affected between Member States prescribed by Article 101(1) do not appreciably restrict competition where the aggregate market share held by the parties to the agreement does not exceed 10% on any relevant market where parties of the agreement are actual or potential competitors. This threshold is for so-called agreements between competitors (horizontal agreement). The relevant figure is 15% for cases where the parties are not competitors. This threshold is for so-called agreement between non-competitors 103 Notice on Agreements of Minor Importance, [1986] OJ C231/2. 104 Notice on Agreements of Minor Importance which do not appreciably restrict competition under Article 81(1) (de minimis) (2001/C 368/07), [2001] OJ C 368/13, replacing Notice on Agreement of Minor Importance, [1997] OJ C372/3.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 75 (vertical agreement). 105 Nevertheless, there are no thresholds for agreement between small and medium-sized enterprises (SMEs),106 as they are rarely capable of appreciably affecting competition between Member States. Undoubtedly, the Commission received a boost from the de minimis Notice issued in 2001, which was revised in 2014107 in line with the developments in the jurisprudence, inter alia, of the ruling of the CJEU in the Expedia case.108 In paragraph 37 of this ruling, the court held that “an agreement that may affect trade between Member States and that has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition”. Significantly, the court emphasised that anti-competitive agreements “by object” cannot be deemed as of minor importance and should be investigated by the Commission. The second reason for the revision was to fully align the text consistent with, in particular, the vertical and horizontal black exemption regulations issued in 2010. 1.1.3. Horizontal agreements and vertical agreements Article 101(1) TFEU, which aims to regulate cartels and other forms of restrictive practice, is framed in general terms. It catches almost all kinds of agreements between undertakings, including anti-competitive agreements between direct competitors, so-called “horizontal agreements”, and other anti-competitive agreements between firms which involve different stages of production, distribution and market process in the same marketplace, referred to as “vertical agreements”. It also applies both to concerted practices which are informally agreed, where little documentary evidence exists to establish collusion, and to well-documented cases of concerted parallelism. It can even apply to agreements which are sanctioned by trade associations (Cini, 1998, p 61). 105 Ibid, pt 7. 106 Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises, (notified under document number C(2003) 1422) (2003/361/EC), OJ L 124036, 20 May 2003. It defines the category of micro, small and medium-sized enterprises (SMEs) as having fewer than 250 employees, an annual turnover not exceeding EUR 50 million and/or an annual balance sheet total not exceeding EUR 43 million. 107 Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) (2014/C 291/01) ), [2001] OJ C 368/13. 108 Case C-226/11, reference for a preliminary ruling under Article 267 TFEU, from the Cour de cassation (France), made by decision of 10 May 2011, received at the Court on 16 May 2011, in the proceedings Expedia Inc. v Autorité de la concurrence and Others. Available on http://curia.europa.eu/juris/document/document.jsf?text=&docid=131804&pageIndex=0& doclang=en&mode=lst&dir=&occ=first&part=1&cid=1171131
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 76 (A) Horizontal agreements A horizontal agreement is an agreement between two or more firms which produce similar goods at the same level; otherwise, they would be most direct rivals in the market. Horizontal agreements tend to divide the market into different areas, as well as creating quotas (quantitative restrictions), joint buying and selling, price fixing that has negative impacts on consumers and market integration, boycotts, bid rigging (collusive tenders) and advertising agreements, etc. Dealing with these categories of agreement has become the priority of Article 101 TFEU, as pro-integration credentials of competition policy can prove. However, albeit it is the strict Commission line, horizontal agreements have been flourishing within the EU. So, Goyder (2003, p 140) stresses that it is important to distinguish between two principal categories of horizontal agreement. One category of horizontal agreement has a primary objective to reduce or eliminate competition between rival firms, to consolidate or strengthen their market positions, or even to prevent a threatened deterioration, etc. For instance, cartels and market sharing agreements are most commonly and substantially found. Therefore, a tight control system with sanctions, for instance the Regulation No. 1/2003, is placed to ensure that all incumbents behave themselves under competitive conditions. The other category of horizontal agreement has a primary objective which is not significantly anti-competitive, regardless of the terms of the agreement, which may include restrictions probably falling within the scope prescribed by Article 101(1). This category includes agreements of cooperation and specialisation, agreements for sharing R&D or for establishing industrial standards, and some kinds of joint venture, etc. If they are not included in certain regularised categories of block exemption, the Commission, inter alia the DG Competition is responsible to tackle them. Herewith is an example of a Decision (IV/28.838 – INTERGROUP) made by the Commission in respect of joint buying.109 INTERGROUP was comprised of about 35,000 retailers and 180 wholesalers and functioned as an intermediary and commercial agent in the purchase and sale of goods, which the chain supplied under a SPAR trademark, for any customer, as well as providing legal and technical assistance required by its customers. The object of the agreement was to enable the importation of jointly produced goods under identical conditions for customers to purchase for favourable prices, but INTERGROUP did not determine sale prices which were set by retailers and wholesalers. The volume of purchases made by INTERGROUP accounted for approximately 2.74% of all purchased products into the Member State of destination and accounted for between 0.706% and 0.789% of the total turnover of all wholesalers of SPAR chains. It is noted that the members of 109 Commission Decision of 14 July 1975 relating to a proceeding under Article 85 of the EEC Treaty (IV/28.838 – INTERGROUP) (75/482/EEC), [1975] OJ L212/23, August 09, 1975.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 77 SPAR chains were free not to use the services of INTERGROUP and were free to trade in any products and might deal in products competing with SPAR trademarks. The agreement did not have substantial effects on competition since the number of imports and purchases abovementioned and the freedom of choice in both supply and demand, in respect of the products concerned is not therefore affected by the agreement to any appreciable extent. Apparently, this agreement did not fall within ex Article 85(1) [now Article 101(1) TFEU], the Commission, as requested by INTERGROUP, certified that, on the facts in its possession, there were no grounds for action under ex Article 85(1) in respect of the agreement notified, resulting that negative clearance could accordingly be given. The majority of cartels are short-lived, and are often terminated before being brought to the Commission’s attention. In contrast, the most pernicious cartels are more persistent. They are mainly in certain key sectors that seem prone to particularly cartelised sectors, which are in steel, cement and pharmaceuticals. However, it would be misleading to claim that all horizontal agreements are anti-competitive. Although restrictions on competition appear to be to the detriment of the welfare of consumers, they may have compensatory advantages. Certain categories of agreement have clear potential for pro-active competition, or, at least, these categories are covered by block exemption regulations. Perhaps, the most obvious areas could be agreements of research and development (R&D), professionalisation and standardisation, of which the Commission has clear delimitation (Cini, 1998, pp 69-70). (B) Vertical agreements Since the mid-1980s, the Commission policy on vertical agreements has become more contentious than on horizontal agreements. The reason for this is that vertical agreements are not produced between competitors, so they are prima facie and therefore less restrictive on competition than horizontal agreements. Nevertheless, as vertical restrictions involve agreements between undertakings at different levels of the market, the facts show that the effects of vertical restrictions are more complicated than the effects of horizontal agreements. These agreements are more harmful economically, and there are a number of differing types of vertical agreements which are caught by Article 101(1). There are also block exemptions relating to vertical agreements in terms of Article 101(3). A vertical agreement is an agreement selling and purchasing goods and services in the different levels of productive and distributive chains of firms. A typical example of a vertical agreement is the distributive agreement between a manufacturer, distributor or retailer. However, the industrial supply agreement between a manufacturer of parts and producers which use such parts is also a vertical agreement.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 78 Practically, vertical agreements simply determine price and quantity of particular sales or purchasing transactions. But, if the agreement comprises restriction on suppliers or buyers, so-called “vertical restraints”, competition may be restricted. For instance, a vertical restraint is where there is an obligation on the buyer not to purchase rival brands, viz, in other words, an obligation not to compete, or the obligation on the supplier only to supply specific buyers, viz, in other words, exclusive supply. Vertical agreements have not only negative impacts, but also positive impacts. For instance, they can help manufacturers seeking to enter new markets, or avoid “free-rides” of a distributor in a promotional period of other distributors, or facilitate suppliers to depreciate investment to particular customers (Cini, 1998, pp 70-2). The main issue is whether vertical agreements really restrict competition, and whether, in that case, the benefits are higher than the anti-competitive effects. Nevertheless, the Commission has been strongly criticised for its approach to the application of ex Article 85(1) [now Article 101(1) TFEU]. The critique was fundamental in that the Commission largely applied ex Article 85(1) to agreements having little or even no anti-competitive effects. The critique was based on three pillars: (i) an inadequate economic analysis under ex Article 85(1); (ii) the Commission’s rationale under ex Article 85(1) was unpersuasive; and (iii) the Commission’s refusal to follow Community Courts. Ergo, the Commission has accepted the critique and published a Green Paper on Vertical Restraints,110 in 1997, which represented several important points for application to anti-competition agreements (Craig, 2003, pp 975-6): (i) the Commission concluded the findings of economic analysis about vertical restraints. Anti-competitive effects of vertical restraints are less outweighed than their efficiency in competitive market where the rivals are the inter-brand competition and there are not barriers to entry;111 (ii) to guarantee the integrated market, without absolute territorial protection, the vertical restraints, such as resale price maintenance and impediments to parallel trade, are treated as per se against to ex Article 85(1) or (3) [now Article 101(1) or (3) TFEU];112 (iii) the Commission, in assessing possible restrictive practice, has consistently engaged in economic analysis, in terms of efficiency and consumer welfare, under ex Article 85(3) [now Article 101(3) TFEU], seeking to protect competition in vertical restraints, such as the 110 Green Paper on Vertical Restraints in EC Competition Policy, COM(96) 721 final, Brussels, 22.01.1997. 111 Ibid, supra, paras 82-5. 112 Ibid, para 276.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 79 production and/or distribution chain, inter-brand and intra-brand competition;113 (iv) the Commission set out four options asking for comments. Option 1 was to maintain the then current system, which implied the broad interpretation of ex Article 85(1) [now Article 101(1) TFEU], coupled with the existing block exemption.114 Option 2 was to enlarge the block exemption regulations without significant changes in procedure, for instance, by covering clauses being similar or less restrictive, and by applying to agreements involving more than two parties.115 Option 3 was to be more focussed on block exemptions, strengthening the market integration objectives of EC’s competition policy.116 Option 4 was to implement economic analysis of vertical restraints under ex Article 85(1) [now Article 101(1) TFEU], coupled with block exemptions.117 The Commission subsequently published, in 1998, a “Follow-up to the Green Paper on Vertical Restraints”118 reviewing it and identifying the then current shortcomings in the current policy. It concluded that vertical agreements which fell within block exemptions should be analysed in a more economics-based, rather than form-based, terms which did not contain a market share limit. The economics-based approach should be based on the effects in the market, as well vertical agreements should be analysed in their market context.119 It concluded that a broader block exemption should be conceived. Therefore, the Commission adopted a new Block Exemption Regulation (BER),120 on 22 December 1999 which entered into force on 1 June 2000, and which offered a shelter to a number of vertical agreements. The BER renders by block exemption the prohibition of ex Article 81(1) [now Article 101(1) TFEU] inapplicable to vertical agreement entered into by companies with market shares not exceeding 30%. The Commission also announced “Guidelines on vertical restraints”,121 which described the means of vertical restraints precisely, 113 Ibid, para 180. 114 Ibid, para 281. 115 Ibid, paras 282-3. 116 Ibid, paras 286-92. 117 Ibid, paras 293-301. 118 Communication (98/C 365/03) from the Commission on the application of the Community competition rules to vertical restraints (Follow-up to the Green Paper on Vertical Restraints), [1998] OJ C365/3. 119 Ibid, pt 3 of Section I. 120 Commission Regulation (EC) No. 2790/1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, [1999] OJ L 336/21, 29.12.1999. 121 Commission Notice – Guidelines on Vertical Restraints, SEC(2010) 411 final, Brussels,
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 80 and those not covered by individual exemption and the BER, as well as defining the relevant market and calculating market shares. The Guidelines also defined the key characteristics of the new rules on vertical agreements. A flow chart was drawn helping to apply these rules and to facilitate its reading.122 1.1.4. Exemptions from prohibition Contrasting to the prohibitive rule of Article 101(1) TFEU, Article 101(3) is a clause of exemption, which does not specifically name exempted sectors or practices and demonstrates the flexibility of the antitrust provision of the European Union. The latter recognises that restrictive agreements, decisions and concerted practices might actually benefit consumers in terms of their effects on competition or might alternatively produce benefits outweighing their negative effects on competition, even though they are caught by the prohibition. Lane (2000, p 112) found that the majority of exemptions applied to cases of agreements, but is also, even rarely, equally applicable to anti-competitive decisions of associations of undertaking and, in extremis, to concerted practices. There are 2 channels to enable the exemption: the first channel is individual exemption under Article 101(3); the second channel is in the form of a block exemption. (A) Individual exemptions Article 101(3) declares that Article 101(1) may not be applicable where an agreement, a decision or a concerted practice “contributes to improving the production or distribution of goods or promotes technical or economic progress, whilst allowing consumers a fair share of the resulting benefit, and which does not (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objective; or (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question”. Ergo, Cini (1998, p 63) indicates that the following four conditions comply with the qualification for exemption of an agreement, decision or concerted practice: (i) it must be beneficial to the EU and its degree of advantages must be higher than its disadvantages, for instance, it improves the production or distribution of goods or improves technical or economic progress; (ii) consumers must obtain a fair share of the resulting benefit; (iii) it comprises merely restrictions which are indispensable to the attainment of the its objectives; and, 10.5.2010, replaces the Commission Notice – Guidelines on vertical restraints (2000/C 291/01), [2000] OJ C 291/1, 13.10.2000. 122 Commission (2002), Competition policy in Europe: The competition rules for supply and distribution agreements.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 81 (iv) it is not possible to eliminate competition in respect of a substantial part of the products in question. Satisfying the above conditions, an individual exemption can be granted by the Commission under Article 101(3) TFEU, but it is still subject to review by the Court. For exemption of categories of agreement, there are block exemptions after two cases, infra, related to former. For example, Bayer AG and Gist-Brocades NV made a specialised agreement, under which Gist-Brocades manufactured raw penicillin in plants and Bayer manufactured 6-Aminopenicillanic Acid (6-APA), an intermediate penicillin product. Then both undertakings supplied mutually their own products to each other. Before that, both undertakings manufactured both products. The Commission referred to the clauses of the agreement in its decision,123 in which ex Article 85(1) [now Article 101(1) TFEU] was breached, but the Commission, then, granted exemption under ex Article 85(3) [now Article 101(3) TFEU] under the conclusion in paragraph 4 of part III of the decision, stated as: “[t]he agreement do not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial part of the products in question”. Another example to be cited for discussion is the Nungesser Case. 124 Nungesser possessed exclusive rights to produce and distribute INRA (a French State research institute) seeds in Germany. This prevented parallel importers from importing seed obtained from another source in France. So, a rival importer complained to the Commission. The Commission held that the clauses in the agreement provided exclusivity and territorial protection provisions were caught by ex Article 85(1) [now Article 101(1) TFEU] and the Commission did not grant exemption under ex Article 85(3) [now Article 101(3) TFEU]. So, Nungesser appealed to the Court. The grounds in the case strengthened the importance of breaking down national barriers and creating a single market. The paragraph 78 of the Case stated that: “… the absolute territorial protection … constituted a sufficient reason for refusing to grant an exemption under Article 85(3) [now Article 101(3) TFEU] of the Treaty …”. 123 76/172/EEC: Commission Decision of 15 December 1975 relating to a proceeding under Article 85 of the Treaty (IV/27.073 – Bayer/Gist-Brocades), [1976] OJ L30/13, 5 February 1976. 124 Case 258/78, L. C. Nungesser KG and Kurt Eisele v Commission of the European Communities, [1982] ECR ECR 2015.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 82 We can conclude from the above cases that the Commission merely grants exemptions to agreements if the agreements do not affect fair competition, namely, the agreements do not distort competition, or do not involve territorial protection. (B) Block exemptions In the area of the Union competition law, if an agreement fulfils the terms of the block exemption regulations, that agreement is not prohibited even though it is in the breach of the provision of Article 101(1) TFEU. Those regulations impose a certain degree of dirigisme, so the undertakings have to conduct their activities under pressure and circumstances prescribed by the block exemption regulations (Arnull, 2000, p 582). In short, the assessment of the behaviour of an undertaking is facilitated by block exemptions which clarify and simplify the application of rules. Block exemption is a conceptual technique similar to the evolution of per se rules, but there are differences. The result produced by a block exemption is to exclude a category of agreements, and the result produced by per se rules which are represented in the form of regulation is to condemn agreements. If agreements fall within the scope and terms regulated by block exemptions, they need not be notified to the Commission. Each regulation enacts a specific area with a reason stated for a block exemption. A majority of regulations, inter alia concerning competition matters, are Commission regulations even though the Council and the European Parliament have been provided by the TEU and the TFEU with the power to make regulation.125 Over the years, a number of block exemptions has been adopted by the Commission, these areas cover respectively vertical, horizontal, technology transfer, and other particular agreements. There are few regulations adopted directly by the Council. Table 4.1 shows block exemptions adopted by the Council and Commission currently in force. Concerning withdrawal of the benefit given by any Commission block exemption, the Commission can make it “when it finds that in any particular case an agreement, decision or concerted practice to which the exemption Regulation applies has certain effects which are incompatible with Article 81(3) of the Treaty [now Article 101(3) TFEU]”.126 Moreover, the national competition authorities have power to withdraw the benefit of any Commission exemption Regulation, where the agreements “have effects which are incompatible with Article 81(3) [now Article 101(3) TFEU] of the Treaty in the territory of a Member State, or in a part thereof, which has all the characteristics of a distinct geographic market, the 125 Article 288 of the TFEU, the paragraph 1 reads as: “[t]o exercise the Union’s competences, the institutions shall adopt regulations, directives, decisions, recommendations and opinions”. 126 Council Regulation No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Article 81 and 82 of the Treaty, [2003] OJ L1/1, Art. 29(1).
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 83 competition authority of that Member State may withdraw the benefit of the Regulation in question in respect of that territory.”127 Thus, we can see that the agreements, decisions and concerted practices which are subject to block exemption regulations are not exempted absolutely, but they are still related to the provision of Article 101(3) TFEU; otherwise, these agreements, decisions and concerted practices fall within the prohibition of Article 101(1) TFEU. Table 4.1: Block exemptions adopted by the Council and the Commission in force (situation as at 1st July 2013) Regulations and Guidelines128 A. Horizontal cooperation agreements 1. Council Regulation 2821/71/EEC of 20 December 1971 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices (OJ L 285, 29.12.1971) 2. Commission Regulation 1217/2010/EU of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreement (OJ L 335/36, 18.12.2010) 3. Commission Regulation 1218/2010/EU of December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialization agreement (OJ L 335/43, 18.12.2010) 4. Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal cooperation agreements (OJ C 11/1, 14.1.2011) B. Vertical agreements 5. Council Regulation 19/65/EEC of 2 March 1965 on application of Article 85(3) of the Treaty on certain categories of agreements and concerted practices (OJ P 36, 6.3.1965) 6. Commission Regulation 330/2010/EU of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices. (OJ L 102/1, 23.4.2010) 7. Guidelines on Vertical Restraints (OJ C 130/1, 19.5.2010) C. Technology transfer agreements 8. Commission Regulation 772/2004/EU of 27 April 2004 on the application of Article 81(3) of the Treaty to categories of technology transfer agreements (OJ L 123/11, 27.4.2004) 9. Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements (OJ C 101/2, 27.4.2004) 127 Ibid, Article 29(2). 128 Refer to “EU Competition Law: Rules Applicable to Antitrust Enforcement – Volume II: General Block Exemption Regulations and Guidelines”, European Union, 2013. ISBN 978-92-79-28609-4.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 84 1.2. Abuse of Dominant Position The former ECJ stated in Continental Case,129 in paragraph 11, that: “Articles 85 and 86 [now Articles 101 and 102 TFEU] seek to achieve the same aim on different levels, viz. the maintenance of effective competition within the Common Market [now Internal Market]”. The levels differ insofar as Article 101 TFEU prohibits restrictive practices which have detrimental effects on competition whilst Article 102 TFEU is concerned primarily with monopolist situations of a single undertaking dominating its power and terms of trade. Hence, Article 102 is concerned with abusive practices rather than the existence of economic power by an undertaking. In short, Article 102130 TFEU provides that the abuse of a “dominant position” in the Internal Market is prohibited. The earliest appearance of “dominant position” arose in the judicial definition in Sirena Case131 in 1971, but the definition of dominance in more detail is in the former ECJ judgment of United Brand v Commission132 in 1978, in paragraph 65, as: “[t]he dominant position referred to in this article [now Article 102 TFEU] relates to a position of economic strength enjoyed by an undertaking which enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately of its consumers.” 129 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission of the European Communities, [1973] ECR p 215. 130 Article 102 of the TFEU reads: “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to 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.” 131 Case 40/70, Sirena Srl v Eda Srl, [1971] ECR 69. 132 Case 27/76, United Brand v Commission, [1978] ECR 207, 14 February 1978.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 85 A finding of a firm which occupies a dominant position is not decided in itself, but allows its conduct to adversely affect the competition in relevant market. The most extreme case of dominant position is monopoly. The dominant position connotes an economic power imposed on competitors in the same market, or generally, the economic power hinders the maintenance of effective competition (Bermann, 2002, p 834). Pursuant to the existence of a dominant position, it is determined by the facts of the relevant market. However, the extent of dominance that dominant undertaking achieves is irrelevant. Except in particular cases, market sharing is generally a reliable indicator demonstrating an undertaking which occupies a dominant position. Market sharing of 40% or higher is sufficient to indicate the existence of a dominant position of an undertaking, but it must consider the stability of the market sharing, market sharing of competitors and other competitive factors. 133 In a number of cases, a dominant position is only held by one undertaking. From the fact that Article 102 TFEU provides “[a]ny abuse by one or more undertakings of a dominant position”, it has been inferred that many undertakings may occupy one dominant position, so-called “joint dominance” or “shared dominance”. The former ECJ stated in SIV Case134 that individual firms can be “united by such economic links that … together they hold a dominant position vis-à-vis the other operates on the same market.” The former ECJ has indicated that ex Article 82 [now Article 102 TFEU] may apply to a group of undertakings that occupy one dominant position.135 Therefore, two or more individual undertakings may join together economically in occupying a dominant position. For instance, they might possess commonly advanced technology, enabling them independently to cope with their competition, consumers and customers. The link between undertakings must cause them to adopt certain similar behaviours in the market. But, in order to build this situation, it is not enough to use the argument in ex Article 81 [now Article 101 TFEU]. Therefore, Lasok (2001, p 690) believes that joint dominance will not happen as the relevant market is oligopolistic.136 133 Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461 para 41, [1979] 3 CMLR 211; Case C-62/86, AKZO Chemie BV v Commission [1991] ECR I-3359, para 60; Case T-30/89, Hilti v Commission, [1999] ECR II-1439, paras 90-92. 134 Joint Cases T-68, T-77 and T-78/89, SIV v Commission, [1992] ECR II-1403, para 358. 135 Case 30/87, Bodson v Pompes Funèbres des Régions Libérées SA, [1988] ECR 2479, [1989] 4 CMLR 984, paras 21 and 26-27; Case 66/86, Ahmed Saeed v Zentrale zur Bekämpfung unlauteren Wettbewerbs, [1989] ECR 803, [1990] 4 CMLR 102, para 35. 136 Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461, para 39.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 86 1.2.1. The concept of abuse Based on the facts supra citato, therefore, a mere dominant position is not prohibited, but its “abuse” is prohibited. This concept is primarily defined by the ECJ in Hoffmann-La Roche Case137 in 1979, in paragraph 91, as: “[a]buse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of a market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” This definition covers the specifications of abuse set out in Article 102 TFEU as well as a large number of practices not specified in it, which can be considered in the case law of the European Courts. The majority of cases of such practices has been defined in decisions of the Commission and judged by the European Courts under Article 263138 TFEU. In many respects, the key concept of “abuse” relies on commercial reality, which is an atypical one under conditions of undistorted competition, or where a dominant firm does not benefit from complete competition. Therefore, a dominant firm may compete appropriately where it provides products or services for better quality or at lower prices. However, it cannot seek to increase its position by not using competition goals which are based on quality criterion,139 or generally speaking, for example, using intellectual property rights to fetter activities of competitors.140 Article 102 TFEU does not list exhaustively incidents of abuse, but it indicates conditions, generally, included in terms of abuse. Concrete incidents of 137 Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461, para 91. 138 Article 263 of the TFEU reads: “The Court of Justice of the European Union shall review the legality… of acts … of the Commission … intended to produce legal effects vis-à-vis third parties. …” 139 Case T-229/94, Deutsche Bahn v Commission, [1997] ECR II-1689, para 78, it states “the concept of abuse of a dominant position amounts to prohibiting a dominant undertaking from strengthening its position by using methods other than those which come within the scope of competition on the basis of quality”. 140 Case T-69/89, RTE v Commission, [1991] ECR II-485, para 65 et seq.; Case C-241/91P and C-242/91P, RTP and ITP v Commission, [1995] ECR I-743.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 87 abuse are enumerated by way of examples, for instance, in Continental Can Case.141 In short, Article 102 TFEU sets out prohibitions only, rather than as the exemptions of prohibition conferred by Article 101 TFEU. Therefore, no exemption is possible, save, in certain cases, pursuant to Article 106 TFEU in the case of public undertakings. In order to apply Article 102 TFEU, Lasok (2001, p. 686) addresses that certain conditions must be met: (1) the existence of “dominant position”; (2) that dominant position must be abused; (3) such abuse has an effect upon the Internal Market or its substantial part; and, (4) such abuse must be able to affect trade between Member States. Thus, both the Commission and the Court of Justice of the European Union (both the Court of Justice and the General Court) have sought to clarify all kinds of behaviours which are likely to be in conflict with the Treaties in policy statements, decisions and judgments which are legally enforceable. The abuse includes selling at extremely high prices which is so-called cartels pricing, charging an excessively low price in order to exclude competitors which is so-called predatory pricing, restricting production or dividing up markets, discriminating against certain consumers or nationals, refusing to supply products in specific conditions, imposing specific purchase agreements to certain categories of products, and, finally, increasing a dominant position by way of mergers which eliminate competitors within a particular market. Albeit a number of case law exists, the Commission must still engage in an ad hoc case analysis. The ambit of legal certainty and the emergence of coherent and comprehensive policy have therefore been limited. One thing is clear that the concept of “abuse” has been broadly defined. So, under Article 102 TFEU there is no exemption. Under Article 102, Cini (1998, p 88) indicates five common examples of anti-competitive behaviours that can be identified. They are respectively unfair pricing, unfair trade conditions, discriminatory pricing, import and export bans (tying agreements), and refusal to supply. However, this does not include an exhaustive list, it outlines, at least, the series of activities that occupy the DG Competition and provide some concrete case examples under the EU’s monopoly regime. (1) Unfair pricing. The issue of unfair pricing is placed in the kernel of the activities provided for by Article 102 TFEU. Cini (1998, p 90) points out 141 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission, [1973] ECR 215, [1973] CMLR 199.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 88 that undertakings holding dominant positions in the market charge prices higher than their real economic value. Currently, the Commission identifies the existence of an abuse. However, unfair pricing is not only charging a higher price. Undertakings may also charge excessively low prices to benefit the consumers. These undertakings may use this strategy as part of a long-term plan to squeeze competitors out of the market, achieving their objectives to be in a dominant position. However, the undertakings which engage in this strategy must possess stronger economic power to support their losses in short-term. There are two typical cases of this predatory pricing, which are AKZO Case142 and Tetra Pak II Case143. 142 Case C-62/86, AKZO Chemie BV v Commission, [1991] OJ C 201/3 ECR I-03359. AKZO, a multinational chemicals company, which owned a subsidiary wholly in UK, and ECS, Engineering and Chemical Supplies (Epsom and Gloucester) Ltd., which was a small UK firm, both produced benzoyl peroxide, which is used as a catalyst in plastic production and also as a bleaching agent in millings. AKZO concentrated on the plastics sector. ECS concentrated on the flour sector, but consequently it extended its activities to the plastics sector and captured one of largest customers of AKZO. Therefore, AKZO set at low price for supplying benzoyl peroxide to the UK flour sector as retaliation by threatening to damage ECS’s business in the UK flour sector and/or to make its withdrawal from the organic peroxides market. ECS primarily obtained an interim order from the High Court in London prohibiting AKZO from carrying its threats on the ground that they constituted an infringement of Article 86 [now Article 102 TFEU] of the Treaty and the proceeding was ended by agreement. Later, ECS complained to the Commission which adopted a decision (Commission Decision of 14 December 1985 relating to a proceeding under Article 86 of the EEC Treaty (IV/30698-ECS/AKZO Chemie, [1985] OJ L 374/1) that held that AKZO had abused a dominant position prohibited by then Article 86. The Commission found the fact that AKZO was in a dominant position in the organic peroxides market and had infringed then Article 86 of the Treaty by pursuing against ECS a course of predation intended to damage ECS’s business and drive it out of the plastics sector. AKZO was fined ECU 10,000,000 and ordered to end the infringement, as well as required to hold back the offering and applying predatory price to customers whose businesses were competing with ECS. AKZO appealed to the Court and argued that it could not be guilty of an abuse since its prices were not predatory. Nevertheless, the Court confirmed the Commission’s definition of organic peroxides market as the relevant market and the finding of abuse, as well as accepted the argument, made by AKZO, that some costs of which the Commission had classified as variable were fixed cost. The Court confirmed that AKZO had been guilty of predatory pricing, but the fine had been reduced 25%, to ECU 7,500,000. 143 Commission Decision 88/501/EEC, of 26 July 1988, relating to a proceeding under Articles 85 and 86 of the EEC Treaty (IV/31.043 – Tetra Pak I (BTG licence), [1994] OJ L 272/27. Case T-83/91, Tetra Pak International SA v Commission, [1994] ECR II-755, confirmed by Case C-333/94P, Tetra Pak International SA v Commission, [1996] ECR I-5951. In the judgment of Tetra Pak II Case, it confirmed and developed the principles which
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 89 (2) Unfair trading conditions. Another form of abusive behaviour attacked by the DG Competition using Article 102 TFEU involves the imposition of unfair trade conditions. It is generally used to benefit the supplier by preventing distributors from reselling a product to other retail outlets or other Member States (Cini, 1998, p 92). European Sugar Cartel Case144 is an example. (3) Discriminative pricing. This third form of abusive behaviour occurs when different prices of the same commodity are charged to different consumers or users despite identical costs. Discriminative pricing covers a wide range of practices. It is only acceptable when an undertaking is placed within a limited share of market, but is deemed objectionable when the firm concerned holds a dominant position and consumers have no alternative supply sources. In United Brands,145 for instance, it was difficult to transport bananas, which are a perishable and delicate fruit, to different places inter-states. In this case, discriminative pricing is in regard to services than goods per se, as services are consumed in a place where they are offered. (4) Tying agreements. These are also deemed to fall under the prohibition of Article 102 TFEU. They do not only restrict competition, but also hinder market integration as defined in the goals of the Treaties. Their effects limit the freedom of distributors in choosing essential services or facilities, laid down in AKZO case. The former ECJ confirmed in Tetra Pak II that an undertaking could be in a dominant position in one market and in abuse of “special circumstances” in another market if the markets had “close associative links”. It meant that one undertaking could subsidise from a monopolised market by using excess profits to pursue predatory pricing on another market which was more competitive. In this case, the dominant position of Tetra Pak was over 90% of market share. In the case, Tetra Pak was fined ECU 75,000,000 in regard to various abuses found, one of which was that Tetra Pak had engaged in predatory pricing in the non-aseptic carton market. 144 Joined Cases 40 to 48, 50, 54 to 60, 111, 113 and 114/73, Coöperatieve Vereniging “Suiker Unie” UA and others v Commission of the European Communities, [1975] ECR 1663. The European Sugar Cartel case was concerned with a cartel between the European sugar producers. Nevertheless, the Commission found that one dominant producer abused its practice by applying for a rebate scheme, which gave an “annual quantity rebate” to customers who purchased only from that producer within the entire year. If the customers purchased from other producers, they would lose the rebate on their purchase for the entire year. The Commission upheld that the rebate was “as a loyalty rebate designed … to prevent customers obtaining their supplies from competing producers”. 145 Case 27/76, United Brands Company and United Brands Continental BV v Commission of the European Communities, [1978] ECR 207.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 90 by vertical forms of dominance, which restrict competition (Cini, 1998, p 93). Microsoft Case146 is an example. (5) Refusal to supply. To refuse to supply long-standing customers as a way to restrict competition is deemed by the Commission an abuse of a dominant position in certain cases (Cini, 1998, p 93). Tiercé Ladbroke Case147 is an example. The prohibition has the same meaning as stated in Article 101 TFEU. The concept of “undertaking” is not only limited to the bodies corporate created under the law of Member States, but also includes undertakings created outside the Union and operating from a foreign base.148 146 Commission Decision of 24 March 2004 relating to a proceeding pursuant to Article 82 of the EC Treaty and Article 54 of the EEA Agreement against Microsoft Corporation (Case COMP/C-3/37.792 –Microsoft) (notified under document number C(2004) 900) (2007/53/EC), [2007] OJ L32/23, 6 February 2007. The Commission took action against Microsoft for offering its Windows Media Player (WMP) as bundled software pre-installed in its Windows operating system. It meant that the package of Windows included the WMP. When customers turned on Windows, the WMP was ready to play. This meant that the competition with other media players by content suppliers and software developers was constrained as WMP became more desirable and convenient to customers. According to EUROPA News Release IP/03/1150, the Commission found that “Microsoft is leveraging its dominant position from the PC into low-end servers and that Microsoft’s tying of WMP to the Windows PC operation system weakens competition on the merits, stifles product innovation, and ultimately reduces consumer choice”. In 2004, the Commission adopted a decision, supra citato, holding that Microsoft had an infringement of Article 82 of the TEC by bundling the WMP with Windows. 147 Case T-504/93, Tiercé Ladbroke SA v Commission, [1997] ECR II-923. Ladbroke accepted bets on horse racing run abroad. The French sociétés de courses, race course societies, and their associated companies (PMU and PMI) had an exclusivity in off-course betting in France, taking bets abroad on French races and on races run abroad in France, as well as exploiting transmission of picture and sound of French horse races. PMI granted exclusive rights to broadcast French horse races in Germany and Austria. Both associated companies refused to supply, directly from France and indirectly from Austria, broadcasting service to Ladbroke’s shops in Belgium. Ergo, Ladbroke complained to the Commission that these practices fell foul into (Article 81 and) Article 82 of the TEC, but this complain was rejected. Ladbroke then brought a challenge to the CFI, which held that the geographic market was merely Belgium and not covering Belgium, France and Germany. The sociétés de courses didn’t run betting shops that implied that the sociétés de courses had not reserved the Belgian market in French pictures and sound to themselves including their associated companies, as well as had not granted to other undertakings access to that market. Meanwhile, in betting shops, major services were not essential to providing films of the races. The refusal to supply could only constitute an abuse if and only if the product or service was essential to the horse races. So, the alleged plea of abuse of dominant position by the sociétés de courses was rejected. 148 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 91 Except for market sharing or supply source, Article 102 TFEU expresses the prohibitive abuse that is similar to the prohibitive behaviour. It reflects that Articles 101 and 102 TFEU are mutually compensatory. However, Article 102 TFEU does not provide for individual or block exemptions, unlike Article 101 TFEU. 1.2.2. Relevant market Competition must take place somewhere. It is necessary to define where the market is in which competition exists or not. Therefore, the definition of a market turns to a crucial factor of determining whether an undertaking is in a dominant position. In the Case 6/72, Continental Can Case,149 the former ECJ pointed out that a position could be dominant within the meaning of Article 102 TFEU only if it is dominant in a relevant market. In paragraph 14 of the Case, the former ECJ stated that: “[t]he definition of the relevant market is of essential significance, for the possibilities of competition can only be judged in relation to those characteristics of the products in question by virtue of which those products are particularly apt to satisfy an inelastic need and are only to a limited extent interchangeable with other products”. So the relevant market must be defined well and appropriately. If the Commission incorrectly defines the relevant market, then the Court of Justice or the General Court may annul the Commission’s decision. Most scholars consider that the relevant market is defined by two factors: products per se and geographical factors. Hence, the decision of an undertaking whether it is placed in a dominant position is deemed according to which factor applies. Nevertheless, to define the relevant market is not an easy job; the Commission, the former CFI and the former ECJ have laid down guidance in various cases, until 1997. Then, the Commission announced, primarily, a non-binding guidance in its Notice150 which orients the Commission to apply merely the concept of relevant market in two dimensions: “relevant product market” and “relevant geographical market”, in the ongoing enforcement of the Community competition policy, especially in applying the Regulation No. 1/2003151 (former Regulation No. 17152) and Regulation (EEC) No. Commission [1973] ECR 215, [1973] CMLR 199. 149 Case 6/72, Europemballage Corporation and Continental Can Company Inc. v Commission, [1973] ECR 215. 150 Commission Notice on the definition of relevant market for the purposes of Community competition law, [1997] OJ 97/C 372/03, 9 December 1997. 151 Council Regulation (EC) No. 1/2003, of 16 December 2002, on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, [2003] OJ L 1/1.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 92 4064/89.153 Nevertheless, Steiner (2003) addresses temporal factors which are unique among other scholars, which he named the “relevant temporal market”. (A) Relevant product markets Based on Articles 101 and 102 TFEU, especially the requirements of Regulation No. 1/2003 and Regulation (EEC) No. 4069/89, the abovementioned Notice defines expressly the relevant markets. Its paragraph 7, in fine, indicates that: “[a] relevant product market comprises all those products and/or services which are regarded as interchangeable or substitutable by the consumer, by reason of the products’ characteristics, their prices and their intended use”. Practically, Istituto Chemioterapico Case 154 judged in 1973 stated that products in the relevant product market possess inherently interchangeability and substitutability. Substitutability can be tested in comparing the characteristics of appearances and utilisation of different products. It includes identical products, or products where their characteristics, prices or utilisation are considered similar by consumers. Steiner (2003, p 438) believes that, albeit this principle is considered only in terms of the products or goods, it can also be extended to the context of services. Another leading case is Michelin Case,155 the former ECJ noted that a particular product was partially interchangeable with another product and there was only some competition between them. Herein, the former ECJ indicated that because there was merely a limited extent of competition between the product of Michelin and products of other undertakings, there was not sufficient condition to include that product in the relevant product market. Apparently, the Commission and the former ECJ required a high degree of interchangeability before they admitted another undertaking’s product into the relevant product market (Cahill, 2006, p 123). Another leading case concerning relevant product market is the Hoffman La Roche Case,156 where the Commission defined the relevant product market which 152 Council Regulation No. 17, First Regulation implementing Articles 85 and 86 of the Treaty, [1962] OJ P 013, 21 February 1962, p 204-11. 153 Council Regulation (EEC) No. 4064/89, of 21 December 1989, on the control of concentration between undertakings, [1989] OJ L 395/1. 154 Cases 6 and 7/73, Istituto Chemioterapico Italiano SpA v Commission, [1974] ECR 223, paras 15 and 19. 155 Case 322/81, NV Nederlandsche Banden Industrie Michelin v Commission of the European Communities, [1983] ECR 3461, para 48. 156 Case 85/76, Hoffmann-La Roche & Co v Commission, [1979] ECR 461.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 93 was formed by several separated relevant product markets of each vitamin produced by Roche, by virtue that each vitamin has different purposes and they are not significantly interchangeable in terms of purpose. However, they can be used as additives in food products as antioxidants. Even so, the Commission still excluded synthetically produced antioxidants from inclusion in the individual separate vitamin product markets. The former ECJ found that the Commission was correct to exclude these synthetic agents from the separate relevant vitamin product markets. The former ECJ found that the vitamins were only interchangeable to some extent but not for all. It stressed, in paragraph 28, that: “… this product may, …, belong to separate markets which may present specific features …”; “… this finding does not justify the conclusion that such a product together will all the other products which can replace it as far as concerns the various uses to which it may be put and with which it may compete, forms one single market”; and “[t]here was no such interchangeability … between all the vitamins of each of the groups C and E and all the products which … may be substituted for one or other of these groups of vitamins for technological uses …”. Finally, as a result of the former ECJ concluded by stating that: “[t]he concept of the relevant market implies … that there is a sufficient degree of interchangeability between all the products forming part of the same market …”. So synthetic antioxidant agents were not considered to be part of the relevant separate vitamin markets as they are only substitutable with certain vitamins in a limited degree. (B) Relevant geographical markets The second relevant market is the relevant geographical market. For the purpose of the EU competition law, it is defined, in paragraph 8 of the Commission Notice supra citato, that: “[t]he relevant geographical market comprises the area in which the undertakings concerned are involved in the supply and demand of products or services, in which the conditions of competition are sufficiently homogeneous and which can be distinguished from neighbouring areas because the conditions of competition are appreciably different in those area”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 94 The importance of location of the relevant geographical market divides into two aspects: firstly, dominance of undertaking which must be “within the internal market or in a substantial part of it” can fall into the provision of Article 102 TFEU; secondly, the definition of geographical market determines how many competitors are involved, and it affects the assessment of economic and market power imposed by undertakings concerned. In general, if a market extends wider, the economic and market power of undertaking becomes diluted. Therefore, the issue of dominance must also be discussed and assessed in the context of the relevant geographical market. In principle, and in the United Brand Case,157 the former ECJ stated in paragraph 44, upon the concept of relevant geographical market, that: “… an undertaking in a dominant position presuppose the clear delimitation of the substantial part of the Common Market [now Internal Market] in which it may be able to engage in abuses which hinder effective competition and this is an area where the objective conditions of competition applying to the product in question must be the same for all traders”. These objective conditions of competition can be changed in accordance with different regions, the reasons of State action, consumers’ habits and preferences, costs of transport, and characteristics of products, etc. However, the abuse of a dominant position must be in the EU market or the substantial part of it to take effect. For example, in the Michelin Case supra citato, the former ECJ judged, in paragraph 103, that there was no difference in the relevant geographic market which was “confined to a single member state as long as it is capable of affecting patterns of trade and competition on the Common Market [now Internal Market]”. (C) Relevant temporal markets In assessing the problem of dominance, Steiner (2003, p 443) considers that the temporal aspect of a market must also be considered even if it is not defined in the Commission Notice concerned. The Commission referred to the specific time of mid-year to determine relevant temporal market in the United Brands Case, when there were few chances of getting substitutes. Paragraph 32 of that Case quotes “… the banana is only affected by the prices – falling prices – of other fruits … during the summer months and mainly in July and then by an amount not exceeding 20%.” To be obvious, a temporal market has a determinant function to the products’ selling market, and be for a limited period of time. So, the temporal market may be 157 Case 27/76, United Brands Company and United Brands Continentaal BV v Commission of the European Communities, [1978] ECR 207, 14 February 1978.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 95 in fact an inherent part of the product market. The former ECJ considered by stating, in paragraph 34, that there were a large number of regular consumers for bananas who were not noticeably or even appreciably enticed away from other seasonal fruits, this was “only for a limited period of time and to a very limited extent from the point of view of substitutability”. At this moment, the substitutability reduces the dominant position of the undertaking. Hence, compared with the both relevant markets abovementioned, the relevant temporal market does not result in a situation of dominant position abuse in the relevant market. Thus, the Commission disregarded this evidence and the Commission Notice defined merely relevant market in respect of products and geography, and also regulates them correspondently. 1.3. System for implementing Articles 101 and 102 of the TFEU Articles 101 and 102 of the TFEU, as the core of the EU’s competition law, set out the Union competition rules applicable to restrictive practices between businesses and abuses of dominant position. Since 1962, the basic law applied to antitrust law was the Council Regulation No. 17.158 It set out the rules of procedure for the application of ex Articles 81 and 82 without significant modification159 until its replacement entered into force from 1 May 2004. This Regulation constituted the system of control, as a result the Commission has specific powers to authorise restrictive agreement pursuant to Article 81(3) TEC [now Article 101(3) TFEU]. Meanwhile, this Regulation provided for a notification system that required undertakings to submit all agreements to the Commission for examination before they entered into them. This system gradually undermined the results from decentralisation in applying to the Rules on Competition set out in the TEC [now TFEU]. De facto, this centralised notification system was originally set out for a Community of six Member States, whereby the Commission built up a coherent body of precedent cases, and ensured that Rules on Competition were applied consistently throughout the Community. If there was an uncertain interpretation to ex Article 81, especially to ex Article 81(3), this system became very useful, on one hand, but it caused a backlog of a huge number of agreements notified to be appreciated by the Commission, on the other hand. In this regard, the Commission reformed this provision and adopted more effective actions in order to simplify the administrative procedures of undertakings and serious infringement against Rules on Competition. In 1999, the Commission published a White Paper on Modernisation of the Rules Implementing Articles 85 158 Council Regulation No. 17, First Regulation implementing Articles 85 and 86 of the Treaty, [1962] OJ P 013, 21 February 1962, pp 204-211. 159 Regulation (EC) No 1216/1999, amending Regulation No. 17: first Regulation implementing Articles 81 and 82 of the Treaty, [1999] OJ L 148/5, of 10 June 1999.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 96 and 86 of the EC Treaty,160 and led to the publication of Council Regulation No. 1/2003, of 16 December 2002.161 The new Regulation replaces the position of Regulation No. 17 from 1 May 2004, and is based on the application of decentralised competition rules. The centralised control system was replaced by the “directly applicable exception system”. In the directly applicable exception system, the competition authorities and courts of the Member States have the power to apply not only to ex Articles 81(1) and 82 of the TEC, which have direct applicability by virtue of the case law of the former ECJ, but also ex Article 81(3) of the TEC. In the meanwhile, the enlargement of the Union has changed the context radically, causing increasing difficulties. This new Regulation is one of the cornerstones of the Union competition law, but needs to be adapted to a much different economic and institutional environment of the 27 Member States starting from 2007, and 28 Member States since 2013. Regulation No. 1/2003 aims at establishing a new system, which ensures competition in the internal market and a future enlargement of the Union.162 The Commission also adopted a series of documents, which complete the landmark modernisation of the EU’s antitrust enforcement rules and procedures, known as the “modernisation package”.163 Therefore, there will be more and closer cooperation 160 Commission, White Paper on Modernisation of the Rules Implementing Articles 85 and 86 of the EC Treaty, Commission Programme No. 99/027, OJ (1999/C 132/01), 12 May 1999. 161 Council Regulation (EC) No. 1/2003 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, [2003] OJ L 1/1. 162 Recitals 1 to 4 of Regulation No. 1/2003, as in note, supra. 163 The Commission adopted seven documents which complement Regulation No. 1/2003. The entire exercise is commonly referred to as the “Modernisation Package”, which comprises: (1) Commission Regulation (EC) No. 773/2004 relating to the conduct of proceedings by the Commission pursuant to Articles 81 and 82 of the EC Treaty, OJ 2004 L 123/18; (2) Commission Notice on cooperation within the Network of Competition Authorities, (2004/C 101/03), OJ 2004 C 101/43; (3) Commission Notice on the co-operation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC (2004/C 101/04), OJ 2004 C 101/54; (4) Commission Notice on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty (2004/C 101/05), OJ 2004 C 101/65; (5) Commission Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) (2004/C 101/06), OJ 2004 C 101/78; (6) Commission Notice – Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty (2004/C 101/07), OJ 2004 C 101/81; (7) Communication from the Commission Notice – Guidelines on the application of Article 81(3) of the Treaty (2004/C 101/08), OJ 2004 C 101/97.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 97 between the Commission and national authorities, and the national authorities inter se. This new Regulation, which introduces a “directly applicable exception system”, supra citato, aims at those undertakings that do not need to notify, on a regular basis, their agreements to the Commission, giving the Commission more time to tackle serious infringement, inter alia, of some cases of cross-border trade, passing to a mechanism of ex post control. At the same time, another change is to decentralise the “monopoly power” over the ex Article 81(3) TEC [now Article 101(3) TFEU] (Motta, 2004, p 33). The new Regulation will not be, in Brussels, centrally enforceable, substituting for the European Competition Network, which is a network linked by national competition authorities and the Commission, engaging respectively in the control of anti-competitive behaviours and political works dealing with complaints. In short, this new Regulation brings radical changes in observance to European competition law. Firstly, ex Article 81(3) TEC [now Article 101(3) TFEU] becomes directly applicable, enabling the national competition authorities and national courts to apply completely ex Articles 81 and 82, including ex Article 81(3). Secondly, the investigation power of the Commission is increased. Finally, the new Regulation creates new cooperative mechanisms between the Commission and the competition authorities of all Member States. Considering the enlargement of the EU, this new Regulation is extremely appropriate. Albeit there still exist some uncertainties, the Commission announced notices or guidelines to clarify and apply the new rules, facilitating undertakings assessing whether their behaviours would be considered for a block exemption. In conclusion, the Regulation No. 1/2003 enables the Commission to use its resources to detect and punish incidents of serious infringements. It helps to eliminate the ineffectiveness or loss of welfare of internal market caused by the prohibitive agreements, decisions or concerted practices that cannot be detected by the Regulation No. 1/2003. 1.3.1. European Competition Network (A) Structure of the ECN The Council Regulation (EC) No. 1/2003 on the implementation of the Rules on Competition laid down in Articles 81 and 82 TEC [now Articles 101 and 102 TFEU], which came into force on 1 May 2004, brings fundamental changes in the observance of EU competition law. It replaces the celebrated antitrust law - Council Regulation No. 17, which was in force for more than 40 years. Pursuant to the provisions of the Regulation supra citato, an unprecedented and closer cooperation relationship, the so-called European Competition Network (hereinafter referred to as ECN), was established between the Commission and the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 98 national competition authorities of 28 Member States of the present European Union. In this regard, the author of this research project depicts the ECN in Diagram 4.1. Diagram 4.1: Cooperation between Commission and the Member States (MS) The decentralised system established by Regulation No. 1/2003 requires coordination and closer cooperation between the relevant authorities, which are, on one hand, the cooperation between the Commission and the competition authorities of the Member States among each other, which constitutes the European Competition Network and, on other hand, cooperation between the Commission and courts of the Member States. In short, the ECN is a structure de jure in three respects: (i) Regulation No. 1/2003 provides that the regulation of the competition function is to be carried out by the complex organisation, named the European Competition Network (ECN); (ii) from a functional perspective, the Commission and the national competition authorities of Member States comprise the administrative system as a whole; (iii) from a structural perspective, within this complex administrative framework, the Commission is to coordinate and program the activities carried out by the national competition authorities of Member States, whose functions in the ECN have only approximately been defined under the Regulation No. 1/2003. Even so, the structure de jure of the ECN is designed to achieve not the goal of anti-competition, but co-administration. It is a sector-based administration in competition issues formed between the Commission and the national competition authorities of Member States, which aims to carry out the specific anti-competition functions and to ensure that competition, set out by the TEC in the Common Market [now TFEU in the Internal Market] is not being distorted and is meeting the challenges of an integrated market.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 99 In addition, their competences are responsible for the performance of the functions designated for anti-competition throughout the Union and the future enlargement of the Union can be performed efficiently. Furthermore, this structure de jure is characterised by a combination of decentralisation and integration (Chiti, 2004). (B) ECN as an administrative organisation of the EU in the model of decentralised integration The operational model of the network supra citato is decentralised integration, which is a modernised model that emerged in 1990. This model reflects the specific nature of the competition network, and its purpose provides a stable combination of decentralisation and integration of national administrations, as well as an integration of supranational organisation and national administrations. Hence, the model of decentralised integration brings definite constructive elements to European competition, which possesses organisational and procedural characteristics. Nevertheless, it causes a problem for the administration of European affairs by influencing the effectiveness of the regulatory structure of the Union system. In this regard, the relationships among national administrations in the integrated European order and the relationship between national administrations and supranational administration have been ignored in terms of legal investigation. Entering the 21st Century, the administrative problems in relation to the creation and functioning of the Union legal system are being considered. It is because this model is not based on a legal relationship between domestic administrations and Union administration, there is not, thereby, an existence of a formal relationship between national institutes and supranational administration; therefore, the Union relies indirectly on the competences of national administrations. Pursuant to this framework, European law grants the EU competences to the Commission for making decisions, and the national administrations of Member States implement its necessary and indispensable functions. Ergo, the competences sharing between the Commission and the national administrations of Member States are managed in accordance with different issues of competition, which is the so-called “co-administration”. This means the Commission and the national administrations of Member States are linked intrinsically and complemented to one another in terms of competences and functions distributed. This co-administration model of the ECN, referred to as an “European Agency”, was established by Regulation No. 1/2003. Moreover, the functions designated to the Commission and the national administrations of Member States are shared between offices in two levels, viz the office of the Commission’s administrative system and the offices of individual administrative system of each Member State, due to the ECN being established by Regulation No. 1/2003, as an unitary administration. However, the tasks of the ECN
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 100 are not really determined pursuant to the provision of Regulation No. 1/2003, but are determined by the two administrative levels based on their respective roles. The unitary administration is a mixed administration, which comprises both functional and structural perspectives, governed by Regulation No. 1/2003, between the Commission and the national administrations of Member States. Its administrative procedure is exclusively subject to antitrust law, which defines and controls rigorously the content of the intervention made by competition. This does not practically and legally fit into the existing administrative law frameworks of Member States. This Union competition procedural framework is adopted to allocate functions amongst the national competition authorities and to integrate those authorities into an exclusively Union procedural context. The joint performance of the anti-competition function of the EU does not only presuppose that competences are shared between the Commission and the national competition authorities of Member States, but also that the collaboration between the Commission and the courts of Member States can be efficiently performed. So at this standpoint, the notion of the ECN is as a set of relatively stable relationships between supranational and national administrations that are non-hierarchical and inter-dependent in nature. Hence, the author of this research study says that it is a “functional communion in competition affairs”. It gives a functional flexibility to the ECN character as of the “European Agency” which is one of its distinctive features. Regulation No. 1/2003 provides for procedural and organisational instruments allowing for the national competition authorities of Member States to collaborate with each other and it ensures the supremacy of the central administration of the Commission with respect to the national competition authorities. Pragmatically, the joint action of the Commission and the national competition authorities of Member States concerns their decentralised offices and takes place in a context that is structurally and functionally integrated of their relationship, which appears as the peculiar phenomenon of a pattern of decentralised integration. Theoretically, this connection between decentralisation and integration constitutes the principal raison d’être for emergent models of joint performance of the EU anti-competition function. De facto, the integration is based on a political compromise between the Commission and the Member States. The decentralised integration attempts, a posteriori, to make a balance, in combating the anti-competition practices, between the EU level and national level, and avoiding burdens to be imposed on the Union central administration (Chiti, 2004).
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 101 1.3.2. Cooperation within the ECN and between ECN and national courts (A) Cooperation within the Network of Competition Authorities The Commission adopted a Commission Notice in 2004 on cooperation within the network of competition authorities which complements the provisions of Chapter IV of the Regulation No. 1/2003.164 A system of parallel competition is created by this Regulation allowing the Commission and the competition authorities of the Member States to apply ex Articles 81 and 82 TEC [now Articles 101 and 102 TFEU]. Both form a network of public authorities and act in the public interest and cooperate closely in order to protect competition.165 The network is a forum for discussion and cooperation in the application and enforcement of EU competition policy. It provides a framework for the cooperation of European competition authorities in cases where Articles 101 and 102 TFEU are applied and are the basis for the creation and maintenance of a common competition culture in Europe. The network is called the “European Competition Network” (ECN).166 The ECN should ensure both an efficient division of work and an effective and consistent application of EU competition law, as well as defining the role and functioning of the Advisory Committee in this new system (Müller, 2004, pp 733-4). In this sense, competition affairs can be dealt with at an appropriate level, enabling the resources of the EU and its Member States to be used effectively in implementing the efficiency of decentralisation. (B) Cooperation between the Commission and the courts of the EU Member States The cooperation of national courts, where loyalty to the EU is obligated and set by Article 4, paragraph 3 of the TEU,167 is laid down in Article 15 of Regulation No. 1/2003. Moreover, in 2004 the Commission adopted a Notice on the cooperation between the Commission and the courts of the EU Member states in the 164 Commission Notice on cooperation within the Network of Competition Authorities (2004/C 101/03), [2004] OJ C 101/43. 165 Article 11(1) of the Regulation No. 1/2003, as in note, supra. 166 Ibid, pt 1. 167 Article 4, paragraph 3, of the TEU, reads as: “Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of institutions of the Union. The Member States shall facilitate the achievement of the Union’s tasks and refrain from any measure which could jeopardise the attainment of the Union’s objectives.”
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 102 application of ex Articles 81 and 82 of the TEC [now Articles 101 and 102 TFEU].168 Article 15(1) of the Regulation No. 1/2003 states that courts of the Member States may ask the Commission to transmit to them information in its possession or its opinion on questions concerning the application of the EU competition rules. Where the coherent application of Articles 101 and 102 TFEU so requires, the Commission, acting on its own initiative, may submit written observations to courts of the Member States. With the permission of the court in question, it may also make oral observations.169 However, as “Uniform application of Community competition law” is entitled and prescribed in Article 16 of Regulation No. 1/2003, when national courts rule on agreements, decisions or concerted practices under ex Articles 81 and 82 of the TEC which are already the subject of a Commission decision, they cannot take decisions running counter to the decision adopted by the Commission. They must also avoid giving decisions which would conflict with a decision contemplated by the Commission in proceedings it has initiated. To that effect, the national court may assess whether it is necessary to stay its proceedings. This obligation is without prejudice to the rights and obligations of the Court of Justice of the European Union under Article 267 TFEU (Müller, 2004, pp 734-5). 2. Cartels Cartel has been an independent policy area of competition policy since 2005 and separated from the policy area of antitrust of the Commission, due to the radical reform of antitrust competition procedure in May 2004, according to the information available in the official website of the Commission.170 Its reform includes the functional restructure of the DG Competition, which is mentioned in Chapter 3, supra. The Commission can concentrate its efforts on investigating and attacking cartels that seriously harm competition in the internal market. In reference to the official website of EU, a cartel is presently defined as “a group of similar, independent companies which join together to fix prices, to limit production or to share markets or customers between them”,171 resulting to lessen 168 Commission Notice on the cooperation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC (2004/C 101/04), [2004] OJ C 101/54. 169 Article 15(3) of the Regulation No. 1/2003, as in note, supra. 170 Visited on 24 April 2007 the website: http://ec.europa.eu/comm/competition/index_en. html. Compared with the information available, on 10 May 2005, in http://www.europa.eu.int/comm/commission_barroso/kroes, the competition policy was only divided into four policy areas: Antitrust, Mergers, State Aids and International Cooperation. In the then Antitrust policy area, it compounds cartels and other anti-competitive agreements between companies. 171 Visited on 23 March 2014 the website:
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 103 the competition among them. When cartels were formed as an independent policy area, a cartel was defined as “an illegal secret agreement concluded between competitors who in coordination fix or increase their prices, restrict supply by limiting their sales or their production capacities, and/or divide up their markets or consumers”.172 In the concept, both definitions are identical with only slightly different wordings, and the present one is more precise. Nevertheless, cartels had been defined two decades earlier as the Commission said in its 24th Report on Competition Policy 1995: “50 Cartels are typically operated in secrecy and considerable efforts are devoted by participants to avoid detection by the authorities, …”. And in its 28th Report on Competition Policy 1998: “44 Of all restrictions of competition, restrictive practices in the form of secret agreements are undoubtedly the most destructive. Very often, these practices involve a substantial number of economic operators in a given area of activity and, as such, they have a very marked impact on the relevant markets. Furthermore, they almost invariably concern prices and thus severely undermine competition. The Commission is committed to an extremely tough stance against cartels, particularly following the adoption of the euro as a common currency. The changeover to the euro in 11 Member States should increase price transparency within the Union and, as a result, intensify competition to the benefit of consumers. This must not be countered by restrictive agreements designed to sidestep market confrontation by artificially fixing prices or other trading conditions, which in the longer term could push up inflation and undermine the foundations of economic and monetary union.” Empirically, cartels173 are usually secret and often carried out by trade associations, and often implemented by mechanisms which give few clues of their http://ec.europa.eu/competition/cartels/overview/index_en.html. 172 Visited on 25 April 2007 the website: http://ec.europa.eu/comm/competition/cartels/overview/index_en.html. 173 The terminology used by OECD is “hard core cartel”, which official meaning is defined in points (a) & (b) of clause 2 of Section A of its Council unclassified document Recommendation of The Council Concerning Effective Action Against Hard Core Cartels [C(98)35/FINAL], read as “a ‘hard core cartel’ is an anticompetitive agreement, anticompetitive concerted practice, or anticompetitive arrangement by competitors to fix prices, make rigged bids (collusive tenders), establish output restrictions or quotas, or share or divide markets by allocating customers, suppliers, territories, or lines of commerce.” However, for the purpose of harmonising the national laws of its member countries, certain conditions are complimented as “the hard core cartel category does not include agreements, concerted practices, or arrangements that (i) are reasonably related to the lawful realization
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 104 existence. Cartels are usually a form of agreement to fix prices and agreements to divide markets, i.e. to preserve the domestic market for domestic products. Market division cartels seriously harm the market integration effort. In the meanwhile, they remove the incentives of producers to perform at a high level, undermining, thus, the goal of business in production and competition, making them maintain high prices and lower performance (Bermann, 2002, p 801). In consequence, cartels impose direct and serious damages on consumers, and industries purchasing cartelised products as its input in production, thus harming their competitiveness.174 The cartelised products are mostly concentrated on standard commodities, for instance, sugar, steel, cement and basic chemicals. The fight against cartels has immediate and positive effects such as cuts in prices, and increases in quality and gives wider choices of goods and services. Even though the Organisation for Economic Co-operation and Development (OECD) has been playing a leading role in coordinating its Member States in combating such price fixing and market sharing agreements, cartels’ detection and investigation will be a priority action of the Commission, whose efforts in recent years have been significant, resulting from an important change in strategy. A number of global price fixing agreements have been detected and record fines have been imposed in the EU (Table 4.2). This high level of fines demonstrates the determination of the Commission to strike against cartels activities. Nevertheless, some exceptions are allowed. The Commission allows cooperation among undertakings to develop technical standards if the final outcome is an agreed single standard in the market as a whole. If cooperation among small firms strengthens the competition with large firms, it is allowed. Some cooperation programmes need specific Commission approval, but others which are covered by the rules on exemption do not. Its overriding consideration is whether the approval brings benefits to consumers. The success of the fight against cartels relies on undertakings being deterred from initiating such cartel activities. Reliable deterrence rests mainly on three of cost-reducing or output-enhancing efficiencies, (ii) are exclude directly or indirectly from the coverage of a Member country’s own laws, or (iii) are authorized in accordance with those laws. However, all exclusions and authorisations of what would otherwise be hard core cartels should be transparent and should be reviewed periodically to assess whether they are both necessary and no border than necessary to achieve their overriding policy objectives. After the issuance of this Recommendation, Members should provide the Organization annual notice of any new or extended exclusion or category of authorization.” 174 The magnitude of harm from cartels is estimated at many billions of Euros annually. The average gain from price-fixing is 10 percent of the selling price but it can vary significantly across cases. An OECD survey shows that the cartel mark-up can be very large, as much as 50% or more. (Source: OECD (2000)).
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 105 pillars: leniency programme, unannounced on-the-spot investigation and decisions imposing severe sanctions. Table 4.2: Cartels 1990 – 2014 in number of decisions and fine imposed Year Number of decisions (per undertaking / association1) Cartel cases2 decided Fine imposed (adjusted for Court Judgement) in Euro3 1990 – 1994 185 10 344,282,500.00 1995 – 1999 45 10 270 963 500,00 2000 – 2004 157 30 3,157,348,710.00 2005 – 2009 205 33 7 926 161 498,50 2010 – 2014 192 30 7 831 270 579,00 Total 784 113 19,530,026,787.50 Remarks: 1. Includes entities not fined such as immunity applicants; If more than one legal entity of the same group were subject to the decision, they are counted as one for the purpose of this table; 2. A cartel case concerns a single proceeding against various undertakings concerned, and may involve more than one infringement. Only those cartel cases where a fine was imposed were considered for the purpose of that table; 3. Amounts corrected for changes following judgments of the Court of Justice of the European Union (General Court and Court of Justice) and only considering cartel infringements under Article 101 TFEU [ex Article 81 TEC]. Wherever prohibitions and fines concern infringements of Articles 101 and 102 TFEU [ex Articles 81 and 82 TEC], only those amounts have been considered which concern the Article 101 TFEU infringements. - Visited on 08 March 2016 the website: http://ec.europa.eu/competition/cartels/statistics/statistics.pdf Apparently, the EU’s leniency175 programme 176 is a crucial element in destabilising cartels, as it includes incentives to end the cartel, and disclose their secrets and illegal behaviours. Therefore, the leniency programme will be maintained and even, if possible, refined in the future for the sake of increasing its 175 According to the page 8 of Fighting Hard Core Cartels: Harm, Effective Sanction and Leniency Programmes, OECD, 2002, “Leniency could mean any reduction in the penalty compared to what would be sought in the absence of full, voluntary cooperation. The clearest, most complete form of leniency is amnesty. In the US programme, where cartels are subject to criminal sanctions, ‘leniency’ means immunity from prosecution. In the EU programme, leniency is described in terms of reductions in fines. Other enforcement agency decisions that could be considered lenient treatment include agreeing not to refer a matter for criminal prosecution, or not to pursue penalties against individuals.” 176 Information on the leniency programme and guidance on how to launch an application for leniency can be obtained at: http://ec.europa.eu/comm/competition/cartels/leniency/leniency.html, visited on 15 May 2007.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 106 effectiveness, making itself more effective, thereby, to be a positive and preventive measure in the fight against cartels. Article 101 TFEU, of course, prohibits the creation and operation of cartels. 2.1. Leniency Programme 2.1.1. The purpose of introduction to Leniency Programme The EU cannot only rely on the DG Competition taking on proceedings against undertakings which violate the provision of the Treaties in order to solve existing problems. Practically, the DG Competition recognises that a number of undertakings know themselves as participants of cartels and are afraid to expose their behaviours because of the high fines that dissuade them from ceasing the relationship in question. Consequently, the Commission defined firstly in legal form a Notice related to Leniency Policy in 1996,177 encouraging those undertakings to declare automatically their participation in cartels to the DG Competition, dispensing with or reducing fines, attacking the sustainable increment of secret cartels under this pro-active policy, achieving finally the protection of consumers’ rights and welfare. Nevertheless, this policy did not achieve the results expected by the Commission, for two main reasons: firstly, leniency was granted in a way of discretion by the Commission. Before the Commission adopted its final decision, undertakings did not know the size of any fines. This clearly reduced the immediate benefits after undertakings had disclosed evidence; secondly, even if the investigation had been started, undertakings which disclosed evidence still did not get immunity. Therefore, until the end of 2001, albeit fines were reduced in several cases, there were only three cases granted full immunity.178 After five years implementation of this Notice, the Commission had accumulated sufficient experiences and considered it was necessary to revise the Notice. Ergo, a Notice was published on 19 February of 2002,179 and the Notice of 1996 was replaced on 14 February of 2002. The new Notice did not only revise substantially the conditions of immunity or reduction of fines, but also defined their 177 Commission Notice on the non-imposition or reduction of fines in cartel cases, [1996] OJ C207/04, 18 July 1996. 178 From the Leniency Policy introduced in 1996 to the end of 2001, there were merely three cases granted full immunity: Rhône-Poulenc (in respect to its participation in two vitamins cartels), a subsidiary of Interbrew (in the Luxembourg brewers cartel) and South-African company Sappi (in respect to disclose valuable information and co-operation in the carbonless paper cartel). The decisions of these cases were made in November and December of 2001, while the revision of leniency policy was in course. See European Commission Press Release IP/02/247, 13 February 2002. 179 Commission Notice on immunity from fines and reduction of fines in cartel cases, [2002] OJ C45/03, 19 February 2002.
EU’s Competition Policy I: Rules, Interpretation and Application onthe Core Provision of Competition Law 107 exclusive procedures, increasing the transparency and giving more certainty in the conditions to grant the reduction of fines, that improved significantly the effectiveness of the Notice. Hence, the two reasons supra citato were improved from the introduction of transparency and certainty, such as provisions of complete and conditional immunity. The then Commissioner of Directorate-General for Competition, Mario Monti, had a comprehensive interpretation to the Notice 2002, he indicated that: “[t]he new Notice should not, in any way, be understood as reflecting a more lenient approach in the fight against price-fixing and other anti-competitive practices. On the contrary, the new policy will increase the likelihood that cartels will be detected which, together with the Commission’s determination to impose fines at dissuasive levels, should deter companies from entering into collusive behaviour in the first place.”180 Apparently, the Notice 2002 was not only to enable effective detection and incremental prosecution of cartels, but also adopted an aggressive and pro-active attitude which encouraged undertakings to disclose secret cartels so as to remit totally or partially the high fines to be imposed.181 At the same time, it enabled detection of the normal functioning of undertakings under deterrence of cartels in the market, achieving thereby the preventive effect upon sustainable collusive behaviour. 2.1.2. Revised Leniency Notice in 2006 and its improvements Albeit the improvements in the Leniency Notice 2002 were significant, its implementation encountered some unexpected problems, such as the uncertainty of immunity of what type of information and the evidence required; the lack of full and continuous cooperation of the applicants to the Commission; the shortage of 180 Commission adopts new leniency policy for companies which give information on cartels, IP/02/247, Brussels, 13 February 2002. 181 With reference to MEMO/06/357 from the Commission, “Competition: Commission proposes changes to the Leniency Notice – frequently asked question”, from 14 February 2002 to the end of 2005, the Commission received 167 applications under the 2002 Leniency Notice, of which 87 requested immunity and 80 for reduction of fines. Nevertheless, the Commission has granted 51 decisions for conditional immunity, rejected or decided not to deal with 23 applications, as well as transferring 6 cases to national competition authorities. For the abovementioned applications for immunity, these figures reflected the fact that, for fulfilling the immunity threshold, numerous immunity applications have not given enough information and evidence on alleged cartels. Among those applications, in the said period, there were 5 cartel cases in which undertakings cooperated with the investigation under the 2002 Leniency Notice, where formal decisions have been taken by the Commission, with total fines of €1,131 million imposed.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 108 guidelines in the procedures; and, whether the level of added value was considered enough, etc. Following these concerns, the Commission revised the Notice and published another new Leniency Notice in 2006182 after public consultations took place in February and October 2006 respectively. As a result of experiences accumulated from the 4 years enforcement of the Leniency Notice 2002, a significant improvement in clarity and effectiveness in the New Leniency Notice was achieved.183 These improvements are summarised in the following four aspects: (1) immunity threshold. The new Leniency notice provides for “targeted inspection” to avoid the issue of uncertainty, so an assessment of the threshold will have to be carried out ex ante and made exclusively on the basis of the type and the quality of the information submitted by the applicant; (2) threshold for reduction of fines. The new Leniency Notice expressly highlights in Article 25 that incriminating evidence directly relevant to the facts in question will generally be considered as providing greater value than evidence such as statements which require corroboration if contested; (3) introduction of a discretionary marker system. This system allows the applicant of immunity to collect and complement, during a specific period, information and evidence required for the threshold of immunity. Nevertheless, the effectiveness of this marker system still needs further discussion and experience to develop its practical form; (4) procedure to protect corporate statements. The corporate statements, in whichever ways they are provided, are only accessible at the Commission premises but this does not prevent their disclosure in the public interest to other addressees of the statement of objections, whose rights of defence are secured in procedures before the Commission. 182 Commission Notice on Immunity from fines and reduction of fines in cartel cases (2006/C 298/11), [2006] OJ C298/17, 8 December 2006. 183 Pursuant to the IP/06/1288, the changes proposed by the Commission ensure that the Leniency Notice will “set out explicitly and clearly what type of information and evidence the immunity applicants should submit to qualify for immunity; link the threshold for immunity to information needed by the Commission to carry out a ‘targeted’ inspection in connection with the alleged cartel, which will allow for the inspections to be better focused; state explicitly that the applicants need to disclose their participation in the cartel; introduce flexibility as to the point in time when applicants should terminate their participation in the alleged cartel activities; clarify the cooperation obligation and extend the obligation not to destroy, falsify or conceal information to cover also the period when the applicant was contemplating making an application; state explicitly that the obligation on continuous cooperation concern also applications for a reduction of fines; pronounce clearly that only compelling evidence will be rewarded outside the bands for reduction of fines; contain a discretionary marker system, whereby an applicant’s place in the queue for leniency can be protected corporate statements; and state that no position is taken on applications concerning prescribed infringements”.
109 Chapter 5 EU’s Competition Policy II: Rules, Interpretation and Application on Mergers, Liberalisation, State Aid and International Cooperation 1. Mergers Full mergers or takeovers create and entrench undertakings with market power that may damage competition, causing negative effects by reducing output and raising prices, and occasionally reducing innovative progress. Mergers or takeovers (so-called “concentration” which has been used in the Merger Regulations) are mainly formed in two ways: the first way is that one undertaking acquires another one creating a single, much larger, undertaking, which is dominant in the market; the second way is that a number of undertakings cooperate rather than compete with each other creating tight oligopoly or oligopolistic dominance. Among all mergers, mergers of competitors are most deeply and broadly harmful to competition. Mergers between a leading firm and its largest competitors can have cartel-like or dominance-creating effects. Furthermore, mergers between buyers and sellers, or so-called “vertical mergers”, can also lessen competition (Bermann, 2002, pp 946-7). Empirically and practically, the Commission can ban mergers of undertakings between two large firms or a takeover of one firm by another firm, if the new enlarged firm would dominate the market and it, therefore, would easily to be able to drive competitors out of the market. However, the Commission, presently and generally, only scrutinises cross-border large scale mergers after the new Mergers Regulation entered into force in 2004. Unless the Community-wide sales are more than ⅔ within a single Member State, undertakings must clear their mergers or takeovers with the Commission, if they have a combined EU turnover of more than €250 million and a worldwide turnover of more than €5 billion.184 In the past, undertakings needed to inform the Commission of their intention to engage in mergers or acquisitions (M&As), as they could create or entrench dominant positions that might result in abuse of market power. This risk explains why the EU 184 Council Regulation No. 139/2004, on the control of concentrations between undertakings (the EC merger Regulation), [2004] OJ L 24/1, 29 January 2004, Article 1(2).
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 110 authorities needed to test mergers in advance, but the treaties of the EU did not contain the provision in question, which could only be fulfilled by case law in courts. The next sections reveal the origins of the merger rules and their developments with analysis of typical court cases. 1.1. Origin of Rules on Mergers Control Early in the Treaty establishing the European Coal and Steel Community (ECSC Treaty) under the influence of US, merger control was included for specific industries. However, in the ECSC Treaty and national competition legislations, there was no purview of merger control. The reason for this was that the EEC was concerned at that time to encourage concentration by building up large scale firms to compete in the world market (Wallace, 2000, p 134). However, the Commission subsequently proposed a regulation on merger control in 1973, but this was opposed by several member states. Hence, the Commission intervened in the behaviour of mergers by drawing support from the general powers of the Rules on Competition, ex Articles 85 and 86, of the TEC [now TFEU] and by support of judgments of the former ECJ [now Court of Justice of the European Union]. In the former ECJ it was found that this system was only ex post supervision, which meant that ex Article 86 [now Article 102 TFEU] did not enable pre-emptive action to prevent any occurrence of abuse of market power and could be applied only after the occurrence of the merger. Ergo, the Commission could only use its power to stop an abuse after it took place. Another issue to be considered was that the cases of mergers and takeovers were different because it was very difficult, or even impossible, to unscramble the original situations. In order to resolve the particular problem of applying ex Article 86 [now Article 102 TFEU] to mergers and takeovers, the draft of mergers regulation was firstly proposed in the summer of 1973. After several modifications on the basis of judgments of court, the Council finally agreed with the stipulation of the first Mergers Regulation185 in 1989. 1.2. Previous Regulations on Mergers Control The Mergers Regulation No. 4064/89 was published at the end of 1989 and entered into force nine months later in September 1990. Its legal basis was ex Articles 83 and 308 TEC [now Articles 103 and 352(1) TFEU]. Under the scheme of that regulation, there was one regime which applied to mergers and takeovers 185 Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentration between undertakings, [1989] OJ L 395/1, 30 December 1989. And its corrigendum in [1990] OJ L 257/13. Amended by Regulation (EC) No 1310/97, [1997] OJ L 180/1, and its corrigenda in [1997] OJ L 199/69, [1998] OJ L 3/16 and [1998] OJ L 40/17.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 111 which had a “Community dimension”, and another which lacked such a dimension. Paragraph 1 of Article 1 of the Regulation provided that it covered all mergers (so-called concentration in Mergers Regulation) which must have a Community dimension186 and other criteria, inter alia, of markets structures, actual or potential competitors, interests of consumers, and the development of technical and economic progress, etc.187 This Regulation also introduced a notification system, under which all concentrations with a Community dimension should be notified to the Commission within one week after their establishment by the parties to the merger or by those acquiring joint control.188 Based on the experience accumulated under the Regulation, the Commission was expected to cope with more merger cases in different types than the cases originally set out in the Regulation. Albeit it was opposed by other Member States, the new regulation189 was approved in 1997 by the Council and entered into force on 1 March 1998. In this new Regulation, the general thresholds were maintained and merger cases with lower turnovers were included which meant that more firms were involved. Pursuant to the procedure for controlling mergers, the notified cases increased significantly from 1997 to 1998, from 168 to 224 respectively. In this regard, the coverage of firms was much wider. Nevertheless, the outright approved concentrations were surprisingly low – 1 case in 1997 and 3 cases in 1998.190 1.3. Statu Quo of Mergers Regulation After six years of enforcement of the revised Mergers Regulation, this Regulation had a substantial amendment and adopted Council Regulation (EC) No. 139/2004, of 20 January 2004, on the control of concentrations between 186 Article 1, para 2, of the Regulation No. 4064/89 reads as: “2. For the purpose of this Regulation, a concentration has a Community dimension where: (a) the aggregate worldwide turnover of all the undertakings concerned is more than ECU 5 000 million, and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more then ECU 250 million, Unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.” 187 Ibid, Article 3(1). 188 Ibid, Article 4. 189 Council Regulation (EC) No. 1310/97 of 30 June 1997 amending Regulation (EEC) No. 4064/89 on the control of concentrations between undertakings, [1997] OJ L 180, 9 June 1997, pp 1-6. 190 Refer to European Merger Control – Council Regulation 139/2004 – Statistics, on 26 April 2007, from official website of EU at: http://ec.europa.eu/comm/competition/mergers/statistics.pdf.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 112 undertakings.191 This Regulation seeks to govern concentrations “bringing about a lasting change in the control of the undertakings concerned and … in the structure of the market”.192 The term “concentration” is defined under paragraph 1 of Article 3 of the Regulation to describe mergers and acquisitions which it covers.193 However, the existence of concentration is based on qualitative rather than quantitative criteria on the concept of control. Ergo, the concentration may occur on a de jure or de facto basis. This means that not all concentrations fall within the scope of the Regulation, but only those which have an “EU dimension” [then “Community dimension”]. The concept of an “EU dimension” allocates responsibility over concentrations between the Commission and the Member States, based on the principle of subsidiarity. The thresholds of a concentration which have an EU dimension are provided in paragraphs 2 and 3 of Article 1194 of the Mergers Regulation. These thresholds are observed in terms of merger control as more undertakings are being notified under this new Regulation, and have effectively reduced the number of notification cases to the Commission within the amended procedure. The changes of procedure for controlling mergers are mainly concerned with the following aspects: (1) in the past, all parties might notify the Commission of the situation before they reached merger agreement with binding effect. Presently, all parties must notify the European Commission when they intend to merge; (2) 7 191 Council Regulation No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC merger Regulation), [2004] OJ L 24/1, 29 January 2004. 192 Ibid, recital 20. 193 Ibid, Article 3(1), which provides that “[a] concentration shall be deemed to arise where a change of control on a lasting basis results from: (a) the merger of two or more previously independent undertakings or parts of undertakings, or (b) the acquisition, by one or more persons already controlling at least one undertakings, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any other means, of direct or indirect control of the whole or parts of one or more other undertakings.” 194 Ibid, Article 1, paragraphs 2 and 3, which provide for respectively that “[a] concentration has a Community dimension where (a) its combined aggregate worldwide turnover of all the undertakings concerned is more than €5 billion and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than €250 million, unless each of the undertakings concerned achieves more than two-third of its aggregate Community-wide turnover within one and the same Member State” and “[a] concentration that does not meet the thresholds laid down in paragraph 2 has a Community dimension where the combined aggregate worldwide turnover of all the undertakings concerned is more than €2.5 billion; in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than €100 million; in each of at least three Member States, the aggregate turnover of each of at least two of the undertakings concerned is more than €25 million; and the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than €100 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State”.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 113 days notification before a merger is abandoned due to its unreasonable severity; (3) the examination takes place immediately after the Commission receives notification, and the examination power of the Commission is not undermined. Practically, each party can take relevant actions to the decisions made by the Commission whether the concentration falls within the scope of the Merger Regulation and/or is compatible with the internal market. If proposed mergers would not significantly impede effective competition within the EU, they are approved unconditionally. If they, and the undertakings concerned, do not commit to remove such impediments, they are prohibited in order to protect other business operators and consumers from the adverse effects eventually occurred. Nevertheless, not all mergers which significantly impede effective competition are prohibited. The Commission could find that a proposed merger could impede competition, but the parties to the merger may commit to take action to correct such effects. The taken action could be selling part of the merged business, opening licence technology to certain market players or competitors, etc. In this regard, if the Commission is satisfied that the commitment concerned maintains or unscrambles competition in the market, it gives conditional clearance for the merger, which can then proceed. During the merger progress, the Commission monitors whether the commitment is being fulfilled, otherwise it intervenes. Generally, concentrations that do not have an EU dimension are assessed by the national competition legislation applicable in its state, whilst concentrations with an EU dimension are assessed under the terms of the EU Merger Regulation in force. Consequently, concentrations with an EU dimension benefit from a “one-stop shop” and are not subject to assessment under the rules on competition of the Member State.195 2. Liberalisation – Concession Granted by Member States Notwithstanding the responsibilities of Articles 101 and 102 TFEU are imposed to “undertakings” and have no relation, prima facie, to activities of public authorities, Article 106(1) TFEU provides expressly that the competition law of the EU applies to “public undertakings and undertakings to which Member States grant special or exclusive rights”. Meanwhile, Member States are prohibited from enacting or maintaining in force any measure contrary to the rules, inter alia, on competition, contained in the Treaties. Some exceptions are allowed to the general rules of the Treaty by Article 106(2) TFEU, which provides that “[u]ndertakings entrusted with the operation of services of general economic interest or having the character of a 195 Ibid, recital 8.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 114 revenue-producing monopoly” are subject to the Rules on Competition, “in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them”. The derogation from the Rules on Competition has been strictly construed by both the Commission and the Courts, and is allowed to the extent to which the performance of particular tasks assigned to such undertakings, and to the economic equilibrium of specific services operated in general economic interest, is not obstructed. In the Corbeau Case,196 the Court held, in paragraph 17, that: “… the obligation on the part of the undertaking entrusted with that task to perform its services in conditions of economic equilibrium presupposes that it will be possible to offset less profitable sectors against the profitable sectors and hence justifies a restriction of competition from individual undertakings where the economically profitable sectors are concerned.” Albeit the “services” alluded to in Article 106(2) TFEU are not expressly indicated as applying to particular sectors, but they are considered essential and left to the Member States for the general economic interest. These “services” can be defined in the sectors of energy supply, postal services, telecommunications, transport, water supply and residual removal services etc. However, the Commission has clarified the scope and criteria of the application of the Rules on Competition in these areas in a Communication197 it published on this subject. Whether the public undertakings are provided for or not in Article 106, Articles 101 and 102 TFEU are applicable to public undertakings. So, the enforcement remains with the rules of the Commission and Regulation No. 1/2003 and is also applicable to public undertakings. In addition, Article 106(3) enables the Commission to address, if necessary, adequate directives or decisions to Member States to ensure the applicability of Article 106. Whereas, the exercise of the measures of Member States granted by Article 106(3) to assess the compatibility of the rules contained in the Treaties is not coupled with the responsibility of actions taken by the Commission, the Commission, here, has a large amount of discretion under Article 106(3). Under Article 106(3), directives or decisions are not limited to particular cases. Directives can be general in nature, such as the transparency in financial relations 196 Case C-320/91, Criminal proceedings against Paul Corbeau, [1993] ECR I-02533, 19 May 1993. 197 Commission Communication – Services of general interest in Europe (96/C 281/03), OJ C 281, 26.09.1996, amended by Commission Communication – Services of general interest in Europe (2001/C 17/04), OJ C 17, 19.01.2001.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 115 between Member States and public undertakings.198 They can also apply to opening up certain markets, such telecommunications.199 A number of cases, such as transport, was excluded originally from European competition law. This has now been provided for by Article 106(2) in the scope of exemption for public undertakings. In recent years, these exclusions have been reduced because, in the view of the Commission, this increases the competition sphere in the areas of telecommunications, postal services, transport, energy, insurance and audio-video media by introducing measures of liberalisation. Likewise, the Commission has issued directives to manage the granted public supply and public works contracts, in order to achieve the benefits of free competition in the scope of relevant public procurement in the internal market. These directives lay down detailed procedures for advertising and conferred contracts, including the compensation of damages paid by authorities acting in infringement of such procedures200 (Steiner, 2003 pp 400-2). In spite of the services of general economic interest presently obtaining higher effectiveness and the trend of privatisation, such rules, particularly the rules of such managerial exemption, are unlikely to be relaxed. Moreover, Article 14 of the TFEU highlights the importance of public services. It indicates that it operates without prejudice to Article 93 (public transport), Article 106 (public undertakings) and Article 107 (states aid) of the TFEU, and the existing case law presumed from and related to them cannot be disturbed. When the Rules on Competition apply to the general economic interests, there is a distinction made between infrastructure and services provided. Albeit it is difficult to establish additional infrastructure services to compete with the existing one, competition conditions can be created in the perspective of services provided. Otherwise, rivals have no chance or find it extremely difficult to enter the same service market quickly and/or without huge financial support. Therefore, the Commission has developed the isolated concept of infrastructure from commercial activities. Thus, infrastructure becomes a way to create a competitive services market. When an owner of exclusive rights possesses specific infrastructure, for example a telecommunication or electricity network, the monopolist may confer the right of use to third parties. This is the principle of liberalisation applying to the 198 Directive No. 80/723, on the transparency of financial relations between Member States and public undertakings, [1980] OJ L195/35, whose validity was upheld by the Court in Cases 188-190/88, France, Italy and United Kingdom v. Commission, [1982] ECR 2545, [1982] 3 CMLR 144. 199 Directive No. 88/301 on competition in the markets in telecommunications equipment, [1988] OJ L 131/73. 200 See Directive No. 89/655, concerning the minimum safety and health requirements for the use of work equipment by workers at work (second individual Directive within the meaning of Article 16(1) of Directive 89/391/EEC), OJ No. L 393/13, 30.11.1989, p 33.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 116 following sectors: energy, postal services, telecommunications and transport. Whilst the energy and transport of the EU are said to be liberalised, all related to agriculture have been liberalised following the Council Regulation No. 26 of 4 April 1962 in force. This Regulation complies with the Rules on Competition under certain conditions. In short, the liberalisation policy of the Commission is provided by Article 106(3) TFEU, which allows the Commission to address directives or decisions to Member States. The Commission also supervises Member States to ensure the liberalisation or exclusive rights are compatible with the provision of Rules on Competition of the TFEU. 3. State Aid 3.1. General purposes of State Aid policy State aid, which is a kind of public subsidies and other forms of aid to undertakings, is generally deemed an effective instrument of public policy of Member States of EU without interfering with the free competitive market, viz. it is compatible with the objectives of a single market as laid down in the Treaties, to ensure that competition and inter-state trade are not distorted by States’ intervention. The fact that state aid is not only a subsidy was stated, in Case 30/59201 in 1961, by the former ECJ that: “it embraces not only positive benefit, such as subsidies themselves, but also intervention which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without, therefore, being subsidies in the strict meaning of the word, are similar in character and have the same effect”. Since the objects of the regulation concerned are government rather than firms that exercise restrictive practices, monopoly and merger, state aid has characteristics that are different from other policies of competition. Thus, state aid control is enforced by the DG Competition, in which one of the Deputy Directors-General is responsible for State Aid policy area, as shown in Diagram 3.1 in Chapter 3, which tackles particularly and exclusively the matters related to state aids (Cini, 1998, p 135). Nevertheless, the Commission does not allow the Government to confer any aid to undertakings which have no chance of surviving in the market, but only agree to provide assistance to those which temporarily sink into financial difficulty and can eventually become more competitive. 201 Case 30/59, De Gezamenlijke Steenkolenmijnen in Limburg v Hight Authority of the ECSC, [1961] ECR 3.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 117 In order to guarantee the normal functioning of the state aid policy, state aid control has been presented, aiming at preventing the use of public resources from distorting intra-Union competition between firms. The Commission may only allow granting of state aid when its positive effects outweigh the negative effects and it achieves the objectives of a single market. For instance, the Commission may approve aid on positive effects of scientific research and development, or environmental protection purposes, etc. Practically, there are various advantages of state aid, including attraction of investors entering least developed countries (LDCs) and developing countries; increment of efficiency of undertakings in certain private sectors; assistance of undertakings engaging in developed countries, existing industrials which are declining but must be preserved; encouraging development of new and high technology requiring large capital investments, etc. Besides that, state aid sustains and protects employment in periods of politico-economic instability. Hence, state aid policy reduces the freedom of Member States in establishing their unilateral industrial strategies, as Cini (1998, p 135) stated that “state aids policy is clearly the most original one in the EU’s Competition Policies”. In the SFEI v La Poste Case,202 the ECJ observed, in paragraph 58, that: “[t]he aim of Article 92 of the Treaty [now Article 107 TFEU ] is to prevent trade between Member States from being affected by advantages granted by public authorities which, in various forms, distort or threaten to distort competition by favouring certain undertakings or certain products. … The concept of aid thus encompasses not only positive benefits, such as subsidies, but also interventions which in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, without therefore being subsidies in the strict sense of the word, are of the same character and have the same effect. …” In this case, state aid is provided for in the provision of the TFEU, which adopts a policy of socio-economic cohesion, and has played a pivotal role in the creation and maintenance of the internal market. This is because state aid possesses the means of reducing disparities between the development levels of various regions, and of avoiding the deterioration of least favoured regions. Also for these reasons, states aid policy is a supranational policy which does not exist in any national context and instead creates an extraordinary system of supervision of state aid. Consequently, it is not considered conventionally as part of any national 202 Case C39/94, Syndicat français de I’Express international (SFEI) and others v La Poste and others, [1996] ECR I-03547, 11 July 1996.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 118 competition policy. Empirically and practically, state aid policy is an atypical part of the competition regime in the Union. In the TFEU, the provisions related to State aid are Articles 107 to 109. In principle, the TFEU represents the general prohibition of State aid. However, it can be seen in certain circumstances that state interventions are needed for an effective functioning and just economy. In this regard, the provision of State aid in the Treaty reserves some space for the objectives of State aid which are compatible with the internal market. These objectives of State aid are provided for in a series of secondary legislations which outline exemptions to the general prohibition. Certainly, the Commission monitors and assesses from time to time these legislations to ensure they are compatible with the development of the EU. Ergo, the legal framework of State aid is revised regularly to improve its effectiveness, to reduce unnecessary State aid, and to respond in a better way to targeted State aid in order to boost the economy of the enlarging EU. It is highlighted that when a new legislation related to State aid is adopted in a Member State, the State aid in question must be applied to exemptions to the general prohibition and must have exclusivity. In addition, its implementation can only be carried out after the approval of the Commission. 3.2. The Structure and Applicability of Article 107 of the TFEU In order to curb state aid and stipulate transparency for permissible aids, Articles 107 to 109 of the TFEU deal with State aid. Article 107 TFEU sets out the principles of exclusivity of State aid that are compatible with the internal market. 3.2.1. Aids incompatible with the internal market Article 107(1) lays down the general principle of exclusivity of State aid and the criteria of incompatibility with the internal market are defined broadly and not exhaustively. Article 107(1) provides that: “[s]ave as otherwise provided in this Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the internal market.” For the purposes of the TFEU, the State aid was defined legally by the Court in paragraph 31 of Case 61/79,203 which stated that the ex Article 92(1) [now Article 107(1) TFEU]: 203 Case 61/79, Amministrazione delle finanze dello Stato v Denkavit italiana Srl., [1980]
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 119 “… refers to the decisions of Member States by which the latter, in pursuit of their own economic and social objectives, give, by unilateral and autonomous decisions, undertakings or other persons, resources or procure for them advantages intended to encourage the attainment of the economic or social objectives sought. …” Before the interpretation of that judgment, State aid can be understood as a policy instrument of the government to moderate the socio-economic situation of specific undertakings or persons, both natural and legal, which have relevant financial needs. It was not specifically outlined what forms of aid are prohibited by measures of State intervention, but only their effects are defined in paragraph 1 of the provision. Earlier in 1963, a list of certain useful forms of aid was given by the Commission replying to a Written Question No. 48 by Mr Burgbacher.204 Forms of aid were listed additionally, but not exhaustively afterwards in 7th Survey on State Aid in the European Union in the manufacturing and certain other sectors, issued on 30 March 1999. In reference to Article 107(1) TFEU, “any aid granted by a Member State or through State resources in any form whatsoever” gives a restrictive interpretation, in lato sensu, to the Commission and it has discretion to decide whether undertakings’ practices are prohibited according to their effects. The provision provides clearly that, if governmental measures adopted to confer benefits and favours to undertakings with finances or resources are not originated from the public accounts of States, the measures are not covered by the scope of the provision. However, the Commission and the Court have found some ways to clarify what is covered by rules on aids, whilst the TFEU is rather vague in defining state aid. Ergo, in the Sloman Neptun Case,205 German law established a register system of shipping which permitted that ships navigating with a hoisted German flag could escape completely from the rigorous German labour law by employing non-EC crew. This was claimed as an effect of aid to relevant ship owners who employed cheap manpower. The Court held, in its paragraph 19, that: “… advantages granted from resources other than those of the State do not fall within the scope of the provisions in question. The distinction between aid granted by the State and aid granted through State resources serves to bring within the definition of aid not only aid granted directly by the State, but also aid granted by public or private bodies designated or established by the State.” ECR 1205, para 31. 204 OJ 125, p.2235/36, 17 August 1963. 205 Joined Cases C-72/91 and C-73/91, Firma Sloman Neptun Schiffahrts AG v Seebetriebsrat Bodo Ziesmer de Sloman Neptun Schiffahrts AG, [1993] ECR I-00887.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 120 This perspective was also held in the Epifanio Viscido v Ente Poste Italiane Case,206 which related to provisions giving dispensation to Poste Italiane from the normal recruitment contract of Italian law, in which the employment period was not limited. These flexible contract terms did not involve any State resource, directly or indirectly, to the undertaking. In paragraph 16 of the Opinion for Advocate General Jacobs, he noted: “[i]t might be asked why, given their potential effect on competition, Article 92(1) [now Article 107(1) TFEU] does not cover all labour and other social measures which by virtue of being selective in their impact might distort competition and thereby have an equivalent effect to State aid. The answer is perhaps essentially a pragmatic one: to investigate all such regimes would entail an inquiry on the basis of the Treaty alone into the entire social and economic life of a Member State.”207 As the social service character of the postal service could not be excluded from being classified as an aid provided for in Article 107(1) TFEU, the Commission has published guidance 208 on determining the certain types of measures which reduced labour costs and constitute State aid. Besides that, another factor stipulated in Article 107(1) of aid is deemed “by favouring certain undertakings or the production of certain goods”. Thus, it is necessary to draw a line to distinguish general measures of economic policy and measures giving favours to particular undertakings or industrial sectors. For instance, in the Joined Cases 6/69 and 11/69 Commission v France,209 the Court held, paragraph 20, that: “[a] preferential rediscount rate for exports, granted by a State in favour only of national products exported and for the purpose of helping them to compete in other Member States with products originating in the latter, constitutes an aid within the meaning of Article 92 [now Article 107 TFEU] the observance of which it is the Commission’s task to ensure”. In this sense, in spite of the discount applying solely to all national products, a preferential rediscount rate must be deemed as an aid, within the provision of the 206 Joined Cases C-52/97, C-53/97 and C57/97, Epifanio Viscido (C-52/97), Mauro Scandella and Others (C-53/97) and Massimiliano Terragnolo and Others (C-54/97) v Ente Poste Italiane, [1998] ECR I-02629. 207 Ibid, Opinion, para 16. 208 Commission letter to the Member States, SG(96)D/8034, Notice on monitoring of State aid and reduction of labour costs, (97/C 1/05), on June 28, 2001. 209 Joined Cases 6/69 and 11/69, Commission of the European Communities v French Republic, [1969] ECR 523.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 121 Treaties, where the exported national products compete with the products of other Member States. The Advocate General Roemer of these joined cases gave an opinion210 that some undertakings would produce only for the domestic market, so that not all undertakings could claim the preferential rediscount rate for exports. The distinction between general measures and aids is not determinate. General measures are in the scope of a particular region, industry or scale of undertaking which is clearly determined. Aids are not defined and enumerated precisely in the provision of resources where criteria come out universally. To such cases, the determinants of aids depend upon judicial discretion. In DMT Case,211 the Court said, in paragraph 27, that: “… where the body granting financial assistance enjoys a degree of latitude which enables it to choose the beneficiaries or the conditions under which the financial assistance is provided, that assistance cannot be considered to be general in nature.” The last factor determining whether an aid falls into the provision is that the aid “distorts or threatens to distort competition …, in so far as it affects trade between Member States”. In the Philip Morris Holland v Commission Case,212 the Court intended to enunciate a per se rule concerning the effect on inter-State trade which resulted from aids conferred to making a cigarette manufacturer close down one factory in the Netherlands and to expand production at the remaining one. In this regard, the Court held, in paragraph 11, that: “[w]hen State financial aid strengthens the position of an undertaking compared with other undertakings competing in intra-Community trade the latter must be regarded as affected by that aid.” Practically, the aid could be financially and relatively small but it could still be regarded as distorting competition as inter-State trade is affected, which was held by the Court in its judgment of Joined Cases Spain v Commission.213 In this regard, the Court determined whether the de minimis rule which was used for the purposes of Articles 101 and 102, applied equally to state aid regime, making the Court consider the prospect of the size of undertaking and the aid. Afterwards in 1996, the Commission issued a Notice on the de minimis rule, which applied a limited form of this principle to State aid. In the Notice, the ceiling for aid covered by the de 210 Ibid, Opinion of Advocate General Roemer, [1969] ECR 552. 211 Case C-256/97, Déménagements-Manutention Transport SA (DMT), [1999] ECR I-3913. 212 Case 730/79, Philip Morris Holland BV v Commission of the European Communities, [1980] ECR 2671. 213 Joined Cases 278/92, 279/92 and 280/92, Kingdom of Spain v Commission of the European Communities, [1994] ECR I-04103.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 122 minimis rule was ECU 100,000 over a three-year period beginning when the first de minimis aid was granting. This ceiling applied to all kinds of aids except exports. And such aid did not need to be notified in advance to the Commission. In 1998, the Commission strengthened this legally in the form of a “soft law” binding by Council Regulation,214 which gave authority to the Commission to exempt, in block, certain aids falling into the de minimis rule. 3.2.2. Exceptions ipso jure The general principle of prohibition of state aid provided for in paragraph 1 of Article 107 TFEU is qualified by “exceptions ipso jure” enumerated in paragraph 2, which provides that the three categories, infra, of aid are compatible with the internal market: (A) Point (a) of Article 107(2) TFEU provides that an “aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned” The ambit of this aid exception is limited to the aid per se designated to products for final consumption. For instance, in Benedetti v Munari,215 the Member State intervened to buy wheat and then re-sold it to produce bread, at a price lower than the target price on the Union market, which was available to consumers. Such intervention might be qualified to the provision, insofar as the intervention did not jeopardise the objectives of the common organisation in the market. (B) Point (b) of Article 107(2) TFEU provides that an “aid to make good the damage caused by natural disasters or exceptional occurrences” Aid to make good the damage caused by natural disasters, in the force majeure, is an obvious exemption from the general principle implied in Article 107(1) TFEU, rather than merely a promotion of the development of undertakings or production of goods. 214 Council Regulation No. 994/98 of 7 May 1998 on the application of Articles 92 and 93 of the Treaty establishing the European Community to certain categories of horizontal State aid, [1998] OJ L 142/1, 14 May 1998. 215 Case 52/76, Luigi Benedetti v Munari F.lli s.a.s., [1977] ECR 163.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 123 (C) Point (c) of Article 107(2) TFEU provides that an “aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point” This provision was applied completely with full effect throughout Germany and has been implemented gradually in restrictive ways after the unification of Germany in 1990. The provision of the discretionary exception is still appropriate to cope with some remaining problems. However, this prospect was argued in Saxony and Volkswagen Cases.216 Due to provision 107(3) TFEU being unchanged in the Maastricht and Amsterdam Treaties, it was argued that the purposes of it ought to be extended to the present market economy. The former CFI rejected this argument and stated that the economic difficulties of Germany were not caused by the then division, but by the nature of its socio-politico-economic system which then applied to the State. Hence, the Commission had a view that new aid conferred by investment in the vehicles industry was to be applied for the provision of 107(3) TFEU instead of Article 107(2)(c) TFEU. The unification of Germany occurred over 25 years ago, so this provision, in fine¸ has foreseen that Germany reached advanced economic development without uneven growth of certain areas. The Council can terminate, at any time, aid granted to these areas by annulment of this provision. 3.2.3. Discretionary exceptions by the Commission Article 107(3) TFEU stipulates broadly the discretion of the Commission to decide whether an aid is compatible with the internal market. In this regard, Arnull (2000, p 690) pointed out that Advocate General Capotorti has explained in Philip Morris Holland Case217 as “implying an assessment of an economic, technical and policy nature”.218 The Court held, in paragraph 24 of the judgment, that “the Commission has a discretion the exercise of which involves economic and social assessments which must be made in a Community context”. The premise of the Commission which applies discretionary exceptions for aid measures is to ensure aids which facilitate the promotion of objectives defined for the Union and the persistence of internal market are not hindered. The 216 Joined Cases T-132/96 and T-143/96, Freistaat Sachsen, Volkswagen AG and Volkswagen Sachsen GmbH v Commission of the European Communities, [1999] ECR II-03663. 217 Case 730/79, Philip Morris Holland BV v Commission of the European Communities, [1980] ECR 2671. 218 Opinion of Advocate General Capotorti, [1980] ECR 2701.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 124 Commission solely has authority to approve aids which reach the objectives listed in Article 107(3) TFEU. Aids with different objectives may be determined to be compatible with the internal market as follows: (A) Point (a) of Article 107(3) TFEU provides that an “aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation” This provision sets out the aid to two regions. Firstly, it is a regional aid to the area where there is economic difficulty, which falls for the consideration under this particular exception rather than under the general exception of regional aid implied in point (c), infra. In the Germany v Commission Case,219 the Court held, in paragraph 19, that “the use of wordings of ‘abnormally’ and ‘serious’ in the exemption contained in Article 92(3)(a) [now Article 107(3)(a) TFEU] shows that it concerns only areas where the economic situation is extremely unfavourable in relation to the Community [now Union] as a whole”, viz., it restricted the coverage of point (a) by requiring an implementation of the assessment of the socio-economic situation whether an aid was appropriate in the Union context, rather than at the national level. Secondly, it is a regional aid, which is added newly in the Treaty of Lisbon, to the regions taking into account their structural, social and economic situations, such as their remoteness, insularity, small size, difficult topography and climate, economic dependence on a few products, the permanence and combination of which severely restrain their development. (B) Point (b) of Article 107(3)TFEU provides that an “aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State” This provision contains an exception of aid in two different types. For the first type, the Court recognised, in paragraph 22 of Joined Cases 62/87 and 72/87,220 that “[t]he Commission has based its policy with regard to aid on the view that a project may not be described as being of common European interest for the purposes of Article 92(3)(b) [now Article 107(3)(b) TFEU] unless it forms part of a transnational European programme supported jointly by a number of governments of the Member States, or arises from concerted action taken by a number of Member States to combat a common threat such as environmental pollution”. For 219 Case 248/84, Federal Republic of Germany v Commission of the European Communities, [1987] ECR 4013. 220 Joined Cases 62/87 and 72/87, Exécutif regional wallon and SA Glaverbel v Commission of the European Communities, [1988] ECR 1573.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 125 the second type, Arnull (2000, p 691) stressed that the Commission used this provision as a “safety valve” to solve the economic recession of Member States followed by the occurrence of the energy crisis in 1974. In this regard, the economic disturbance appeared in the entire State rather than a region or a sector. (C) Point (c) of Article 107(3)TFEU provides that an “aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest” Compared with Article 107(3)(a) TFEU, this provision is more important to the general principle of Article 107(1) TFEU and it enables the Commission to authorise aids to facilitate the development of particular sectors or particular region of a Member State. The sectors are those industries in economic difficulties, such as textiles, motor vehicles and coal and steel, and the sectors of agriculture, fisheries and transport. In analysing the discretion conferred by this provision to the Commission, its competence is to authorise an aid to facilitate the development of the economic activities and areas in question, but, by the proviso, in fine of the provision, such aid must not cause any adverse effects on trading conditions against the common interest, in relation to the Union context. The “development” has a positive meaning in sectoral activities and regions in relation to economic progress and advancement. Hence, aids are not addressed to particular undertakings in terms of financial or material assistance, otherwise they do not fall within the exception conceived in Article 107(3)(c) TFEU. In this regard, aid receivers can unscramble potential difficulties and return their competitiveness in the sector and region where they locate. In other words, the objective of aid must develop the relevant sector or region, but not a particular undertaking within that sector or region. Comparing point (a) with point (c) of Article 107(3) TFEU, in paragraph 19 of Case 248/84 Germany v Commission,221 the Court held that the latter provision “is wider in scope inasmuch as it permits the development of certain areas without being restricted by the economic conditions laid down in Article 92(3)(a) [now Article 107(3)(a) TFEU]” and “gives the Commission power to authorise aid intended to further the economic development of areas of a Member State which are disadvantaged in relation to the national average”, as is distinct from the Union. 221 Case 248/84, Federal Republic of Germany v Commission of the European Communities, [1987] ECR 4013.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 126 As stated in point 3.6 of Guidelines on National Regional Aid:222 “In contrast to Article 92(3)(a) [now Article 107(3)(a)], where the situation in view is identified precisely and formally, Article 92(3)(c) [now Article 107(3)(c) TFEU] allows greater latitude when it comes to defining the difficulties of a region that can be alleviated with the help of aid measures. The relevant indicators do not therefore necessarily boil down in this case to standards of living and underemployment. In any case, the appropriate framework for evaluating these difficulties may be provided not only by the Community [now Union] as a whole but also by the relevant Member State in particular.” Point 3.7 goes on to state that the regional aid covered by Article 107(3)(c) TFEU must form part of a coherent regional policy of the Member State. Whereas it is intended for regions which are less disadvantaged than those regions included in Article 107(3)(a) TFEU. Such regional aid granted is exceptional and restrictive merely to a very limited degree. In such situations, there is only a small part of the national territory of a Member State that may prima facie qualify for such aid. Hence, the population covered in regions falling within Article 107(3)(c) TFEU must not exceed 50% of the national population not covered by the derogation under Article 107(3)(a) TFEU. The proviso, in fine of the provision, which imposes a limit to sectoral or regional aid to an extent of that market mechanism can be disturbed for the sake of socio-economic benefit, is deemed to guarantee fair competition in terms of maintenance of the common interest at the Union level. Likewise, such aid must not cause any adverse effects on trading conditions against the common interest, in relation to the Union context. (D) Point (d) of Article 107(3) TFEU provides that an “aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest” This point (d) of ex Article 87(3) TEC [now Article 107(3) TFEU] was inserted, compared with previous points, into the Treaty on European Union223 entering into effect on 1 November 1993. Before that, the application of culture and heritage was considered under point (c) supra citato. The Commission has used the point (d) for several cases, inter alia of books. In the 28th Report on Competition Policy 1998, paragraph 275, the Commission authorised an aid, to Coopérative 222 Guidelines on National Regional Aid (98/C 74/06), [1998] OJ C74/09. 223 Treaty on European Union (92/C 191/01), [1992] OJ No C191, 29 July 1992.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 127 d’Exportation, Livre Français (CELF), for supporting books to non-French-speaking countries, provided that it was intended to offset the extra cost involved in handling small orders. However, this Commission decision was partially annulled by the former CFI on the grounds that the Commission had not analysed completely and appropriately the competition in the book market in Community level. The derogation in point (d) was an expressly applied cultural objective, which aid pursued, but not other, commercial, activities of CELF, to this decision. The proviso of point (d) is the same as point (c), with the particular objective of competition in the common interest with the specific impact of aid measures in relation to the aspects of broadcasting, media and culture. 3.3. The Application of Article 107 of the TFEU We can see, on the basis of the discussion supra, that if state aid fulfils the conditions provided for by Article 107(1) TFEU, but falls within the exceptions enumerated in paragraphs 2 or 3, or exemption made by the special power of the Council, state aid is not regarded as incompatible with the internal market. Furthermore, the application of Article 107(3) needs an assessment of the socio-economic situation in the Union as a whole. The power of exemption used by the Council is the authorisation used for “exceptional circumstances” provided for in the third subparagraph of Article 108(2) TFEU,224 and which is described as one of the “safety valves” of the Treaties. The meaning of exceptional circumstances is abstract and hard to define. However, Advocate General Cosmas had an opinion in Case 122/84225 and suggested that exceptional circumstances are “something extraordinary and unforeseen, or at least something not permanent or continuous and of course something other than normal”. In that Case, the Commission deemed that the envisaged aid was incompatible with the internal market acting in accordance with 108(3)226 TFEU, but the Council took 224 Article 108(2), subparagraph 3, of the TFEU reads as: “On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from the provisions of Article 107 or from the regulations provided for in Article 109, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known.” 225 Case 122/84, Kenneth Scrivner and Carol Cole v Centre public d’aide sociale de Chastre, [1985] ECR 1027, 27 March 1985. 226 Article 108(3) of the TFEU reads as: “3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 128 the view, pursuant to the third subparagraph of Article 108(2) TFEU, that there existed exceptional circumstances, so that the aid was compatible with the internal market. The Treaties adopt an approach to make the Union institutions responsible primarily for giving effect to Article 107 TFEU and machinery for this purpose is provided for in Articles 108 and 109 TFEU. Nevertheless, the courts of Member States may not apply Article 107 independently. In the Steinike & Weinlig v Germany Case,227 the Court held, in paragraph 10, that: “[t]he parties concerned cannot … simply, on the basis of Article 92 [now Article 107 TFEU] alone, challenge the compatibility of an aid with Community [now Union] law before national courts or ask them to decide as to any compatibility which may be the main issue in actions before them or may arise as a subsidiary issue. There is this right however where the provisions of Article 92 [now Article 107 TFEU] have been applied by the general provisions provided for in [now Article 109 TFEU] or by specific decisions under Article 93(2) [now Article 108(2) TFEU]”. Under this interpretation, Article 107 TFEU has no direct effect. Ergo, national courts have not interpreted Article 107 TFEU and made decisions concerning an aid introduced by a Member State which do not obtain clearance under Article 108(3) TFEU, as constituting an aid. In this regard, national courts need to provide effective protection of an individual’s rights granted by the machinery of Articles 108 or 109 TFEU, and need to seek assistance from the Commission on the basis of a Notice in the field of state aid.228 3.4. The Machinery of Articles 108 and 109 of the TFEU Article 108(1) TFEU provides for the continuity of the “existing aid” which the Commission shall keep under constant review and shall propose any appropriate measure required by the progressive development or by the functioning of the internal market. It requires that aid must be revised to be compatible with the internal market and in conformity with its objectives. compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision.” 227 Case 78/76, Steinike & Weinlig v Federal Republic of Germany, [1977] ECR 595. 228 Notice on Cooperation between national courts and the Commission in the state aid field, [1995] OJ C312/8, 23 November 1995.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 129 Article 108(2) TFEU provides for the procedure to maintain the state aid granted by a state or through state resources. The Commission must give notice to parties concerned to submit their comments. If the Commission finds that the aid is not compatible with the internal market or such aid is being misused, it must order the state to abolish or alter the aid within a specified time period. If the Member State does not comply with this decision, the aid in question may be brought before the General Court. Article 108(3) TFEU provides for both new aids and existing aids that must be commented on by the Commission before implementing. If the Commission finds the aid is incompatible with the internal market, it will install investigation procedures outlined in Article 108(2) TFEU. Article 109 TFEU provides that the Council “may make any appropriate regulations” based on the Commission proposal and acting on the qualified majority of the Council itself, and it “may determine the conditions in which Article 108(3) shall apply and the categories of aid exempted from this procedure.” 4. International Cooperation International cooperation is a policy area of Competition Policy which was formed to reflect the increasing globalisation of the world economy and acknowledging that mergers and cartels are internationalising and have transnational characteristics. In other words, this did not exist as a designated policy and was known as Relations with Third Countries.229 The EU recognised that the absence of international rulings on restrictive practices had become a priority concern for any government and international organisations that have been trying hard to promote an open market economy. Therefore, the policies’ scopes were varied with the cooperation between the EU and two key international organisations – WTO and OECD, and between the EU and countries or regions outside the EU, which have established bilateral relations. At that time, some countries were also candidates to enter the EU. The purpose of this policy is to combat jointly opaque private restrictive practices. It tends to establish an international competition regime, which removes the barriers that prevent the emergence of a set of international competition rules, even though it is not agreed upon universally. For this reason, the EU, which has 229 Pursuant to the information available, on April 2004, on the official website of EU, the policy area of “International” was not clearly defined as available presently, which contained two levels of cooperation relationships: firstly, it was the cooperation relationship between the EU and other countries or regions outside the EU; secondly, it concerned the Commission relations with various international organisations, networks or groups of countries concerning competition policy and enforcement, such as the International Competition Network (ICN), the Organisation of Economic Cooperation and Development (OECD) and the World Trade Organisation (WTO).
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 130 fully-fledged provisions in competition, as a ruling model of competition, promotes fair trade jointly with the abovementioned organisations and other countries with the objective of establishing internationalised competition regulation. However, this cooperation tends to be bilateral and multilateral. Either bilateral or multilateral, it is clear that the internationalisation comes in different forms and levels of cooperation. Practically, it might be argued that a global competition regulator will eventually emerge through the regionalisation of national competition policies and by the internationalisation of regional competition regimes. This section seeks to clarify succinctly the bilateral and multilateral relations of the EU with the WTO, OECD, and other countries which have more influence in competitive activities. 4.1. Cooperation with International Organisations The competition policies of different international organisation have something in common, but the models of their policies have a number of potential conflicts. Therefore, these organisations know clearly that an agenda of cooperation and harmonisation of divergent and inconsistent policies is needed. The Commission and a number of national competition authorities and international organisations have joined to promote and encourage measures of harmonisation and cooperation. Albeit there is a long way to go to achieve an international competition code, a consensus which is driven from recognising the existing possible approaches is able to address uncontrolled transnational restrictive practices; moreover, international pressure has been imposed onto the international economic agenda (Cini, 1998, p 197). Especially, there are two international organisations, WTO and OECD, which have been the essential arenas for discussing internationalisation. However, they are still negotiating the recognised issues and have not taken any real action. 4.1.1. The World Trade Organisation The World Trade Organisation (WTO), which replaced the General Agreement on Tariffs and Trade (GATT) in 1995, was seen to be a more appropriate international platform to discuss competition issues. Nevertheless, GATT was never involved seriously in this policy area. In the Havana Charter 1947, GATT failed to create an International Trade Organisation which included substantially antitrust rules. It meant that GATT was an international trade-driven entity, without any anti-competition provisions. Nothing changed until the mid-1980s in the viewpoint amongst GATT members in terms of the establishment of competition policies. In 1992, an International Antitrust Code Working Group was established and was mainly composed of German anti-trust experts. The Working Group introduced a draft International Antitrust Code and submitted it to
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 131 GATT in the second half of 1993. The Code, which advocated minimum standards for competition rules which covered commonly the horizontal and vertical agreements, mergers and dominant positions, recommended the creation of an independent International Antitrust Agency and a Disputes Settlement Panel under the WTO to take effect in 1995. Since then, WTO started to be involved marginally in competition issues, which lie at the heart of the trade being promoted by it. In the first two years after its establishment, WTO only dealt with specific trade issues until the Singapore ministerial meeting, where the ministers agreed to establish several working groups to deal with competition policy. This idea was based on the famous Van Miert Report.230 This report suggested the idea of establishing an international antitrust code, supra citato, which was considered unrealistic. At the same time, it introduced another idea, in the transitional period, whereby the Member States of WTO should be encouraged to develop their owned effective competition policies and bilateral antitrust agreements (Cini, 1998, pp 199-200). 4.1.2. The Organisation for Economic Cooperation and Development The establishment of the Organisation for Economic Cooperation and Development (OECD) gives a platform to its members to study and discuss economic policies, enabling the policies to achieve the best enforcement; and to encourage cooperation between its member states, inter alia of transnational implications in the area of national policies. Early in the 1960s and 1970s, the member states of OECD outlined their opposition to competition-related affairs. At that time, the competition policy was defined as applying to domestic economic affairs exclusively. In the 1990s, these policies began to be brought up on an international level. Before this changing circumstance, the role of OECD was determined clearly by the works of Competition Law and Policy Committee (CLP). The members of the CLP included the national competition authorities of member states and the then DGIV of EC (now DG Competition of EU). It worked mainly to publish reports and provide information related to competition affairs. The most influential document was the Memorandum on Cooperation between Competition Authorities in 1986, which brought up cases concerning competition regulations and international cooperation of antitrust affairs. Albeit the harmonisation and internationalisation advocated by the document did not achieve a huge success, it did result in member states being persuaded to implement and enforce competition policies per se. In the mid-1990s, a number of key issues was added to the agenda of CLP, including: the convergence of competition policies of member states; interaction between international trade policies and competition policies, which led to the 230 COM (95) 359 final.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 132 setting up of the Joint Group of Trade and Competition; interaction between economic rules and competition, which was important for member states regulating again their regimes; and, international competition to be implemented by competition officials. The Commission participated fully on the agenda and relevant works, for instance, of measures of public supports; in examination of the role advocated by competition authorities; in discussion of infrastructure projects, SMEs, liberal professionals and undertakings in dominant position, etc. Thereof, the OECD turned to be a contact part of the DC Competition, participating constantly in international affairs related to European competition policy (Cini, 1998, pp 197-8). 4.2. Bilateral Cooperation and the Extraterritoriality Principle Before stepping towards a unique international antitrust code resulting from multilateral cooperation, bilateral cooperation between regional organisation and countries is a better way for transnational competition policies to combat cross-border restrictive practices, rather than pure unilateral methods of international competition enforcement which is an inappropriate way to deal with transnational practices and would provoke retaliation from infringed rival states. This subsection outlines some landmarks of bilateral cooperation of the EU with other countries which are economically stronger in trade and investment. Under the terms of bilateral cooperation agreements, competition laws of both states may generally apply to each other where the undertakings locate. Albeit the application of competition law to another state seems to impinge on the sovereignty of a state or territorial integrity, the cooperation agreement might comprise provisions allowing the extraterritorial application of competition law, even though Articles 101 and 102 TFEU do not provide expressly on the question of extraterritorial applicability. However, the concept of extraterritoriality been proved controversial, for instance, America has tended to solve difficulties of international trade by extraterritoriality which provoked frequent European criticism (Cini, 1998, p 200). De jure, the extraterritoriality principle does not exist in the purview of Treaties. It has been solely recognised by Commission decisions and judgments of the former ECJ. It was considered as a new way to regulate Union-related issues upon transnational firms. This principle appeared firstly in the Dyestuffs Case231 in 1969. The Commission investigated an alleged cartel between the manufacturers of dyes based on aniline. It was found that a subsidiary of the Imperial Chemical Industries Ltd. (ICI), located in Belgium, engaged in a concerted practice which infringed ex Article 81(1) TEC [now Article 101(1) TFEU]. It was considered that 231 Case 48/69, Imperial Chemical Industries Ltd v Commission of the European Communities (Dyestuffs), [1972] ECR 619.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 133 the subsidiary was instructed to do this by the headquarters of the undertaking incorporated in the United Kingdom which was not at that moment a member state of the EC. The judgment of the former ECJ did not take up the “effects doctrine” but rather the “single economy entity doctrine”, which was developed by the Community law, by which “parents and subsidiaries are considered to be one undertaking for the purposes of the application of the competition rules” (Jones, 2004, p 1249). In this regard, the judgment against the subsidiary imputed to parents, viz. the jurisdiction of the former ECJ applied, in this case, to undertakings outside the EC. However, it is possible to reduce the contention by introduction of “comity provisions” to bilateral cooperation agreement, as long as the Commission accepts this. But in earlier times, both the Commission and the former ECJ have rejected this approach. Afterwards, it appeared in the judgment of the Wood Pulp Case,232 the judgment of the former ECJ recognised in three points: firstly, the Commission did not infringe the competition rules applicable to the individual undertakings; secondly, the Commission did not infringe international law, as stated in paragraph 18 that “[a]ccordingly the Community’s jurisdiction to apply its competition rules to such conduct is covered by the territoriality principle as universally recognised in public international law”; thirdly, the argument based on the infringement of the principle of “non-interference” was rejected and as stated, in paragraph 22, that: “[a]s regards the argument relating to disregard of international comity, it suffices to observe that it amounts to calling in question the Community’s jurisdiction to apply its competition rules to conduct such as that found to exist in this case and that, as such, that argument has already been rejected.” Therefore, the former ECJ confirmed that ex Article 81(1) TEC [now Article 101(1) TFEU] could be applied extraterritorially based on the concept of extraterritorial jurisdiction which stands on the implementation of the agreements rather than its formation or effects. 4.2.1. Brief bilateral relationships of EU with US, Canada and Japan Presently, the EU has dedicated cooperative agreements with the United States,233 Canada234 and Japan235 on competition policy. Under these agreements, 232 Case 89/85, A. Ahlström Osakeyhtiö and others v Commission of the European Communities, [1998] ECR 5193. 233 Agreement between the Government of the United States and the Commission of the European Communities regarding the application of their competition laws, [1995] OJ L 95, 27 April 1995, p 47-52; Decision of the Council and the Commission of 10 April 1995 concerning the conclusion of the Agreement between the European communities and the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 134 the DG Competition and the national competition authorities, generally and contextually, exchange information in general matters, coordinate their enforcement activities, and cooperate on anti-competitive activities which adversely affect the common interest of the other party. The cooperation between the US with EU began in 1991 when a cooperative agreement entered primarily into force. 236 However, France challenged this agreement, and was supported by Spain and the Netherlands. It was found by the former ECJ that the Commission had no power to conclude and enter into agreements with foreign countries. Finally, the agreement was formally approved by a joint decision of the Council and Commission in 1995.237 Before this, the legal problem of the Agreement had not impeded its implementation on an informal basis. The decision provided, principally, for the issues which were: (i) each party should notify reciprocally to the other where the activities enforced by its competition authority might affect the important interests of other party (Article II); (ii) the parties agreed, in the common interest, to exchange information and to have regular meetings between competition authorities (Article III); (iii) the competition authorities of each party rendered assistance, in their enforcement activities, to competition authorities of the other party (Article IV); (iv) one authority might notify and request another party’s competition authority to take appropriate enforcement activities, such as “traditional comity” or “negative comity” (Article Government of the United States of America regarding the application of their competition laws, [1995] OJ L 095, 27 April 1995, p 45-46; and its corrigendum, [1995] OJ L 131, 15 June 1995, p 38-39; Agreement between the European Communities and the Government of the United States of America on the application of positive comity principles in the enforcement of their competition laws, [1998] OJ L 173, 18 June 1998, p 28-31; 234 Commission Decision of 17 September 1976 (76/753/Euratom), Competition-related extracts from the Framework Agreement for commercial and economic co-operation between the European Communities and Canada, [1976] OJ L 260, 24 September 1976, p 22; Council and Commission Decision of 29 April 1999 (1999/445/Ec, ECSC), Agreement between the European Communities and the Government of Canada regarding the application of their competition laws, [1999] OJ L 175, 10 July 1999, pp 49-60. 235 Agreement between the European Community and the Government of Japan concerning cooperation on anti-competitive activities, [2003] OJ L183, 22 July 2003, p 12-17; Council Decision, of 16 June 2003, concluding the Agreement between the European Community and the Government of Japan concerning cooperation on anti-competitive activities (2003/520/EC), [2003] OJ L 183, 22 July 2003, p 11. 236 The cooperation of the EU with the US is stated in Section 3 of Part II, Competition Policy in the New Trade Order: Strengthening International Cooperation and Rules, COM(95) 359 final, Brussels, 12 July 1995. 237 95/145/EC, ECSC: Decision of the Council and the Commission of 10 April 1995 concerning the conclusion of the Agreement between the European Communities and the Government of the United States of America regarding the application of their competition laws, [1995] OJ L95, 27 April 1995, pp. 47-52.
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 135 V); (v) each party took into account the important interests of the other party in the course of its enforcement activities, such as “positive comity” (Article VI). After four years of implementation, a second agreement, the so-called “Positive Comity Agreement”, was signed in 1998, which intensified cooperation to grant a waiver, in good faith, allowing exchange of protected information to other party. The success of the agreement supra citato encouraged the EC to cooperate with Canada with similar terms of agreement238 which entered into force on 29 April 1999. The principle of “positive comity” provided for by the EC-US cooperation agreement is also contained in the agreement with Canada. In 2003, the EC concluded a cooperation agreement with Japan239 which entered into force on 9 August 2003. The principle cooperative elements are reciprocal information of other’s important interests, coordination of enforcement activities, mutual consultations and exchange of non-confidential information. Afterwards, the EU has started to establish more competition dedicated agreements with other countries, namely Bosnia and Herzegovina, Brazil, China, India, Republic of Korea, Russia Federation and Switzerland.240 4.2.2. Bilateral cooperation with China The cooperation between the EU and China started formally in 2003, resulting from the Joint Statement adopted by the EU-China Summit 2001 and intending to intensify the discussion of both in the area of competition. Its objective is to establish a permanent forum, on a regular basis, for consultation and transparency between China and the EU, and to enhance the EU’s technical and capacity-building assistance to China concerning competition law. These discussions and consultations have increased the mutual understanding and mission and approaches of each entity. In that time, both parties reached a “Declaration on the start of a dialogue on competition by the EU and China” and signed, one year after, “Terms of reference of the EU-China competition policy dialogue”, enabling China to use the implementation experiences, in the area of competition, obtained by the EU, to define the very first comprehensive competition law. 238 Council and Commission Decision of 29 April 1999 concerning the conclusion of the Agreement between the European Communities and the Government of Canada regarding the application of their competition laws (1999/445/EC, ECSC), [1999] OJ L175, 10 July 1999, pp. 49-60. 239 Council Decision of 16 June 2003 concluding the Agreement between the European Community and the Government of Japan concerning cooperation on anti-competitive activities (2003/520/EC), [2003] OJ L183, 22 July 2003, pp 11-17. 240 Visited on 08 March 2016 in website: http://ec.europaeu/competition/international/ bilateral/
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 136 An important session of EU-China in competition dialogue was held in Brussels on 20 June of 2006, with a major agenda item being the discussion of a draft anti-monopoly law. 5. Conclusion The EU has been developing for over 50 years. Its economic strength approaches that of the US, but the economy of Asia, especially the emerging economy of China, is becoming larger. Thus together they form the tripod of economic powers in the world. In the view of the regionalised economy of Europe, the EU economy has grown significantly. The latest enlargements took effect on 1 May 2004, on 1 January 2007 and on 1 July 2013, increasing the Union, respectively, from 15 to 25, to 27 and then to 28 Member States. Those new Member States are all countries from Central and Eastern Europe, whose economic strengths are much lower than the original 15 Member States. Nevertheless, the non-negligible part is the rich resources, inter alia, of human and material resources, possessed by the new Member States. These resources supplement the shortages of the existing 15 Member States, increasing thereby the competitiveness of the EU as a whole in the arena of the global economy. Thus, the economy and development of the EU itself and its Member States facilitate the integral development of the entire EU. Therefore, the competition law and policy (CLP) accelerates the development of the EU and its Member States in harmonised rhythm, encountering, albeit occasionally, some obstacles. In the first place, it constrains the unhealthy and adverse economic powers of undertakings; in the second place, it allows the beneficial co-operations in the EU and between undertakings of Member States; in the third place, it opens up the concessionary undertakings of Member States enabling the privatisation of undertakings to confer better efficiency in the open market economy. In short, in the external aspect, the CLP grants an umbrella to the EU which facilitates its development. In the internal aspect, the CLP grants the coordination of activities between Member States and of the integral EU, and the healthy and free inter-state competition in conformity with the EU law and national laws, developing a common growth-oriented economy. This shows that the CLP develops its functions and effects that influence the economy of the EU. Meanwhile, it is provided with the catalytic functions to develop other EU policies, inter alias, of common commercial policy, energy policy, employment policy, environmental policy, industrial policy, and research and development policy etc. Hence, the CLP occupies, as always, an important position in the European Union law. This can be seen from a number of directives, regulations, decisions, and even case-law currently in force, ensuring the fair and effective operation of undertakings in the EU. Their focus is on determining policies relating to antitrust, cartels,
EU’s Competition Policy II: Rules, Interpretation and Application onMergers, Liberalisation, State Aid and International Cooperation 137 merger control, state aid, liberalisation and international cooperation. These also make the six competition policies effectively and perfectly applicable to the development of competitiveness of the EU and its Member States in the open market economy. It is noted that the Rules on Competition, as always, will continually occupy a vital position in the Treaties, and are even included contextually in the provision of its internal policies, with the aim of strengthening and developing the intermediate function of adjustment among other EU policies.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 138
139 PART II THE PRESENT LEGAL PROVISIONS RELATED TO FAIR COMPETITION IN MACAO
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 140
141 Chapter 6 The Legal Provisions which maintain Fair Competition in various sectors in Macao 1. Brief Evolution of the Economic Situation of MSAR Under the globalisation of the world economy, the economy of Macao is functioning as a free economic market under a capitalist system.241 As a result, there is no restriction on foreign investments and imports and exports of goods and services are freely traded with no government interference. The present economy of Macao has developed significantly from the 1970s, and also since then, regional development has been consistently increasing. Starting from that time to now, the economy of Macao can be divided simply into two phases, marked by the transference of sovereignty of Macao to the People’s Republic of China (hereinafter referred to as PRC) in 1999. The first phase started from the openness and reform of Mainland China in 1978. During this time, the population of Macao was increased by a huge number of immigrants from Mainland, which stimulated internal demand; it also brought a huge number of workers to Macao in the short term, promoting the development of industrial sectors, especially encouraging the rapid development of the manufactures and services. The second phase is after the reunification of Macao to China, especially starting from the openness of the exclusive right of the gaming industry in 2001, bringing an impetus to the economic growth of Macao mainly stemming from more open competition in the gaming industry, as well as promoting the development of the tourism industry and its related services industry. Table 6.1 shows the growth of GDP in Macao between 1982 and 2010. This highlights that the economic development of Macao has been sustainably increasing from the 1980s to the present date. The changes of GDP of certain years were even more dramatic with high economic growth. The annual growth rates of 1984, 1987, 241 In accordance with the Basic Law of Macao Special Administrative Region, Article 5 provides for that “… in the Macao Special Administrative Region, … the previous capitalist system … shall remain unchanged for 50 years”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 142 Table 6.1: Growth of GDP of Macao between 1982 and 2010 (thousand Patacas) Year GDP Δ% Year GDP Δ% Year GDP Δ% 1981 n/a -- 1991 29,048,912 15.72 2001 51,126,406 1.08 1982 6,755,562 -- 1992 38,027,243 30.91 2002 54,799,070 7.18 1983 8,032,259 18.90 1993 43,642,518 14.77 2003 62,337,747 13.76 1984 10,005,490 24.57 1994 48,650,940 11.48 2004 80,345,098 28.89 1985 10,286,258 2.81 1995 54,467,218 11.96 2005 92,142,328 14.68 1986 11,570,603 12.49 1996 55,288,941 1.51 2006 113,703,618 23.40 1987 14,965,407 29.34 1997 55,554,577 0.48 2007 141,902,768 24.80 1988 17,646,051 17.91 1998 51,639,489 -7.05 2008 161,598,958 13.88 1989 20,906,725 18.48 1999 49,387,377 -4.36 2009 165,576,329 2.46 1990 25,102,418 20.07 2000 50,579,087 2.41 2010 223,743,323 35.13 Remarks: n/a – not available. Source: “Macao Statistics Yearbook 2010” and “Estimations on the GDP – Principal Revision 1982 – 2010”, published by the Statistics and Census Services Bureau, in reference to the website: http://www.dsec.gov.mo 1990, 1992, 2004, 2006, 2007 and 2010 were over 20%, it was over 30% in 1992 and over 35% in 2010. The surprising levels of economic growth of these years were rare among the world countries and regions. With regard to the GDP growth rates of each decade, economic growth was 271.58% in the period between 1982 and 1990, 71.12% between 1991 and 2000, 337.63% between 2001 and 2010. The growth rate during this entire period, between 1982 and 2010, was 3,211.99%. Thus, the development of Macao rose steadily by the increase of the labour force followed by the population growth in the 1980s. The 1990s, featured the following regional economic development and fluctuation: the Asian Financial Crisis in the 1997, the economy of Macao was affected by the decline in the Hong Kong stock market caused by international speculators. Until the end of 1999, Asian countries took different positive financial measures, so that international speculators were seriously defeated and quit, ending the negative growth of the economy of Macao. Following the Asian financial crisis in 1997, the economy of Hong Kong was restored to the level of 1997 in 2007. The situation in Macao differed from Hong Kong. Soon after the reunification of Macao, the exclusive right of gaming ceased and the gaming market was opened with effect from 2001. Undoubtedly, this was the major reason that stimulated the rapid economic growth of Macao, enabling the recovery to the levels of 1997 in 2002. Subsequently, based on the increment of social infrastructure of Macao Special Administrative Region (hereinafter referred
The Legal Provisions which maintain Fair Competition in various sectors in Macao 143 to as MSAR), the entry of foreign investment and foreign workers brought from the openness of gaming right, the growth of the economy of Macao accelerated dramatically. Indeed, the economic growth of Macao became one of the “miracles” in the world in the first decade of 21st Century. The growth rate of GDP was over three times, so that, in 2010, the GDP per capita reached 421,312 patacas, or 52,769 US dollars, ranked the eight in the world. With regard to regional economic activities, the activities of all industries and sectors are required to fulfil the provisions of the Commercial Code and develop in an orderly fashion under the legal framework. For the development of certain industries and sectors, the government enacts individually specific laws to address specific issues, this is because the relevant industries and sectors and the public interest has a certain degree of connectivity. For example, public utilities and/or the activities which ensure the living quality of residents are subject to the intervention and surveillance of the government, also the functioning of Public Administration intervenes in the activities of certain industries, such as the activities of government procurement. Government procurement is recognised as one of main functions conducted by Public Administration and forms per se a part of the regional economy. Government procurement is deemed as a tool of economic activity in the public sector, so that it is interpreted as a tool of industrial regulation. Under this function, transparency and accountability are the issues of major concern, and one of the objectives of implementing government procurement policies aims to assure that public funds are utilised effectively and appropriately. For this reason, the amount of expenditure by government on implementing projects related to government procurement drives directly the regional economic development and reflects the situation of economic development of the Region. Diagram 6.1: GDP of Macao in the period between 1982 and 2010 (100 million of patacas)
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 144 Diagram 6.2: Annual variation rate of GDP of Macao in the period between 1982 and 2010 (Δ%) 2. The Economy-related Provisions in the Basic Law of Macao Special Administrative Region The Basic Law of the Macao Special Administrative Region which was adopted by the National People’s Congress of the People’s Republic of China is a constitutional law of Macao Special Administrative Region and is the supreme law of Macao Special Administrative Region (hereinafter referred to as MSAR). Any law enacted by the Legislative Assembly and any administrative regulation established by the Chief Executive, as well as legal instruments and administrative instruments in any form, cannot violate or contradict the provisions of the Basic Law. Pursuant to Article 5 of the Basic Law, it provides that the capitalist system of MSAR remains unchanged for 50 years; Article 11 of this Law sets out that “the systems and policies practiced in the Macao Special Administrative Region, including the … economic systems, …, shall be based on the provision of this Law”. So, the free market economy of MSAR is based on the provisions of the Basic Law in this regard. Provisions of Chapter V regulate specifically the basic economic activities of the MSAR, in particular the provisions of Articles 103 to 120. Amongst these provisions, the free market economy of MSAR is defined mainly under the idea of a “high degree of autonomy”, establishing respectively economic policy in various aspects, comprising property policy of individuals, public finance policy, taxation system, monetary and financial systems, no foreign exchange control policies, the policy of free trade, policies on the development of industry and commerce, labour policy, shipping policy, and policies on tourism and recreation etc. Competition policy is not mentioned explicitly as part of a policy where the MSAR shall establish an environment that promotes sustainable development of industries.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 145 This means that the Basic Law does not regulate explicitly and directly policy to protect fair competition, but that does not mean that such a policy cannot be established in the legal system of MSAR. In any case, some contents that affect fair competition can be found in the “economy” provisions of the Basic Law, including: (1) “The ownership of enterprises and the investments from outside the Region shall be protected by law” (Article 103); (2) “The monetary and financial systems … shall be prescribed by law. The Government of the Macao Special Administrative Region shall, on its own, formulate monetary and financial policies, safeguard the free operation of financial markets and all kinds of financial institutions, and regulate and supervise them in accordance with law” (Article 107); (3) “The Macao Special Administrative Region shall maintain the status of a free port and shall not impose any tariff unless otherwise prescribed by law” (Article 110); (4) “The Macao Special Administrative Region shall pursue the policy of free trade and safeguard the free movement of goods, intangible assets and capital” (Article 111); (5) “The Macao Special Administrative Region shall, in accordance with law, protect the free operation of industrial and commercial enterprises and make its own policies on the development of industry and commerce. The Government of the Macao Special Administrative Region shall improve the economic environment and provide legal guarantees for promoting the development of industry and commerce and for encouraging investments, technological progress and development of new industries and new markets” (Article 114); (6) “The Macao Special Administrative Region shall, on its own, make policies on tourism and recreation in the light of its overall interests” (Article 118); Thus, the Basic Law sets out clearly some public policies and systems of the MSAR, and to a certain extent defines the objective or effects of these policies and the economy system to be achieved. However, the Basic Law is restricted to the “surface” of provisions, the substantial provisions and contents are subject to further regulation, which can be addressed through legislative and regulative procedures, or realised through the definition of specific policy. It can be affirmed that industries and other economic activities are operating in the free market system. The freedom indicated herein is absolute freedom.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 146 3. The Present Legal Framework of MSAR The present legal system of MSAR is a distinctive and unique continental law system. Before 20th December 1999, Macao was governed by the Republic of Portugal, the Macao legal system was based on the legal system of Portugal. Albeit the judicial system of Macao was independent from Portugal in 1992 by the promulgation of Base Law of Judiciary Organisation of Macao established by Law no. 112/91/M. Macao’s legal system has not been changed and even remained unchanged after the reunification of Macao with China. But from that date, the People’s Republic of China exercised sovereignty over Macao. Under the governance policy of “one country, two systems”, “Macao people administering Macao” and “high degree of autonomy” of the PRC, pursuant to Article 8 of the Basic Law of Macao Special Administrative Region, provided for that “[t]he laws, decrees, administrative regulations and other normative acts previously in force in Macao shall be maintained, except for any that contravenes this Law, or subject to any amendment by the legislature or other relevant organs of the Macao Special Administrative Region in accordance with legal procedures”. Its Article 11 sets out “[i]n accordance with Article 31 of the Constitution of the People’s Republic of China, the systems … practiced in the Macao Special Administrative Region, including … the … legislative and judicial systems, … shall be based on the provisions of this Law”. So, the legal system applicable to the MSAR continues in force and is independent from the legal system of the PRC. However, it cannot violate the Constitution of the People’s Republic of China and the National Laws applicable to the MSAR. This means that the legal system of MSAR remains unchanged and is still based on the continental legal system. De jure, the legal and normative modalities of MSAR are set out in accordance with the Basic Law, which retain principally the laws, decrees, administrative regulations and other normatives in force. Besides that, the Law no. 3/1999 – Publication and Form of Statutes – provides for two types of administrative regulation: statutes with normative form242 and statutes without normative form243; together with the provisions of Law no. 13/2009, the present 242 The statutes with normative form comprise: (1) Law; (2) Administrative Regulation; (3) Resolution of the Legislative Assembly; (4) Executive Order; (5) external normative Dispatch of the Chief Executive; (6) external normative Dispatches of the principal official of the MSAR; (7) relevant international agreements signed in the name of “Macao, China”; (8) international agreements applicable to the MSAR; (9) agreements of juridical and judicial cooperation and agreements of abolition of visa signed with other countries or regions under the assistance of empowerment of the People’s Central Government; (10) agreements of juridical and judicial cooperation signed with judicial organisations of other regions of Mainland; (11) Notices and declarations of the Legislative Assembly; (12) Notices and declarations of the government. 243 The statutes without normative form comprise: (1) the election results to the
The Legal Provisions which maintain Fair Competition in various sectors in Macao 147 internal normative sources can be clearly listed out according to their hierarchy and prevalence from high to low. (1) National laws; (2) Basic Law of Macao Special Administrative Region; (3) Law; (4) Administrative Regulation, divided to independent administrative regulation and complementary administrative regulation; (5) Executive Order; (6) Resolution of the Legislative Assembly; (7) Dispatch of the Chief Executive; (8) Notice of the Chief Executive; (9) Dispatch of the principal official; (10) Other internal normative sources. In this regard, from the various normative modalities defined by the Government of MSAR, operating in coordination with the various types of normative acts, still in force, and defined by the former Macao Government, in according with their legal hierarchy and prevalence, the following diagram summarises the legal frame work of MSAR: Legislative Assembly; (2) the nominations of deputies designated to the Legislative Assembly, the nominations and exonerations of member of Administrative Council, the nominations and exonerations of presidents, judges, prosecutors, as well as, by law, other nominations and exonerations must be published; (3) the Basic Law of Macao Special Administrative Region and its amendments, as well as the revision project of this Law to present by the Macao Special Administrative Region and the interpretations of this Law made by the competent entities; (4) the national law to apply in the Macao Special Administrative Region and the interpretations regarding its application in the Macao Special Administrative Region made by the Standing Committee of the of National People’s Congress; (5) other documents related to the Macao Special Administrative Region to approve by the National People’s Congress and by its Standing Committee; (6) the regulatory documents about the establishment and functioning of the Macao Special Administrative Region approved by the Preparatory Committee of the Macao Special Administrative Region of the National People’s Congress; (7) the documents of empowerment of the National People’s Congress and its Standing Committee and the documents of empowerment of the People’s Central Government, as well as the orders, directives and authorisations issued, in terms of the Basic Law, of the People’s Central Government; (8) the documents of nomination and exoneration of the Chief Executive, the Government principal officials and the prosecutors, issued of the People’s Central Government; (9) the policy addresses of the Chief Executive.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 148 Diagram 6.3: Legal framework of MSAR 3.1. National laws In the Basic Law of Macao Special Administrative Region, Article 1 provides immediately for that “[t]he Macao Special Administrative Regions is an inalienable part of the People’s Republic of China”. Based on the policy of “one country, two systems”, not all national laws of the PRC are applicable to the MSAR, only the national laws listed in the Annex III of the Basic Law and the national laws, which can be added or removed by the Standing Committee of the National People’s Congress, can be enforced in the MSAR.244 The national laws enforced in the MSAR are confined to those laws related to defence and foreign affairs, as well as other laws not belongings to the ambit of the autonomy of the MSAR as specified by the Basic Law. 3.2. Basic Law of the Macao Special Administrative Region The Establishment of the Macao Special Administrative Region and the definition of the formulating of the Basic Law of the Macao Special Administrative Region comply with the provision of paragraph 13 of Article 62 of the Constitution 244 Pursuant to Article 18 of the Basic Law.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 149 of the People’s Republic of China. The Basic Law entered into force on 20th December 1999, which was adopted by the Eighth National People’s Congress at its First Session on 31st March 1993 and published by the Decree of the President of the People’s Republic of China No. 3. Until now, this Basic Law has not been amended. Apparently, the Basic Law is a law applicable to the MSAR, but not promulgated by the Government of MSAR. It’s promulgated by the PRC and is a local law only applicable to the MSAR. 3.3. Law As one of the normative instrument, law is in stricto sensu. The laws enforced in MSAR are specified and classified into three types: The first is the Basic Law of Macao Special Administrative Region, per se; the second is the previous law of Macao; the third is the law enacted by the Legislative Assembly of MSAR. De facto, the Basic Law is a law, but is not legislated in MSAR. It is a law, which was enacted for the MSAR, adopted by the National People’s Congress of the People’s Republic of China, and is a local law of the People’s Republic of China, not belonging to national law. Furthermore, another type of law not belonging to MSAR but applicable to her is the national laws listed in the Annex III of the Basic Law and the national laws likely to be added or removed.245 The subject matters of law, enacted by the Legislative Assembly of MSAR, are subject to the provisions of Article 6 of Law no. 13/2009 – Legal System of Framework of Internal Normative Sources, based on the principal of absolute legislative reserve, and are the exclusive legislative power of the Legislative Assembly.246 245 The National Laws listed in the Annex III of the Basic Law comprise: (1) Resolution on the Capital, Calendar, National Anthem and National Flag; (2) Resolution on the National Day of the People’s Republic of China; (3) Nationality Law of the People’s Republic of China; (4) Regulation of the People’s Republic of China concerning the Diplomatic Privileges and Immunities; (5) Regulation of the People’s Republic of China concerning Consular Privileges and Immunities; (6) Law of the National Flag of the People’s Republic of China; (7) Law of the National Emblem of the People’s Republic of China; (8) Law of Territorial Water and Contiguous Zones. Till to now, the national laws applicable to the MSAR have been increased to 13, the newly added national laws are respectively: (1) Law on the Exclusive Economic Zone and the Continental Shelf of the People’s Republic of China; (2) Garrison Law of the Macao Special Administrative Region of the People’s Republic of China; (3) Law of the People’s Republic of China on the Immunity concerning the Application of Coercive Judicial Measure to Asset of Foreign Central Banks; (4) Official Reply of the State Council concerning the Limits of the New Campus of the University of Macau in Hengqin Island. 246 The Basic law per se does not clearly and concretely indicate which areas and matters are enacted by legal and normative forms. However, the Law no. 13/2009 – Legal System of
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 150 The Basic Law does not provide for which organisation assumes the legislative power, but its Article 67 sets out that “[t]he Legislative Assembly of the Macao Special Administrative Region shall be the legislature of the Region”. Thus, it can be understood and presumed that the Legislative Assembly of the MSAR is the organisation conferred with the legislative power and with the right to exercise this legislative power. In this regard, the law has a concretised normative form, in the ambit of competences of the Legislative Assembly, and must be enacted, amended, suspended and repealed in accordance with the provisions of the Basic Law and the legal procedures. Nevertheless, the right to rise the enactment of law does not belong to the competence per se of the Legislative Assembly, but the Executive Council of the MSAR presents the draft laws to the Legislative Assembly,247 to be approved by the Legislative Assembly, then signed by the Chief Executive, as well as published and promulgated in the Official Gazette of the Macao Special Administrative Region before entering into force. Framework of Internal Normative Sources – was promulgated on 27th July 2009, which delimits, firstly, by form of law, respectively by concretised and abstract forms, the matters of absolute legislative reserve. The concretised matters listed exhaustedly comprising 18 areas or matters, respectively are: (1) Legal system of fundamental rights and freedom, and their guarantees, provided for in the Basic Law and other legislative acts; (2) Status of resident of Macao; (3) System of residence right in Macao; (4) Voter registration and electoral system; (5) Definition of crimes, misdemeanours, penalties, security measures and their assumptions; (6) General system of administrative violations, its procedure and establishment of respective sanctions, without prejudice to lower fines regulated by independent and complementary administrative regulations provided for by Article 7 of that Law; (7) Statute for deputies of the Legislative Assembly; (8) Legal system related to the organic, functioning and personnel of supporting services to the Legislative Assembly; (9) Civil Code and Commercial Code; (10) Administrative Procedure Code; (11) Systems of civil, criminal e administrative procedure and system of arbitration; (12) Registration and notary code; (13) Format of normative acts and other acts subject to official publication; (14) Fundamental systems applicable to the workers of public administration; (15) Budget and tax system; (16) Legal system of soils, land use planning, urban planning and environment; (17) Legal regime of monetary and financial systems and foreign trade operations, and (18) Systems of the property, of the requisition and of the expropriation by public utility. With regard to the matters provided for by the abstract form, they are the other matters, in fact, under the competence conferred to the Legislative Assembly by the Basic Law, viz. the Legislative Assembly needs to legislate by implementing the matters covered by the competences conferred by the Basic Law, so as to enact by the form of law. These are the matter of legal reserve belonging to the provisions of the Basic Law, such as the provisions of Articles 6, 29, 40, 41, 84 and 90 etc. must be enacted in the form of law. The Chief Executive and the Government of MSAR has no rights to regulate these matters. 247 Pursuant to the first paragraph of Article 58 of the Basic Law of Macao Special Administrative Region.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 151 3.4. Administrative Regulation Before the reunification of Macao, this kind of instrument did not exist. The appearance of administrative regulation complied with the provision of paragraph 5 of Article 50 of the Basic Law, the Chief Executive “formulate[s] the administrative regulations and promulgate[s] them for implementation”, but the provision does not determine explicitly the ambit of the regulated matters. Even so, the Law no. 13/2009 – Legal System of Framework of Internal Normative Sources – clearly classifies and defines the normative scope of the administrative regulation. Pursuant to this Legal System, Article 4 sets out that the administrative regulation is a normative act, and is divided into independent administrative regulation of the Chief Executive and complementary administrative regulation of the Chief Executive. The independent administrative regulation aims to set out the primary and original matter in relation to the issues not enacted by law. The complementary administrative regulation aims to establish the concretised measures necessary for execution of laws. In order to apply effectively and correctly the independent administrative regulation, paragraph 1 of Article 7 of this Legal System lists explicitly matters which can be formulated by independent administrative regulation.248 3.5. Decree-Law Before the reunification of Macao, decree-law, which was promulgated by the governor, was one of the two important normative instruments which compose the legal system of Macao. Pursuant to the provisions of Article 8 of the Basic Law and of Article 3 of the Law no. 1/1999 – Law of Reunification, maintains, in rule, the previous decree-law, adopting it as statute of the MSAR. 248 Pursuant to the provision of paragraph 1 (Independent and complementary administrative regulations) of Article 7 of the Law no. 13/2009, the matters can be regulated by independent administrative regulation comprising: (1) norms of development, implementation and execution of governmental policies; (2) definition of systems and procedures of management of public issues; (3) organisation and functioning of Government and statute of the respective members; (4) structure and organic of public administration and of all of its organic services and units, including consultative organs, as well as of personalised public services, public institutes, public establishments, autonomous services and funds, public foundations e other autonomous entities and of similar natures, with except those which are posted or which are part of the organic or functional sphere of the Legislative Assembly, of courts, of public prosecutor or of Director of Audit and Commissioner Against Corruptions, and still with the exception of the bodies which competences directly interfere with the fundamental rights and freedom and their guarantees, namely the organs of criminal investigation; (5) organisation and functioning of Executive Council and statute of the respective members; (6) administrative violation and respective fines which does not exceed 500,000 patacas; (7) other matters not included in Article 5 of this Law.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 152 This legislative power, of signing by governor, and promulgating decree-law was conferred by the former Organic Statute of Macao, and was identical to the legislative power of the Legislative Assembly, so the decree-laws formulated by governors and the laws enacted by the Legislative Assembly have possessed the same legal effect. Pursuant to the Organic Statute of Macao, its Article 5 provides for that “[t]he legislative function is exercised by the Legislative Assembly and by the Governor”; its paragraph 1 of Article 13 provides for that “[t]he legislative competence of Governor is exercised by decree-laws …”. The legislative competence of the Governor conferred by the Organic Statute of Macao is non-specific, to formulate decree-laws by the applicable mean of exclusivity. Pursuant to Article 13 of the Organic Statute of Macao, “[t]he legislative competence of the Governor … encompasses all matters which are not reserved to the sovereign organs of the Republic [of Portugal] or the Legislative Assembly, without prejudice of provision in Article 31”. The legislative competence provided for by Article 31 is classified into three rights: legislative power of absolute reserve, legislative power of relative reserve, and legislative power of competition. Regarding the legislative power of absolute reserve, this belongs to the legislative right of the former Legislative Assembly, comprising the election system of the former Legislative Assembly and the Statute of Deputies. Regarding the legislative power of relative reserve, albeit the respective legislative competence belongs exclusively to the former Legislative Assembly, it can authorise the Governor in the form of law, by formulating decree-law, to promulgate the scope of legislation, including: (1) systems of custody, house searches, confidentiality of private communications, relatively indeterminate penalties and security measures, and their presuppositions; (2) general scheme of grant of the Governor; (3) essential elements of the tax system, establishing the incidence and rate of each tax and setting the terms under which tax exemptions may be granted; (4) administrative division of territory; (5) general basis of the legal system of local administration, including local finance; (6) legal system of relation between organs of central administration of the territory and organs of local administration and condition in which the organs of latter can be dissolved by the Governor; (7) bases of the system of public administration in the territory; (8) setting up new category and functional title, changing tables that define those categories and fixing of salaries, wages, and other forms of personnel remuneration of tables. Regarding the legislative power of competition, the Legislative Assembly and the Governor possess the identical legislative power to specified issues. Any party can formulate statutes, but only the former can legislate in form of law, the latter legislate in form of decree-law. Given that both statutes have the identical legal
The Legal Provisions which maintain Fair Competition in various sectors in Macao 153 positions, they possess the identical legal effect. The legislative power of competition comprises the following issues: (1) status and capacity of persons; (2) rights, freedom and guarantees in all matters not contrary to the content of no. (1) of the previous paragraph; (3) definition of crimes, penalties, and their presuppositions, as well as criminal proceedings, in all matters not contrary to the content of no. (1) of the previous paragraph; (4) general system of punishment of the disciplinary offences, as well as the misdemeanours and the unlawful acts of just social order, and its process; (5) general system of the requisition and expropriation for public utility; (6) general system of the lease; (7) monetary system and standard of weights and measures; (8) public associations, guarantees of managed persons and civil liability of the Administration; (9) general outline of the statute of public enterprises; (10) outline of the former judiciary system of Macao; (11) protection system of nature, ecological balance and cultural property; (12) system of social security and health. After the reunification of Macao, the government of MSAR, especially the Chief Executive, can no longer formulate decree-law, but the previous decree-laws maintain their validity after appropriate adjustment. However, the revision on the provided matters is not purely determined by law or administrative regulation, which is set out explicitly by Article 8 of Law no. 13/2009, enabling the amendment, suspension or repeal of decree-law, in the form of law or an administrative regulation, according to its matters provided per se. In cases where these matters require concrete norms for their execution, the amendment, suspension or repeal has to be carried out by complementary administrative regulation. 3.6. Executive Order An executive order is a normative instrument, of which the Chief Executive has the exclusive right, which mainly relate to the publication of government policies.249 Albeit the present legislation does not define the position related to its legal effect, it is generally in accordance with the legislative technique and the priority of different normative instruments provided for by Article 3 of the Law no. 3/1999. This means that the legal position of an executive order is a normative instrument lower than an administrative regulation. 3.7. Resolution of the Legislative Assembly Besides the enactment of law, the Legislative Assembly can make another normative instrument, conferred by the provision of Article 71 of the Basic Law, which is the resolution of the Legislative Assembly, in order to execute the 249 Pursuant to the provision of paragraph 4 of Article 50 of the Basic Law of Macao Special Administrative Region.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 154 following duties: (1) “[t]o examine and approve budgets introduced by the government; and examine the report on audit introduced by the government”; (2) “[i]f a motion initiated jointly by one-third of all the members of the Legislative Assembly charges the Chief Executive with serious breach of law or dereliction of duty and if he or she refuses to resign, the Assembly may, by a resolution give a mandate to the President of the Court of Final Appeal to form an independent investigation committee to carry out investigation”. Moreover, the Legislative Assembly may also make resolutions in accordance with the provisions of other normative instruments, such as the resolution provided for by Article 37 of the Rules of Legislative Assembly of the Macao Special Administrative Region, to decide to advance or postpone the functioning period of the Legislative Assembly. 3.8. Dispatch of the Chief Executive De jure, the dispatch of the Chief Executive refers to external normative dispatch of the Chief Executive provided for by paragraph 4 of Article 3 of the Law no. 3/1999. Except the provisions of paragraphs 2, 3, 4 and 5 of Article 50 of the Basic Law confer to the Chief Executive the competence to issue specific normative documents, when the Chief Executive exercises his or her competences, he or she may execute statutory duties through issuing dispatches of the Chief Executive, as well as specified in the provisions of published laws and administrative regulations, he or she must announce concrete measures and practices through dispatches of the Chief Executive. 3.9. Notice of the Chief Executive In the present legal instruments of the MSAR, the notice of the Chief Executive and its objective of use are not set out. However, the “notice of Government” provided for by paragraph 5 of Article 5 of the Law no. 3/1999 represents merely the notice issued by public service departments and organisations for implementing their governmental duties. As the name implies, the notice of the Chief Executive is a form of instrument issued exclusively by the Chief Executive himself, as the highest entity of the MSAR. Strictly speaking, this is an administrative instrument with binding force. Any matter issued by the notice of the Chief Executive is applicable to the entire MSAR. Empirically and practically, the notice of the Chief Executive is only published in the Series I of the Official Gazette of the MSAR. It is obviously applicable to the “other documents which, by law, must be published in this series” provided for by paragraph 9 of Article 3 of the Law no. 3/1999. This statute sets out that the notice of the Chief Executive must be published in the Series I of the Official Gazette of the MSAR cannot be determined. Nonetheless, in accordance with the matters specified in the published notices of the Chief Executive, its scope
The Legal Provisions which maintain Fair Competition in various sectors in Macao 155 of application may be induced to: (1) international instruments applicable to the MSAR; (2) resolutions, declarations or instruments of any other forms approved by the Security Council of the United Nations; (3) agreements signed for certain matters between the (Government of) Macao Special Administrative Region of the People’s Republic of China and (governments of) other countries or regions; (4) national laws of the People’s Republic of China applicable to the Macao Special Administrative Region, etc. 3.10. Dispatches of the Principal Officials Pursuant to the provision of paragraph 6 of Article 50 of the Basic Law, the principal officials of the MSAR refer to the Secretaries of Departments, Commissioner against Corruptions, Director of Audit, the leading member of the Police and the customs and excise. The Secretaries of Departments refer to the Secretary for Administration and Justice, the Secretary for Economy and Finance, the Secretary for Security, the Secretary for the Social Affairs and Culture and the Secretary for Transport and Public Works, determined pursuant to the provisions of the Administrative Regulation no. 6/1999 revised by the Administrative Regulation no. 23/2010 – alteration to the Administrative Regulation no. 6/1999 which approves the organisation, competences and functioning of public services and entities. Among these principal officials, the Commissioner-General of Unitary Police Service and the Director-General of Macao Customs Service do not issue any external normative dispatches. Nevertheless, these principle officials may exercise the competences conferred by the provision of Article 64 of the Basic Law, by issuing dispatches within the scope of competences conferred to their governances, the matters include: (1) the formulation and implementation of policies; (2) conduction of administrative affairs; (3) conduction of external affairs as authorised by the PRC under the provision of Basic Law. Besides that, they may also issue dispatches regarding the situations specified by the provisions of law or administrative regulation. 4. Provisions regarding Unfair Competition in the Commercial Code 4.1. Objectives Defined in the Regulation of Competition The present Commercial Code was promulgated by Decree-Law no. 40/99/M, revised by Law no. 6/2000 and Law no. 16/2009. This Code has revised the Commercial Code which was entered into force more than 100 years ago, viz. it was firstly published in 1888. The revised Commercial Code is more appropriate for the economic development of Macao, as well as meeting the needs of appropriate legal framework by entrepreneurs and enterprises.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 156 The ninth recital of Preamble of this Code indicates that: “[i]n an innovative manner, the Code specifically regulates the commercial enterprise and the various legal transactions of which it can be the object. It establishes a right of ownership over the enterprise, a right that is more than, and different from, the various rights which confer upon the subject powers over each and every good which is part of it at any given moment. This solution will allow the protection of matters which up to now could not be protected, or only achieved partial but still insufficient protection by means of confining regulation, such as for example unfair competition.” Thus, in the provisions of the new Commercial Code, commercial enterprises and their relevant legal acts have new regulations, including the newly established “Regulation of Competition between Entrepreneurs”, expecting by this that their rights will be properly protected. This Regulation is provided for in the Title X of Book I, comprising two chapters. Chapter I is of the “Competition between Entrepreneurs in General”, which covers anti-monopoly provisions; Chapter II relates to “Unfair Competition”, namely which provisions are object to the practices of unfair competition. These provisions aim to ensure that commercial behaviours are conducted under fair competition among commercial enterprises,250 avoiding damaging the economic interests of the region of Macao. This is the legal limits set out in paragraph 1 of Article 153 of the Commercial Code,251 and also has become the target provision of the MSAR for the protection of fair competition. 4.2. Subject Applicable to the Regulation of Competition In the regulation of competition of MSAR determined in the Commercial Code, the concerned subject ensuring fair competition is the entrepreneur, and competition must occur between entrepreneurs; otherwise, it is not applicable to the provisions of the Commercial Code in order to protect fair competition in the region of Macao. “Entrepreneur” referred to herewith aims at implementing commercial 250 Pursuant to the Commercial Code, its Article 3 provides for that “1. The following are considered acts of commerce: a) acts especially regulated in the law as a result of the special needs of commercial enterprises, namely those mentioned in this Code, and analogous acts; b) acts practiced in the exercise of a commercial enterprise. 2. The acts practiced by a commercial entrepreneur are considered as being in the exercise of the respective enterprise, if from such acts or from the circumstances surrounding their practice the opposite does not emerge”. 251 Pursuant to paragraph 1 of Article 153 of the Commercial Code, “[c]ompetition between entrepreneurs shall take place in a manner that does not harm the interests of the economy of the Territory, and within the limits established by the law”.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 157 practices. Therefore, the Commercial Code defines the scope of commercial entrepreneurs. Article 1 of this Code defines two types of “commercial entrepreneur”: the first type is “individuals and collective persons which, in their own name, themselves or through third parties, exercise a commercial enterprise”; the second type is “commercial companies”. Furthermore, to understand clearly the scope of activities that commercial entrepreneurs can operate, and defining “commercial enterprise”, paragraph 1 of Article 2 of this Code provides for that: “[a] commercial enterprise is any organisation of productive factors for the exercise of an economic activity aimed at production for systematic and lucrative exchange, namely: a) industrial activity for the production of goods and services; b) activity of intermediation in the circulation of goods; c) transport activity; d) banking and insurance activity; e) activities auxiliary to the above mentioned ones.” This provision lists clearly and explicitly the economic activities regarded as commercial enterprise, which are activities regulated by laws, but not limited to these. Given that the economic activities operated by commercial enterprises cannot be exhaustively listed in the Commercial Code, paragraph 2 of that Article sets out a negative provision, as long as “[t]he organisation of factors of production for the exercise of an economic activities which is not separable from the person exercising it is not considered a commercial enterprise”. Article 5 of the Commercial Code defines specifically the qualification of commercial entrepreneurs. It provides for that “[a] commercial entrepreneur can be any individual, resident or non-resident, or collective person, with or without registered office in the Territory, endowed with civil capacity, without prejudice to special provisions”. In accordance with of the content of this provision, commercial entrepreneur can be natural persons and legal persons. Moreover, the nationality of commercial entrepreneurs, for natural persons, is not restricted to the residents of MSAR,252 and can also be foreign persons; for legal persons, is not restricted to companies which has headquarters and possess commercial registry in the MSAR. It can also be a company which has no headquarters and do not possess commercial registry in the MSAR, but its parent company must be a company whose 252 Resident of Macao Special Administrative Region is divided into permanent resident and non-permanent resident, his/her nationality is not necessarily the Chinese nationality. Only if anyone meets the requirements provided for by the Law no. 8/2002 of the MSAR – System of Resident Identity Card of Macao Special Administrative Region, being issued a valid or renewable permanent resident identity card or non-permanent identity card of the Macao Special Administrative Region as well as possessing civil capacity, he/she can be commercial entrepreneur specified by the Commercial Code.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 158 commercial registry allows it to engage in business activities in its location. In the provisions of the Commercial Code, two categories of entities are restricted specially and cannot be commercial entrepreneurs. Its Article 9 provides for that, “[c]ommercial entrepreneurs cannot be: a) collective persons [legal persons] which do not have material interests as their object; b) those who are legally forbidden from exercising a profession connected to the exercise of a commercial enterprise”. The restricted person in the first category is a legal person whose operations cannot aim at any profit, or who are not aiming to make money in commercial activities. From these, it can be deduced that, legal persons whose profits are not their material interests are not restricted. In addition, legal persons who obtained psychic interests are also not restricted; the restricted person of the second category is someone who exercises a profession related to the business operation of commercial enterprises, but this profession is subject to the prohibition by any law, including the Commercial Code. These persons cannot be commercial entrepreneurs. Under certain circumstances, the MSAR shall operate commercial enterprises, but shall not be classified as a commercial entrepreneur. Pursuant to the Commercial Code, its Article 10 provides for that “1. [t]he Territory [now the Region], when exercising a commercial enterprise, does not acquire the status of commercial entrepreneur; however, regarding such exercise, it is subject to the provisions of this Code. 2. [t]he previous paragraph applies to the entities mentioned in subparagraph a) of the previous article [Article 9]”. 4.3. Provisions regarding the “Regulation of Competition between Entrepreneurs” This regulation, which is specified between Articles 153 and 155 of the Commercial Code, provides explicitly for the scope of application of rules on competition to the MSAR, and also is applicable to anti-monopolistic competition. These provisions entrench two limits regarding the application of the Regulation of Competition, which are respectively: “legal limits” and “contractual limits”. However, the subject applicable to these limits is merely “entrepreneurs”. 4.3.1. The meaning of “Legal Limits” “Legal limits” are provided for by Article 153 of the Commercial Code: “1. Competition between entrepreneurs shall take place in a manner that does not harm the interests of the economy of the Territory [now Region], and within the limits established by the law. 2. All agreements or practices that have the object or effect of preventing, falsifying or restricting competition are forbidden, without prejudice to special provisions.”
The Legal Provisions which maintain Fair Competition in various sectors in Macao 159 (A) The meaning of “competition between entrepreneurs” For this provision, the situation of competition has occurred. Generally, one participant competes with another participant in a market, engaging in economic activities under the principle of survival of the fittest. In this regard, if the participants are not under the same market, the status of competition between them does not exist. The participant in a market here referred to an entrepreneur regulated by law. As aforementioned, the entrepreneur, viz. the participant in the market does not necessarily possess the “nationality” of the MSAR. Hence, competitions between the participants in a market, in the view of their nationalities as the requirement, can be: (1) competition between a participant of local market and another one or more participants of local market; (2) competition between a participant of local market and one or more participants of foreign markets; (3) competition between one participant of foreign market and one or more participants of local market; (4) competition between one participant of foreign market and one or more participants of foreign market. The competition between participants in a market abovementioned, as long as its result damages the economic interests of the Region of Macao, is subject to the provision referred to. (B) The meaning of “competition … shall take place in a manner … within the limits established by the law” The commercial and other economic activities of Macao are engaged in a free market economy, or in economy of laisser-faire indicated in the traditional economic theory, in which the “invisible hand” automatically determines the equilibrium price. But, under the present capitalist society, the free movement of capital from foreign investment, cross-border trade, etc. has many uncertain factors, and often results in distortions in the free market, resulting in the disequilibrium of competition between enterprises. To this end, the Government of Macao had gradually formulated laws and regulations for certain industries to protect fair competition, in expectation of the market being a “level playing field”, enabling the healthy development of enterprises of that industries and offering together a sound operational environment for sustainable development of MSAR. These rules on protecting fair competition can be divided into two categories: the first category is the provision of generality with a wider coverage, is the Regulation of Competition between Entrepreneurs specified by the Commercial
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 160 Code, viz. the provisions of Articles 153 to 173. The second category, which contains substantial and material provisions, is the provisions of industrial activities, covered by the scope of its targeted activities. The relevant industries comprise communications, government procurement, Internet, gaming, food labelling, labour relations, international aviation, international trade, cross-border travel and transportation, intellectual property rights, import and export, finance, postal service, and public health etc. The relevant provisions concerning the ambits of protection of fair competition include the general fair competition, restricted competition, monopoly, competition supremacy, dominant position, reasonable pricing or predatory pricing. The concrete provisions related to fair competition shall be expounded in text below. (C) The meaning of “competition … shall take place in a manner that does not harm the interests of the economy of the Territory” Since the Commercial Code allowing competition between entrepreneurs must be engaged as specified by law in the MSAR, in the meaning of legal provisions the relevant competing practices represents positive, goodwill and proactive practices. Under a free market system, every commercial enterprise makes unremitting efforts to maximise its profits, and also intentionally or unintentionally promotes industrial development. Summing up the profits gained by all commercial enterprises in their trading and economic activities, and from which positive benefits which are accumulated, contributes to the entire economic interests of the MSAR. However, from the meaning of the title of this point, it is acceptable as long as the competition between entrepreneurs does not damage the interests of the economy of MSAR, viz. the competition among them does not bring any economic interests to the MSAR which is also compatible with the provision of this article. It must highlight that, the meaning of “Territory” specified in this article, which was commonly used in the legal instruments in the former Government, has been interpreting as “Macao”. After the reunification of Macao, the wording “Region” instead of “Territory” represents the “Macao Special Administrative Region”. Whether the wording “Territory” or “Region” is being used to represent this region, it does not only represent geographically Macao or Macao Special Administrative Region, but also indicates the legal and judiciary means, that is, within the jurisdiction area of Macao or MSAR. For a long time, Macao comprises geographically Macao peninsula, Taipa Island, Coloane Island and the Cotai reclamation area, and even included the reclaimed lands in harmony with the regional development. The jurisdiction of MSAR is implemented in these locations. Until the Ninth Session of the Standing Committee of the Eleventh National People’s Congress, on 27th June, 2009, adopted the “Decision of Standing
The Legal Provisions which maintain Fair Competition in various sectors in Macao 161 Committee of the National People’s Congress of the People’s Republic of China, concerning the delegation of powers to the Macao Special Administrative Region to the exercise of jurisdiction in the new campus of the University of Macau to install in the Hengqin Island”, empowered MSAR starting from the date of inauguration of the new campus of University of Macau in Hengqin Island, within the lease term of land of this campus, the exercise of jurisdiction over this campus in accordance with the legislation of MSAR. The new campus of the University of Macau is a piece of land delimited from the southern side of Hengqin Port, in Zhuhai City of Guangdong Province. The Government of MSAR acquired, by lease, the right to use the land of the new campus of the University of Macau. The lease term starts from the date of inauguration until 19th December, 2049. After the expiry of the lease term, this can be renewed by decision of Standing Committee of the National People’s Congress of the PRC.253 On 20th July 2013, the new campus of University of Macau in Hengqin Island opened formally. Its determined area is a piece of land of 1.0899 square metres.254 From that date on, the area is subject to the jurisdiction of MSAR. (D) The meaning of “all agreements or practices that have the object or effect of preventing, falsifying or restricting competition are forbidden” (a) Agreements or practices In this provision, two kinds of behaviours incur prohibition, which are: agreements and practices. An agreement is far more invasive and has a deeper impact than practice. Agreement is a consensus achieved by more than one participant, which can be two or more. It can be a common participation of natural persons or legal persons and comprise a contractual relationship by mutual unanimity of meaning. It represents expressly that one person is not able to comprise a contractual relationship which implies consensus, viz. is merely an individual intention. Furthermore, agreement is generally not restricted to agreement in writing, but also includes verbal agreement, which is a so-called “gentlemen’s agreement”. As for practice, it can be a practice of entrepreneur per se, and also a practice exercised by two or more entrepreneurs. This provision does not indicate explicitly or implicitly that practice is a practice exercised individually by 253 Pursuant to the content of “Decision of Standing Committee of the National People’s Congress of the People’s Republic of China, concerning the delegation of powers to the Macao Special Administrative Region to the exercise of jurisdiction in the new campus of the University of Macau to install in the Hengqin Island” promulgated by the publication of Notice of the Chief Executive no. 19/2009. 254 According to the contents of “Official Reply of the State Council concerning the Limits of the New Campus of the University of Macau in Hengqin Island” promulgated by the Notice of the Chief Executive no. 43/2012.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 162 each part or a concerted practice. If a practice is exercised by more than one entrepreneur, but there is not any form of communication among them, so their practices are differed formally and materially from each other, this is deemed as an individual practice; in case where practices are identical or analogous, and it is deemed as concerted practice. (b) Preventing, falsifying or restricting competition The content of these agreements or practices must prevent, falsify or restrict competition. The meaning of preventing competition is because of the agreements between entrepreneurs or the practices exercised by entrepreneurs result in the absence of competition in economic activities or the competition was suspended or terminated. Falsifying competition indicates that agreements between entrepreneurs or practices exercised by entrepreneurs are not compatible with the provisions of the Commercial Code and other statutes related to protection of fair competition, which is deemed as illegal agreements or practices. Regardless which law is violated, only if the respective agreement or practice eventually damages the economic interests of MSAR, will it be prohibited. Restricting competition indicates that competition exists between entrepreneurs, but based on certain or all entrepreneurs achieve jointly agreement or they execute some practices, the degree of competition is reduced, and thereupon they obtain benefits which should not be gained and other competitors incur losses. The participants of this restricting competition can be competitors of the same industry, resulting from which the restricting competition is horizontal restriction of competition; in case of the participants in different industries but are in the same supply chain, resulting from which the restricting competition is vertical restriction of competition, whose negative impact is often more severe and deeper than the horizontal restriction of competition, but it is harder to prove its existence. (c) Object or effect The prohibition by this provision is agreements or practices that have the object of preventing, falsifying or restricting competition, no matter whether these agreements or practices are successful at preventing, falsifying or restricting competition or not. Another prohibition is the agreements between entrepreneurs or practices executed individually by them, which have no object, as well as no relevant intention or purpose, of preventing, falsifying or restricting competition. However, the agreements or practices among them have a certain degree of effect or result, leading to eventually the prevention, falsification or restriction of competition. Thus, these agreements or practices are subject to this legal provision and are prohibited. De jure, the wording “object or effect” expresses that both are not necessarily fulfilled simultaneously. It means if only an agreement or practice per se has the
The Legal Provisions which maintain Fair Competition in various sectors in Macao 163 object of preventing, falsifying or restricting competition, or an agreement or practice per se has no these objects, but the obtained effect is to prevent, falsify or restrict competition, these agreements or practices are prohibited without exception. 4.3.2. The meaning of “contractual limits” In economic activities, competition exists between two or more entrepreneurs, so one entrepreneur cannot produce a competitive effect. Therefore, in the Commercial Code, its Article 153 provides explicitly for that, agreements achieved or practices implemented by competition between entrepreneurs have the object of preventing, falsifying or restricting competition, or produce the effect of preventing, falsifying or restricting competition, from which the interests of the economy of Macao are damaged, and these are generally prohibited. However, the proviso of this article is that this prohibition is not applicable to the exceptional provision; in other words, it is so-called the provision of “exceptional application”. Nevertheless, pursuant to Article 154 of the Commercial Code, it is not materially a provision of exceptional application, but the restrictive provision of the type of “agreement” alluded by Article 153, that it is only agreements that with specific characteristics are deemed as agreements provided for by Article 153, and only these agreements are considered as prohibited within the scope of “legal limits”; otherwise, the respective agreements are not deemed as agreements restricting competition. Article 154 (contractual limits) of this Code provides that: “1. An agreement restricting competition between entrepreneurs shall, under penalty of nullity, respect the limits indicated in the previous article and be made in writing. 2. For the agreement to be valid, it must be limited to a certain zone or to a certain activity. 3. If the duration of the agreement was not set, or was set for a longer period, it shall be valid for five years only.” Pursuant to paragraph 1 of this Article, the agreements applicable to paragraph 2 of Article 153 must be in writing to be deemed as agreements restricting competition. If the agreements are achieved verbally between entrepreneurs, they are not within the limits. In other words, verbal agreements restricting competition are not covered by the provision of that article. In spite of verbal agreements reaching the object or producing the effect of restricting competition, and damaging the economic interests of MSAR, they are not subject to that provision and shall not be prohibited. The provision of this article runs counter to the provisions of fair competition or anti-monopoly laws internationally, where agreements restricting competition are agreements in any form; otherwise, it cannot reach encompassed
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 164 guarantee to the regional economic interests. Regarding the provision of paragraph 2 of this Article, the agreements achieved between entrepreneurs are limited to a certain zone or to a certain activity, which is to determine the competition within a certain market, viz. theoretically within a “relevant market”, which comprises “geographic market” or “product market”. Regarding the provision of paragraph 3 of this Article, whether an agreement has a specified a period, the validity of the agreement prescribes five years in maximum. To a certain extent, this expressed provision and the conditions considered internationally by fair competition instruments are different. In the international experience, some unfair competition or anti-monopoly agreements have to go through longer period to develop their effects. 4.4. Regarding the Provisions of “Unfair Competition” Chapter II of Title X of Book II of the Commercial Code, from Articles 156 to 173, points out that unfair competition or the protection of fair competition, including the applicable subjects and objects, has requirements comprising the behaviours of unfair competition, concrete behaviours of unfair competition, prescription to take judicial action, compensation of damage, etc. 4.4.1. Scope of subjects applicable to the provisions of unfair competition The key persons who implement the behaviours of unfair competition are the “entrepreneurs” specified in the Commercial Code. Competition can only be produced by a number of two or more persons, so only one entrepreneur cannot engage in competition. However, the behaviours of unfair competition are not limited to the competition produced between entrepreneurs, viz. one of the stakeholders can be entrepreneur. Pursuant to paragraph 1 of Article 157 of the Commercial Code, it provides for that “[t]he norms on unfair competition apply to entrepreneurs and to whoever participates in the market”. This shows the another part or other parts of the behaviours of unfair competition are not necessarily entrepreneurs, as long as the entrepreneur practices commercial behaviour in the relevant market, any person who participates in this commercial behaviour is deemed as a person “whoever participates in the market”. Furthermore, paragraph 2 of that Article provides that they do not necessarily belong to the same industrial sector or operate in the same business, viz not in the relationship of identical industry; in other words, their industries can be different in the respective supply chain, and even they can operate a business in industries without any relationship.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 165 4.4.2. Scope of objects applicable to the provisions of unfair competition Unfair competition occurs in commercial behaviour; its requirements are that the stakeholders must be trying to prevent competition in the market. In the case where competition is not occurring in the market, or the behaviour executed by stakeholders does not encourage competition, it does not comprise unfair competition, and the respective behaviour is not considered as the behaviour of unfair competition. Paragraph 2 of Article 156 of the Commercial Code specifies objective criteria on how to judge whether behaviours executed by stakeholder have the object of reducing competition. It sets out that “[i]t is presumed that the act is practiced with the purpose of competition if, by the circumstances in which it takes place, it is objectively adequate to promote or to ensure the distribution in the market of the products or services of the party or of a third party”. Regarding the behaviours executed by stakeholders must occur in the market, but the Commercial Code does not specify concretely on this. Apparently, the respective behaviour must be engaged in the MSAR, this is considered as the “geographic market”. De jure, the aforementioned article provides expressly that the “market of the products or services” is deemed as the “product market”. 4.4.3. Requirements comprise the behaviours of unfair competition and their category (A) Requirements comprise the behaviours of unfair competition The Regulation of Competition aims at protecting fair competition among enterprises, ensuring the sustainable socio-economic development of the economy, guaranteeing welfare of consumers, so any behaviour damaging competition should be banned. In the provision of Article 158 of the Commercial Code, a behaviour comprising unfair competition must fulfil three elements: behaviour of competition must be judged before objective situations, breach of norms of economic activity, and breach of honesty of economic activity. Firstly, which situations are objective? They are not specified explicitly in law and rely on the facts occurred based on individual behaviour of competition and consequences resulting from it. Concerning the norms and honest usage of economy activity, they are the objectives inhibited by the behaviours of unfair competition. The norms of economic activity are subject to legal and administrative instruments related to economic activities exercised by different industries in various extents, so their contents and extents differ. Honest usage of economic activity has no uninform standard in society and must be determined individually in conformity with actual situations, different industries, different periods, different socio-cultures and customs and backgrounds, etc. In general, the honesty of a stakeholder is deemed as who is a sincere and reliable principle, does not engage in fraudulent conduct,
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 166 possesses a good reputation, and is trustworthy. In such a manner, it is that an individual devoted to his obligations is brave to assume responsibilities himself. Intrinsically, the criteria of honest usage can be interpreted in three aspects: the first aspect is the criterion of social morality, by way of combination of specific conditions of society to decide sincerity, credibility and genuineness; the second aspect is the criterion of legal morality, it is allowed by legal provisions and possesses legal binding force; the third aspect is the criterion of morality of objective facts, in the behaviours executed by stakeholders, the judicial bodies appraise every behaviour engaged in by all stakeholders by this usage as evidences, including the behaviours of competition engaged in among stakeholders in the economic activities. The judges evaluate all these behaviours relating to economic activities. The sentences made by judges based on honest usage reflect the objective facts of these behaviours.255 (B) Legal behaviours of unfair competition The commercial practices executed by entrepreneurs based on their operation and for the purpose of benefits are diversified, and do not exist in a fixed and stable model. However, some entrepreneurs intend to achieve their purposes by implementing unfair competition in order to gain profits outside the normal range, resulting thereby in detrimental influence in the market. The provisions of “unfair competition” of the Commercial Code, point out explicitly and concretely 11 behaviours which are behaviours of unfair competition, these are respectively: acts of confusion, misleading acts, offers, negative statements, acts of comparison, acts of imitation, exploitation of other persons’ reputation, breach of secrets, promotion and exploitation of contractual breaches, exploitation of dependence, sales at a loss, and judicial action for unfair competition. According to the damage caused by these behaviours or the consequences caused by infringed interests, these behaviours of unfair competition can be divided into three categories: damages of competitors’ interests, damages of consumers’ welfare and damages of collective interests.256 The first category is the damages of competitors’ interests, including: (1) Acts of confusion Pursuant to paragraph 1 of Article 159 of the Commercial Code, acts of confusion refer to all behaviours that create confusion with the enterprises, the products, the services or the reputation of competitors. The target of this provision is the practices executed among competitors, making it difficult for consumers to distinguish the identities of the 255 Edited by Song, Liying and Wang, Mancang. Government Procurement. Xian: Xian University of Traffic Press. First Edition, October of 2007, p 28. 256 Edited by Liu Gaolong and Zhao Guoqiang. New Discussion on the Laws of Macao. Macao Foundation. November of 2005, pp 59-65.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 167 enterprise itself, the products sold or services rendered by enterprises, or misunderstand enterprises with certain reputation, etc., such as of infringement or breach of intellectual property rights, which infringe the norms of economic activity. Generally, comprising unfair competition, entrepreneurs engage in partial or total falsification, reproduction or copycat of another trademark or its characteristics, making consumers’ thinking of an enterprise, products or services in association with the imitated or reproduced trademark, as a result the original enterprise incurs a loss in commerce and goodwill. These violate commercial honesty. (2) Negative statements Pursuant to paragraph 1 of Article 162 of the Commercial Code, negative statements refer to the use and diffusion of words regarding a competitor’s products, services or commercial relations of competitors which diminish their reputation in the market, unless the respective words are exact, true and pertinent. The negative statements per se are torts, the nature of its violation could be extremely severe, and even comprise illegal criminal acts, such as slander or insult etc. Objectively, negative statements are engaged in by words, in written or verbal form, to belittle or harm the enterprises, products, services or commercial relations of their competitors, intending to decrease their commercial reputation, as a result of, in the mind of consumers, the enterprises, products, services or commercial relations of the perpetrators are viewed as being superior. De jure, if the words reflect the truth and are accurate and appropriate, they do not constitute the negative statements. In this legal provision, it points out expressly what words are inappropriate, which relate to nationality, religious or ideological beliefs, and the private life or other purely personal circumstances of the targeted persons. Apparently, this provision is also to safeguard the right of personality of individuals and is also compatible with the sensitive data of the personal data protection regulated by Law no. 8/2005 – Personal Data Protection Act, which cannot be used or diffused carelessly under the unauthorised situations. (3) Acts of comparison In practice, it happens often, through a fair and just way and mean, in the comparison of enterprise, products and services, only if a comparison which is based on facts can it determine the advantage or disadvantage of enterprises, products and services, enabling consumers to make a choice which fulfils their needs based on the objectives facts and results. Pursuant to Article 163 of the Commercial Code, the stakeholders proceed
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 168 to an open or public comparison of their or others’ enterprises, products or services with those of competitors, when the respective facts of this comparison are not analogous, irrelevant or incomparable, this practice of comparison is deemed as a behaviour of unfair competition. In this provision, pointing out that an act of comparison itself is not necessarily behaviour of unfair competition, only if it is not paired with misleading acts or negative statements, and the following elements are not fulfilled, it is not a tort: (i) the comparison of enterprises, products or services is not disclosed to the public by stakeholder, or the process or result of comparison is not disclosed to the public; (ii) the facts in comparison of enterprises, products or services are analogous, relevant or comparable. (4) Acts of imitation In daily practices, the imitation of products or services of enterprises is a learning process from unknown to recognition, aiming to understand techniques or functions, furthering technological innovation. Pursuant to Article 164 of the Commercial Code, only if the products, services and activities of an enterprise are not subject to the Legal System of Intellectual Property Right and other relevant sectoral acts and safeguarded, they can be freely imitated. Nevertheless, if the imitation of a third person’s products or services makes consumers apt to think in association of the respective products or services, or damage the reputation or efforts of other persons, this act of imitation is deemed as behaviour of unfair competition. If the respective associated thinking or exploitation of reputation of other persons is inevitable, the respective act of imitation is not deemed as behaviour of unfair competition. However, if this act of imitation is carried on sustainably and its intention is to hinder or obstruct the stable position of its competitors in the relevant market, and go beyond what may be considered a common response mode, this is deemed as behaviour of unfair competition. In fact, imitation can be divided into general imitation and slavish imitation. General imitation refers to a stakeholder, through learning from and by reference to an operators’ business results, uses part of these results and applies this to his imitating products or services. Slavish imitation, commonly known as plagiarism, refers to a stakeholder completely imitating elements and results of another operator’s products or services, making mimic products or services and original products or services identical and becoming a fully replicate products or services. (5) Exploitation of other person’s reputation Pursuant to Article 165 of the Commercial Code, provided that
The Legal Provisions which maintain Fair Competition in various sectors in Macao 169 “[i]mproper exploitation of the entrepreneurial reputation of another person, to one’s own benefit, or to a third party’s, is considered unfair”. In accordance with this provision, using reputation, whether authorised or empowered or not, of other enterprises to the benefit of himself or a third person may not comprise infringement, the key point is whether the use is appropriate. The exploitation of other persons’ reputation and acts of confusion are not identical. The former would not mislead consumers recognising the products or services of the stakeholder are in fact the products or services of others’ enterprises; and also differed from negative statements, such as enabling consumers to think in association with the products or services of mentioned enterprises, which mislead consumers recognising the products or services of others’ enterprises are in lower quality than the products or services of himself or third person. This provision does not specify expressly and concretely how the use of the reputation of others’ enterprise is appropriate or inappropriate. (6) Breach of secrets Pursuant to paragraph 1 of Article 166 of the Commercial Code, breach of secrets is that “[t]he spreading or exploitation, without permission from the holder, of industrial secrets or any other entrepreneurial secrets that were either accessed legitimately, but with a duty of confidentiality, or not legitimately, namely as a consequence of any of the conducts [by promotion and exploitation of contractual breaches], is considered unfair”. In this provision, the prerequisite is the respective information is spread without prior permission by the right holder, so this points out two objective facts: firstly, disclosure or use of industrial secrets or any other enterprise secrets where there is a duty of confidentiality, comprises behaviour of unfair competition. If a perpetrator infringes this provision they shall be guilty of a criminal offence, constituting a crime of breach of confidentiality.257 Duty of confidentiality must be compatible with the provisions of Law no. 8/2005 – Personal Data Protection Act – and other relevant industrial legislations; secondly, by illegitimate way, enticing workers, suppliers, customers and others who must comply with contractual obligations, infringe contractual obligations, or, by illegitimate way, disclosing or using the contracts-related enterprise secrets, or deceiving, intending to drive competitors out of the market, or other analogous circumstances, which are behaviours per se constituting 257 Pursuant to Article 189 of the Criminal Code, provided for that “[w]ho, without consent, reveal secret to other person who has taken acknowledgement by reason of their status, occupation, employment, profession or art is punished with imprisonment up to 1 year or a fine up to 240 days”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 170 criminal acts, considered as the crime of improper use of secrets.258 (7) Promotion and exploitation of contractual breaches Pursuant to paragraph 1 of Article 167 of the Commercial Code, promotion of contractual breaches is “[t]he instigation of employees, suppliers, clients and other obliged parties to the breach of contractual obligations that they have undertaken towards competitors”, is considered as a tort. The “instigation” pointed out herein is generally to offer interests by the way of promise of gain, which can be interests of money, materials or non-materials, usually regarded as “bribery”. Besides that, pursuant to the provision of its paragraph 2, exploitation of contractual breaches refers to a stakeholder promoting lawfully the termination of the contracts of employees, suppliers, and clients of other persons’ enterprises, or stakeholder, to his or to third person’s interest, in acknowledgement of other persons’ contractual breaches, uses this behaviour, such as on purpose disclosing or using commercial secrets of other enterprises, or in this situation there is deceit, with the intention of driving competitors out of the market or other analogous circumstances, is considered unfair. (8) Exploitation of dependence Pursuant to Article 168 of the Commercial Code, the dependence of commercial activities refers to an entrepreneur who is a client or supplier of other entrepreneurs and does not have another analogous alternative for its operations. This dependence per se is not a problem, only if improper use of this relation is deemed as unfair competition and incurs the prohibition by the Commercial Code. (9) Sales at a loss Pursuant to Article 169 of the Commercial Code, some entrepreneurs sell products or render services by a price lower than cost or the acquired price, its purpose or strategy is to drive a competitor or some competitors out of the market. This predatory behaviour is deemed as behaviour of unfair competition. The second category is the damages of consumers’ interests, including: (1) Acts of confusion The commercial acts executed by entrepreneurs aim at gaining benefits 258 Pursuant to Article 190 of the Criminal Code, provided for that “[w]ho, without consent, uses a secret of other person on commercial, industrial, professional or artistic activity, that has taken acknowledgement by reason of their status, occupation, employment, profession or art, and which has harmed so the other person or the Territory is punished with imprisonment up to 1 year or a fine of up to 240 days”.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 171 from their clients or consumers, enabling them to obtain profits in the operating business. If they practice acts of confusion, with the intention to make clients or consumers think in association with enterprises, products or services of third persons, it makes consumers, by misunderstanding the enterprise with a higher reputation, higher quality of products or services, incur damages. These acts of confusion fall foul of in the provision of paragraph 2 of Article 159 of the Commercial Code and are deemed as behaviour of unfair competition. (2) Misleading acts Pursuant to Article 160 of the Commercial Code, misleading acts refer to perpetrators use of diffuse incorrect or false indication, unreal indication, as well as any other act which produce wrong interpretation on characteristics, functions, quality or quantity etc. of the respective products or services, or which generally produce wrong interpretations on the advantages offered by the products or rendered by services. The “use or diffusion” herein generally refers to advertisements or propagandas engaged in by stakeholders. Misleading consumers by illegitimate advertisements or propagandas is prohibited by law. In this regard, Law no. 7/89/M – System of “advertising activities” – can be interpreted. Its Article 2 provides for that “‘[a]dvertising’ or ‘advertising activities’, the entire disclosure aimed at directing the public’s attention to a particular good or service of a commercial nature, in order to promote their acquisition”. Its Article 6 provides for the veracity of advertisings, pointing out that “[t]he advertisement must respect the truth, not distort the facts or mislead recipients” and “[t]he statements concerning the origin, nature, composition, properties and conditions for the acquisition of goods or services must be advertised at any time, subject to proof”. Moreover, Article 10 prohibits deceptive advertising, providing that “[i]t is forbidden to use forms of advertising that, directly or indirectly, for untruthfulness, omission, ambiguity or exaggeration, induce the consumer in mistake concerning the characteristics of goods or services”. For example, with regard to Law no. 7/90/M which regulates the Publication Act, subparagraph h) of Article 2 provides that advertising is “the texts or images published aimed, directly or indirectly, to promote goods, services or initiatives activities to public, even without complying with the advertising scheme adopted by the company owning the publication”. Certainly, the respective “texts or images” must reflect the veracity and truth of the promotion of goods, services or activities in question; otherwise, deception exists resulting in the occurrence of misleading acts.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 172 (3) Offers For the offers with commercial purpose, Article 161 of the Commercial Code sets out in two aspects: the first is the offers engaged in for the purpose of publicity. If entrepreneurs engage in advertising to publicise or spread their enterprises, products or services, whereby consumers must purchase their products or acquire services, it is deemed as unfair competition. Its paragraph 1 provides for that “[t]he delivery of offers with advertising purposes, and analogous commercial practices, are considered unfair if, by the circumstances in which they take place, the consumer is put in a situation of having to contract the main performance”; the second is the offers engaged in for the purpose of promotion or sales. Entrepreneurs engage in promotion by offering identical or other products or services, in order to attract consumers to purchase their products or acquire services. In normal circumstances, the respective purchased products or rendered services should be the major ones, if the offered products or services are the complementary, these offers do not have problems. However, if the offers tend to make the consumers want to acquire offered products or services and they must purchase the main products or services, or making it hard for the consumers to determine the real value of the offered products or services or hard to compare with other offered products or services, these offers are illegal acts and are subject to the Commercial Code. Its paragraph 2 provides for that “[t]he offer of any type of advantage or premium of the case of acquiring the main performance is considered unfair if it induces or can induce the consumer in error concerning the level of prices of other products or services of the same entrepreneurs, or if it renders excessively difficult the assessment of the effective value of the offer or its comparison with alternative offers”. The third category is the damages of collective interests. If the consequences caused by the effect of the two categories of violation of fair competition aforementioned damage the interests of competitors and consumers, the impact arising from these is long-lasting and severe. It can jeopardise fair competition of the free economic market and results in markets becoming unbalanced. The major method is that entrepreneurs exclude competitors by illegitimate practices, and can even squeeze them out of the market, viz. reducing competitors in the same market or making them bankrupt, until reaching oligopoly, whereby entrepreneurs could do everything they want for profits. This kind of practice not only harms the interests of other enterprises, it also harms the interests of consumers. The typical practices are predatory pricing, tying in sales, etc. If entrepreneurs execute commercial acts
The Legal Provisions which maintain Fair Competition in various sectors in Macao 173 violating fair competition or applicable to the provision of Article 158 of the Commercial Code, these acts are considered unfair and harm the collective interest. 4.4.4. Prescription to initiate judicial action for unfair competition and compensation of damage For unfair competition practiced by entrepreneurs, Article 170 of the Commercial Code sets out the prescription to initiate judicial action. It points out that the victim should initiate judicial action before a court within one year when he or she has known, or could have known, the person who practiced the unfair competition. No matter whether the victim knows or not the person who practices the unfair competition, judicial action cannot be initiated after three years of the occurrence of facts. When the court determines whether the practice in question constitutes unfair competition, a decision of the existence of facts shall be publicised. In this decision, it must order to prohibit the continuation of the practice in question and indicate the appropriate ways to eliminate the effects produced by the practice of unfair competition. Independent of whether the practice of unfair competition is engaged in intentionally or with fault by the perpetrator, this perpetrator must assume the indemnity of damage caused by that practice. 5. Fair Competition-related Provisions, Existing in the Laws of Economic Sectors In the legal provisions of the MSAR, albeit it does not provide nominally for the law of competition or anti-monopoly, these are set out substantially in the provisions of the Commercial Code. Although the Commercial Code has been the primary law regulating the major economic activities of enterprises in the MSAR for the protection of fair competition, the relevant provisions which possess generality and general applicability are primarily specified in this Code, as well as determining concrete practices of unfair competition. Although these provisions are not all-rounded or complete, they still work to a certain extent. Nevertheless, to protect fair competition within an industrial sector and among industrial sectors, it not only relies on the general provisions of the Commercial Code, but also depends on the provisions specifically provided for in the sectoral laws of relevant industries. The following table lists, in a manner of synthetic classification, the present competition-related provisions.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 174 Table 6.2: Number of legislations in force in respect of competition-related provisions of MSAR Area of unfair competition Industries / Activities Law AR DL EO Ord DCE NCE DSTPW TOTAL Restrictive competition General commercial activities, telecommunications, contract law, public administration, aids to SMEs, intellectual property rights, government procurement, food labelling, protection of consumers, Internet service, finance, insurance, aviation, transportation, road and intercity passengers transport, gaming, advertising activity, freight forwarding 10 14 13 1 3 19 4 1 65 Abuse of dominant position Telecommunications, public health, public administration, Internet service, aviation, gaming 2 6 1 16 2 27 Unreasonable price Telecommunication, public health, Internet service, import and export, communications 2 2 1 7 12 Mergers Specific services financed by government, special stamp duty, services of terrestrial mobile telecommunications, finance, infrastructure, public network of fixed telecommunications 2 1 10 13 Monopoly Post service 2 2 Total 14 22 19 1 4 52 6 1 119 Remarks: 1. Information collected until 28th February 2016. 2 In spite of the total number of legislation is counted as 119, but, among them, one legislation may involve more than one area of unfair competition. 3. AR: Administrative Regulation; DL: Decree-Law; EO: Executive Order; Ord: Order; DCE: Dispatch of the Chief Executive; NCE: Notice of the Chief Executive; DSTPW: Dispatch of the Secretary for Transport and Public Works. It could be seen clearly in this table, that, in the present legal framework of MSAR, there is a certain number of sectoral laws relating to economic activities which contain provisions related to the protection of fair competition, reaching totally 119 legal instruments as at 28th February 2016. Some of them contain provisions involving more than one area of unfair competition.
The Legal Provisions which maintain Fair Competition in various sectors in Macao 175 In these sectoral laws, areas of unfair competition are classified as restrictive competition or antitrust, abuse of dominant position, unreasonable price or predatory price, mergers and monopoly. Among them, the laws involving restrictive competition have highest number, reaching 65; the second highest number is of abuse of dominant market, reaching 27; the third is of mergers, being 13; the fourth is of unreasonable price, being 12; lastly, 2 laws regulate monopoly. With regard to the regulations of fair competition, they are not limited to a specific or individual legal form. Only if the matters fulfil the relevant legal form, the economic activities of fair competition-related area shall be provided for by the relevant legal form. The present legal forms which have been regulating fair competition include law, administrative regulation, decree-law, executive order, directive, dispatches of the Chief Executive, notices of the Chief Executive, dispatches of the Secretary for Economy and Finance, and dispatches of the Secretary for Transport and Public Works. Until 28th of February 2016, there were 52 dispatches of the Chief Executive which involve the regulation of areas related to fair competition. Besides that, the matters regulated by law, administrative regulation and decree-law have relatively smaller numbers, being respectively 14, 22 and 19. They involve higher legal positions in the legal system of MSAR, in addition their scopes and applied areas are also wider and deeper than other legal acts. Hence, they have a stronger binding force and have been used to strengthen and protect fair competition. 6. Conclusion The economy of Macau expanded rapidly in the early 1980s following the economic reform and opening up of China, and the opening up of exclusive rights of gaming after the reunification of Macao. Until 2000, the GDP per capita in Macao jumped to the eighth place of the world. In response to this economic development and transition in Macao, the laws and regulations of some major and specific industries and activities related to the protection of fair competition have been added one after another, guaranteeing that businesses can operate and grow under the circumstances of fair competition. This also protects the interests and welfare of consumers. Nevertheless, the respective provisions related to fair competition are scattered and only focused on specific industrial sectors and are relatively “superficial”. Provisions of a more comprehensive nature and general applicability were entrenched in the revised Commercial Code, which was promulgated in 1999, which is the part of “Regulation of Competition between Entrepreneurs”. This acts as the foundation of the current legislations of fair competition of MSAR. Based on these provisions, the provisions scattered in laws and regulations of various industrial sectors can now be linked together, subject to the conceptual norms and be understood in a more cohesive way. Therefore, this
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 176 chapter discussed this Regulation, analysing in depth the protection of fair competition, including its subjects, objects and the conditions and requisites that result in infringements of this Regulation. In addition, this chapter analysed specific acts of unfair competition as set out in the Commercial Code. Finally, this chapter discussed clearly and concisely the legal framework of MSAR, the principle legal forms and their hierarchical relationship, as necessary background to the following chapters, which discuss the relevant laws and regulations of various areas of fair competition and their interconnections and how they relate to the overall legal system.
177 Chapter 7 Core Provisions I of Fair Competition of Macao: Restrictive Competition of Relevant Industries and Sectors The last chapter noted that MSAR has passed through two vital turning points in the past four decades, namely the reunification of Macao to China at the end of 1999 and the reform and opening up of China in 1978. In the 1980s the rapid evolution of the socio-economy of Macao saw the economy transformed from production and manufacturing activities to services. So at that time, the former government of Macao began to engage in the institutionalisation of certain commercial sectors and economic activities, resulting in promoting a pluralistic development of the socio-economy under strict regulations in several areas. Thereafter, following the reunification of Macao, and according to the provisions of the Basic Law of Macao Special Administrative Region, the society, economy and culture of Macao are developing on the assumption that the capitalism and judicial system remain unchanged. So, the government of MSAR continues to establish and improve the activities of different industries in the economic field. Both the former government of Macao and the government of MSAR aimed at promoting local and regional development to enhance and improve the existing economic systems, and to create new systems and new orders for promoting certain economic activities for regional development. Under the development of the free economy market of Macao, certain regimes related to economic activities regulated by the government set out provisions ensuring fair competition or prohibiting unfair competition, as listed in Table 7.1. These provisions require the execution of fair competition by enterprises and to protect fair competition between enterprises, with a view to ensure the orderly development of the market and so that the interest of consumers would not be damaged.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 178 Table 7.1: Legislation of MSAR concerning provisions of the protection of fair competition # Field of activity Year Statute Issue 1. Government procurement 1985 Decree-Law no. 63/85/M Regulates the process of acquisition of goods and services 1999 Decree-Law no. 74/99/M Approves the legal regime of the contract of public works 2006 Notice of the Chief Executive no. 5/2006 Orders to publish the ratification of the People’s Republic of China, and the notification that accompanied on the application of the UN Convention Against Corruption, adopted in New York, on 31 December 2003, as well as the authentic text in Chinese accompanied with the respective translation into Portuguese 2. Protection of consumers 1988 Law no. 12/88/M Creation of the Consumer Council 3. Industry of transportation 1988 Decree-Law no. 50/88/M Approves the general basis of the legal regime of transport in Macao 4. Advertising activity 1989 Law no. 7/89/M Defines the general regime of the advertising activity 5. Industry of insurance 1989 Decree-Law no. 38/89/M Defines the legal regime of the exercise of the activity of insurance mediation 1997 Decree-Law no. 27/97/M Establishes the new legal regime for access and exercise of the insurance activity in the territory of Macao 2001 Administrative Regulation no. 27/2001 Amends the legal regime of the exercise of the activity of insurance mediation – Repeal Articles 37, 38 and 46 of Decree-Law no. 38/89/M, of 5 June 6. Postal services 1989 Decree-Law no. 2/89/M Approves the new Organisational Regulation of the Postal and Telecommunications Services 1999 Decree-Law no. 88/99/M Sets out the general principles to be observed in the provision of
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 179 # Field of activity Year Statute Issue postal services and the installation and use of postal infrastructure 2006 Administrative Regulation no. 2/2006 Amends the Organisational Regulation of Postal Services 7. Industry of aviation 1991 Decree-Law no. 27/91/M Approves the Regulation of Ultra-light Aircraft 1996 Decree no. 282/96/M Fixes the rates payable for the use of Macau International Airport 1998 Decree-Law no. 10/98/M Approve the System of Aircraft Registration 2003 Executive Order no. 25/2003 Approves the Regulation of Air Navigation of Macao 2004 Administrative Regulation no. 10/2004 Frames the Statute of the Activity of Civil Aviation in Macao 2004 Administrative Regulation no. 11/2004 Establishes the regime of Civil Liability for Air Carriers and Operators 2011 Administrative Regulation no. 19/2011 Amends Law no. 11/2004, establishing the Regime of Civil Liability for Air Carriers and Operators 2012 Administrative Regulation no. 18/2012 Aerodrome Certification 2012 Executive Order no. 45/2012 Establishes the system of fees to be charged by the Civil Aviation Authority for service rendered in the frameworks in the ambit of its powers 2012 Dispatch of the Chief Executive no. 169/2012 Approves the certificate template of aerodrome to be issued under the Administrative Regulation no. 18/2012 (Aerodrome certificate) 2013 Law no. 2/2013 Law of the investigation of accidents and incidents in civil aviation and the protection of the air safety information
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 180 # Field of activity Year Statute Issue 8. Sector of financing 1993 Decree-Law no. 32/93/M Approves the Legal Regime of Financial System of Macao 9. Food labelling 1992 Decree-Law no. 50/92/M Establishes the conditions to be complied with in labelling of food ready to be supplied to the final consumer 1994 Decree-Law no. 56/94/M Amends Decree-Law no. 50/92/M, of 17 August, which regulates the process of labelling of food ready to be supplied to the consumer 2004 Administrative Regulation no. 7/2004 Amends Decree-Law no. 50/92/M, of 17 August 10. Industry of import and export 1995 Decree-Law no. 53/95/M Repeals Decree-Law no. 46829, Decree no. 46828, both of 5 January, Decree-Law no. 578/70, of 24 November (Measures of anti-dumping) 1998 Dispatch no. 50/GM/98 Fixes a 0.5% rate on the fees payable by the issuance of certifying documents of origin of Macao in connection with exports of goods subject to a quota 11. Industry of freight forwarding 1996 Decree-Law no. 7/96/M Regulates the provision of freight forwarding activity 12. The statistical information system of MSAR 1996 Decree-Law no. 62/96/M Defines the legal framework for the development of Macao Statistical Information System – Repeal Articles 1 to 28 of Decree-Law no. 74/87/M, of 31 December 13. Activity of the television broadcasting by satellite 1998 Decree-Law no. 3/98/M Approves the regime of licensing of television broadcasting by satellite 2004 Administrative Regulation no. 6/2004 Amends Decree-Law no. 3/98/M, of 19 January 1999 Decree no. 206/99/M Confers to Telesat – Satellite Communications Limited, a
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 181 # Field of activity Year Statute Issue licence to install and operate a system of television broadcasting by satellite 1999 Decree no. 207/99/M Confers to Telesat – Satellite Communications Limited, a licence to install and operate a system of satellite management 2000 Dispatch of the Chief Executive no. 232/2000 Authorises the “China Satellite TV (Group) Limited Company” to provide telecommunications ser- vices of television broadcasting by satellite 2004 Dispatch of the Chief Executive no. 46/2004 Determines that the “Satellite television MASTV, Limited Company” is licenced to provide the telecommunications services of television broadcasting by satellite 2008 Dispatch of the Chief Executive no. 318/2008 Licences “Macau Lotus Satellite TV Media Limited” to provide the telecommunications services of television broadcasting by satellite 2014 Dispatch of the Chief Executive no. 136/2014 Renews Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, conferred to “Telesat – Satellite Communications, Limited”, to install and operate a communica- tions system of television broad- casting by satellite 2014 Dispatch of the Chief Executive no. 163/2014 The endorsement to the firm “宇宙衛星通信服務有限公司” in Portuguese “Telesat – Comunica- ções por Satélite, Limitada” and in English “Telesat – Satellite Com- munications, Limited”, in the Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, is considered as being made to the “宇宙衛星通信服務股 份 有 限 公 司 ”, in Portuguse “Telesat – Comunicações por
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 182 # Field of activity Year Statute Issue Satélite, S.A.” and in English “Telesat – Satellite Communi- cations, Limited” 14. Private notary 1999 Decree-Law no. 66/99/M Approves the Statute of Private Notaries – Repeals 15. Intellectual property rights 1997 Decree-Law no. 97/99/M Approves the Legal Regime of Industrial Property 1999 Decree-Law no. 43/99/M Approves the regime of copyright and related rights 2001 Administrative Regulation no. 21/2001 Approves the organisation and functioning of the Customs Services 2008 Administrative Regulation no. 25/2008 Changes the organisation and functioning of the Customs Services 2012 Law no. 5/2012 Amends the regime of copyright and related rights 16. Motor vehicles tax 2002 Law no. 5/2002 Approves the Regulation of Tax on Motor Vehicles – Repealing the Law no. 20/96/M of 19 August, Law no. 7/98/M of 24 August and Law no. 1/99/M of 19 April 17. Road and intercity passengers transport 2004 Administrative Regulation no. 4/2004 Approves the Regulation of Road and Intercity Passengers Transport 18. Labour relations 2008 Law no. 7/2008 Law of labour relations 2015 Law no. 2/2015 Amends Law no. 7/2008 “Law of labour relations” 19. Integrity 2009 Law no. 19/2009 Deals with the prevention and suppression of corruption in the private sector This chapter will examine the legal instruments and the relevant legal regimes which contain provisions for the protection of fair competition, especially the provisions related to restrictive competition, and will analyse their role in promoting economic activities.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 183 1. Government Procurement Government procurement refers to the procurement tasks undertaken by government. The countries of the world determine, in principle, goods, services and works covered by procurement laws. These laws are important as government expenditure or public spending incurred is an extremely large part of the economy. According to WTO data, expenditure of government procurement, including expenses of personnel and defence, accounts for an average of 15% of GDP of each country; for the member-states of EU, the proportion is even higher, at about 20%. For the MSAR, as defence spending does not belong to the autonomy of MSAR, and the expenses of procurement personnel are hard to extract from the public accounting system, only the expenditure of government procurement can be calculated. In a decade after the reunification of Macao, it is estimated that government procurement expenditures accounted for 6.17% of GDP.259 Thus, government procurement plays a very active role in business and trade and its influence in the market economy cannot be ignored, especially in the aspects of fair competition and integrity of government procurement. Currently, the legislations applicable to government procurement are in two levels: international law and local legislation. The former is the United Nations Convention against Corruption; the latter is the legal system of government procurement established by the former government of Macao and the government of MSAR. 1.1. Provisions related to the Protection of Fair Competition in the United Nations Convention against Corruption, which is applicable to MSAR On 21st February of 2006, the government of MSAR promulgated Notice of the Chief Executive no. 5/2006 through the Official Gazette, enabling the United Nations Convention against Corruption to be applicable to MSAR. Amongst the preventive measures set out in the Convention, one of which is to establish an appropriate system of procurement by competition as one of its base factors, so that government procurement is conducted with integrity. Paragraph 1 of Article 9 provides: “1. Each State Party shall, in accordance with the fundamental principles of its legal system, take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in 259 Tang, Tat Weng. “Collection of Articles on the Legal System of Government Procurement in Macao Special Administrative Region”. Associação dos Licenciados em Administração Pública, 1st Edition, September of 2015. In reference to article “Position Occupied by the Government Procurement of MSAR in the Regional Economic Development: Retrospect and Prospect”, p 154.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 184 preventing corruption. Such systems, which may take into account appropriate threshold values in their application, shall address, inter alia: (a) The public distribution of information relating to procurement procedures and contracts, including information on invitations to tender and relevant or pertinent information on the award of contracts, allowing potential tenderers sufficient time to prepare and submit their tenders; (b) The establishment, in advance, of conditions for participation, including selection and award criteria and tendering rules, and their publication; (c) The use of objective and predetermined criteria for public procurement decisions, in order to facilitate the subsequent verification of the correct application of the rules or procedures; (d) An effective system of domestic review, including an effective system of appeal, to ensure legal recourse and remedies in the event that the rules or procedures established pursuant to this paragraph are not followed; (e) Where appropriate, measures to regulate matters regarding personnel responsible for procurement, such as declaration of interest in particular public procurements, screening procedures and training requirements.” In this provision, the member-states of the United Nations shall, according to the fundamental principles of domestic law, establish a procurement system based on 3 factors: (1) transparency; (2) competition; (3) objective criteria in decision-making. The competition indicated herein implies fair competition, banning any behaviour of restrictive competition by enterprises, so as bidders compete for the contracts of government procurement under fairness, impartiality and transparency. The “appropriate system of procurement” indicated by this provision involves 5 aspects, which the procurement process should follow and comply with. The procurement process is not limited to the tendering procedure and these means are also applicable to the consultation procedure, but the wording is only for the form of the tender, otherwise, it cannot be effective in ensuring honest procurement. In these aspects, the methods of execution by procuring entities in the relative procurement process have been determined clearly and formally. In spite of not mentioning fair competition, if the procuring entities are able to comply substantially and materially with the requirements of these aspects, it will not cause the government to encourage any behaviours of restrictive competition. 1.2. Locally Legislated Provisions related to Protection of Fair Competition in the Legal Regime of Government Procurement The current legal system of government procurement of MSAR has been developing since the 1980s. Its core legal instruments are: (1) Decree-Law no.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 185 122/84/M, altered by Decree-Law no. 30/89/M – determining the rules on expenses of acquisition of goods and services and realisation of public works; (2) Decree-Law no. 63/85/M – determines the tendering procedure of acquisition of goods and services; (3) Decree-Law no. 74/99/M – approving the legal system of contract of public works. The latter one was passed one month before the reunification of Macao, after which, there were only few subsidiary regulations published for the enforcement of government procurement. The Decree-Laws indicated above in points (2) and (3) can be deemed as procedural laws of government procurement, which involve provisions that protect fair competition. 1.2.1. Generalised provisions in relation to the protection of fair competition In Decree-Law no. 74/99/M, there is a general provision related to competition. Article 5 provides: “1. Are prohibited all practices or agreements that may distort the normal conditions of competition and should be rejected proposals and applications submitted as its consequence. 2. If a practice or agreement harmful to competition has resulted in the award of a contract, should be suspended its implementation, following the procedure laid down in article 209, unless the competent authority decides otherwise on reasonable grounds. 3. The occurrence of any of the facts set out in paragraph 1 shall be notified by the owner of work to the entity which, in the Territory [now Region], proves the registration in the official registry of contractors and, in the case of competitor with headquarters or branch outside Macao, its counterpart in the country or territory where they are established, for appropriate action.” Paragraph 1 of this article applies to bidders and also procurement personnel who conspire with bidders, and this can be understood in two aspects. Firstly, if practices exercised by bidders or agreements reached between bidders, have the objective or effect that may distort normal competitive conditions, they shall be prohibited; secondly, if there is a conspiracy between bidders and procurement personnel, namely the procurement personnel available to the bidder unlawfully favour or provide some undisclosed information giving the bidder an advantage, thereby depriving the chance of other bidders to win the procurement contract, it shall also be prohibited. Thus, when these bidders submit proposals for participating tenders, tendering entities or owners of works shall not accept these submitted proposals; or, in the situation of tendering entities or owners of works engage in the procedure of pre-qualification of bidder for future restricted tenders, the application
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 186 requested by these bidders are similarly not accepted. From the contents of these prohibitive provisions, tendering entities or owners of works are able to determine or presume reasonably, before (ex ante phase of tendering procedure) or during the opening session of tender proposal, that the practices or agreements engaged constitute unfair competitive behaviour. Paragraph 2 of this article shows that after the tendering procedure or during the execution of public works contract (ex post phase of tendering procedure), where the owner of the works discovers and confirms that a contractor was awarded a contract by exercising practices of restrictive competition, it should suspend immediately the execution of works and start the procedure of resolution of contract, or the competent authority can tackle the contract based on other adequate grounds. Pursuant to paragraph 3 of this article, the owner of the works must notify the entity, where the contractor registered its activities, of the occurrence of any practices or agreements indicated in paragraph 1. If the contractor is a local one, the respective entities are the Commerce and Movable Property Registry and the Business Registration Centre of Financial Services Bureau; if the headquarters or branch of the contractor is not located in MSAR, the relevant entity is the entity related to commercial registration in the country or region where the contractor locates, so this entity files necessary procedures to cope with anti-competitive practices. 1.2.2. Specific provisions in relation to the protection of fair competition The tendering procedure established by two procedural laws related to government procurement sets out the means of protection of fair competition, particularly while the tendering entity evaluates the proposals submitted by qualified bidders and detects any bid made by a bidder which involves anti-competitive practices, inter alia cartels pricing, predatory pricing, collusion, bid-rigging etc. In this situation, the contracting authority reserves the right not to award the respective project of procurement. (A) Bidding by cartel pricing With regard to the tendering procedure for acquisition of goods and services, the provision of subparagraph b) of Article 38 of Decree-Law no. 63/85/M, “[t]he contracting authority has the right not to award contract: … b) [w]hen all proposals, or the most convenient one, offer the total price higher than the base price, if any; …” is confirmed. The contracting authority indicated herein is the competent entity who is able to authorise expenses to the respective tender; “the most convenient one [proposal]” refers to the one which obtains the highest pass points by evaluation criteria previously defined by tendering entity, this proposal achieves, in this time, the best equivalence between price and integrated quality among all
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 187 proposals, so it is considered as the most adequate proposal with the best conditions; the “base price” is the highest budgeted expense defined previously by tendering entity before starting a tender. If the proposed priced is higher than the amount of the budgeted expense, the tendering entity may not have sufficient expenditure capacity to cope with the acquisition of the procurement project, then it will not be awarded, or the respective procurement project is treated by mean of “nullification of tender”. However, in the tender of government procurement, public entities do not generally determine the base price, but only provide an estimated price for the procuring project, so as to legally select an appropriate form of procurement. Using the estimated price as the base price, if the price suggested by the proposal with the best conditions or the prices contained in all proposals are higher than the estimated price, then not awarding the contract may not be realistic and not compatible with market situations. In general, if the estimated price of the procuring project is reasonable and within the normal pricing range in the market, then the suggested prices of bidders may be higher or lower than the estimated price. If, and only if, the suggested price is in the normal pricing range of the market of the procuring project, the tendering entity should still award contract. If the price suggested by the proposal with the best conditions or the prices contained in all proposals is unreasonably higher than the estimated price, or higher than the upper limit of normal pricing range, in this situation these prices can be considered as cartel prices, or the respective bidders have submitted the proposal by mean of unfair competition, the contracting authority reserves the right not to award the contract. Regarding the tendering procedure of public works, the provision of subparagraph b) of Article 96 of Decree-Law no. 74/99/M, “[t]he owner of works has the right not to award contract: … b) [w]hen all proposals, or the most convenient one, offer the total price considerably higher than the value for the tendering effects; …” is confirmed. The meaning and functions of this legal provision is analogous with the corresponding legal provision of the above-mentioned Decree-Law, the difference is for works only. The owner of works herein indicated “is a legal person who contracts with contractor to perform certain work and in interest to which the execution is provided”;260 “the value for effect of the tender” is an estimated price previously determined, based on the circumstance of market, by the tendering entity, for the realisation of tender of the project of works. (B) Bidding by predatory pricing Regarding the tendering procedure of acquisition of goods and services, in the provisions of Decree-Law no. 63/85/M, there is not any provision covering related bidding by predatory pricing by a bidder, not to mention not to award the contract if 260 Pursuant to paragraph 2 of article 3 of Decree-Law no. 74/99/M.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 188 there is bidding by predatory pricing. However, the provision of this aspect exists in the tendering procedure of public works as set out in Decree-Law no. 74/99/M. Subparagraph c) of Article 96 provides that “[w]hen all proposals, or the most convenient one, offer total price considerably lower than the value for the tendering effects, and the reasons are not sufficiently elucidated”. In normal circumstances, only if the integrated quality of the proposed project of works meets the required level, the proposal with the lowest price submitted by a bidder is beneficial to the government to control the procurement cost or expenditure of public finance. This low price bidding must still be in the normal and reasonable pricing range of the market; otherwise, bidding with a price lower than the pricing range shall be deemed as a bid with predatory pricing, or that it is done to win a contract of works by mean of restrictive competition that is not permitted by law. (C) Bidding by collusion of bidders Regarding the tendering procedure of acquisition of goods and services, the provision of subparagraph c) of Article 38 of Decree-Law no. 63/85/M, “[t]he contracting authority has the right not to award contract: … c) [w]hen there is a strong presumption of collusion between bidders; …” is confirmed. The collusion stipulated by this provision is a kind of restrictive competition behaviour, and is one of the issues related to procurement integrity, which is a behaviour practiced between bidders. But whether there is collusion does not need to be determined by the tendering entity of the public institution. It is only based on its holdings an objective basis to presume its existence, then it can make a decision not to award the tender. It is worth noting that, if collusion is practiced between bidders and procurement staff, it is not in the scope of this provision. Does this mean that the law permits this kind of collusion? In fact, any unfair competitive behaviour which affects the integrity of procurement is bound by the provisions related to unfair competition as set out in the Commercial Code. Regarding the tendering procedure of public works, the provision of subparagraph f) of Article 96 of Decree-Law no. 74/99/M, “[t]he owner of works has the right not to award contract: … f) [w]hen there is a strong presumption of collusion between bidders, in particular under paragraph 1 of Article 5; …” is confirmed. Concerning the part “[w]hen there is a strong presumption of collusion between bidders”, the interpretation of this provision is analogous to the previous paragraph, but this provision sets out expressly a pre-requisite condition “in particular under paragraph 1 of Article 5”; specifically, based on the practices or agreements which may distort the normal conditions of competition, if it can be presumed strongly there is collusion practiced between bidders, the owner of works reserves the right not to award the contract. This pre-requisite is not inconsistent with the relevant provisions of the Commercial Code.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 189 2. Protection of Consumers The Consumer Council was restructured in 1998 and is functioning till the present date and is subject to Law no. 4/95/M altered by Law no. 1/98/M. The former revised Law no. 12/88/M which regulates the “Protection of Consumer”, the 2nd recital of its preamble indicates that “recognised that … the unfair and restrictive practices of competition … must be object to appropriate specific legislative measures”; in the provision of paragraph 1 of Article 9 of this Law, indicates that “the consumer has the right to be informed of the essential characteristics of goods and services that will be provided in order to be able to make a conscious and rational choice between competing goods and services and use, in the best conditions, these goods and services”. This Law uses the protection of fair competition as a basis to guarantee the rights of the consumer. 3. Transport Industry Currently, the legal regime of transport applied to MSAR is subject to Decree-Law no. 50/88/M, altered by Decree-Law no. 59/88/M, the 1st recital of its preamble points out that this law “establishes the general bases of the land transport system of Macao, setting the general guidelines of technical, economic and administrative nature to be observed in its conception, organisation and operation”; its 3rd recital indicates at the same time that this law also “establishes the principles which should guide the land transport policy, …” Article 3 of this Decree-Law provides the principles of transport policy, its paragraph 2 points out that “[t]he rules governing access to the market of land transport and its functioning will be defined, taking into account the principles of free competition between transporting entities and the free choice of users”. The contents of this provision imply the prohibition of the abuse of a dominant position of the land transport market by transporting entities and of any measures and practices of restrictive competition. 4. Advertising Activity The present regime related to advertising activity is stipulated by the promulgation of Law no. 7/89/M, in 1989. Before that, there was no legal order in this aspect. Article 1 of this law sets out the applicable scope, which is that “[t]he law establishes the general rules to be complied with the dissemination of advertising messages, whatever the medium used, as well as the conditions for their registration and public display”. In order for this law to reach a common understanding on the implementation, its Article 2 sets out that “‘[a]dvertising’ or ‘advertising activity’ means any dissemination that aims to direct the public’s attention to a particular good or service of a commercial nature, in order to promote
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 190 its acquisition”. The content of advertising messages must comply with the general principles established by the Law, its Article 3 stipulates that “[t]he advertising message must be lawful, identifiable and true and respect the principles of free and fair competition and of consumer protection”. The free and fair competition mentioned herein has no further stipulation by this Law, and then it applies to the “Regulation of Competition between Entrepreneurs” under the Commercial Code. In the view of advertising activity in its form or in its content, the unfair competition practices defined in the “Regulation of Competition between Entrepreneurs” may involve acts of confusion, misleading acts, offers, negative statements, acts of comparison, exploitation of other person’s reputation, and breach of secrets etc. Certainly, specific violation depends on the actual situation of the advertising activity. In accordance with the provisions of this Law, if an advertising message is formally or materially illegal, it does not have any sanctions. However, due to the dissemination of illegal advertising messages, resulting in the interests of third parties incurring damages, the owners of the advertising media are assumed to have civil liability and severally with the advertising agent and the advertiser. But, when the advertiser is able to prove that he does not know in advance the content of the disseminated advertising, he can be eligible for exemption from civil liability.261 If the illegal advertising that has been disseminated results at the same time in a violation of a criminal nature, it is also subject to criminal law; and the person who is responsible for the dissemination of the illegal advertising, is deemed as the principle culprit to be punished. If the advertising agent does not deliberately disseminate illegal advertising but is a sole advertising creator, it is deemed as an accomplice of the culprit.262 In addition, this Law has also defined the penalties for specific violations, but noted that when there is no special provision, they are only punished in accordance with the provisions of this Law. However, the provisions of such punishment do not point out illegal behaviours belonging to unfair competition. Therefore, when relating to the violation of unfair competitive behaviours, it can only apply the relevant provisions of the Commercial Code, Civil Code and Criminal Code to determine the punishment. 5. Insurance Industry The current legislation regulating the access and exercise of the activities of insurance and reinsurance in the region of Macao is Decree-Law no. 27/97/M. This Decree-Law revised Decree-Law no. 6/89/M which has been enforced for 8 years. This Decree-law was to update the relevant legal framework, aiming to strengthen 261 Pursuant to Article 25 of Law no. 7/89/M. 262 Ibid, the provision of Article 26.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 191 the prudential supervision and define adequately new solutions to the emerged realities after the publication of latter Decree-Law, particularly the regulation of the conditions of constitution and establishment of reinsurers in the region of Macao, the conservation and microfilming of documents related to the insurance activities, as well as the setup of branches and representative office and the ambit of their activities. The access or exercise of the activities of insurance or reinsurance by insurer or reinsurer can only be authorised in the form of an executive order, after hearing the opinion of the Monetary Authority of Macao by the Chief Executive, in which shall be specified the class or classes of insurance which each insurer or reinsurer is permitted to operate.263 To authorise the constitution of an insurer, the conditions for consideration are the criteria of opportunity and convenience, in relation to primarily the interest of the economy and finance, or of the market that is deemed for the region of Macao. Therefore, in the evaluation of the opportunity and convenience of the constitution of an insurer, there are five specific evaluation factors that must be considered, the fifth evaluation factor has a direct relationship with the protection of fair competition, which is the “[c]ompatibility between the insurer’s prospects for development and maintenance of healthy competition in the market”. Consonant to the implication of this provision, if the development prospects of the insurer affect the healthy competition in the market, the relevant practices of their enforcement are considered as the practice of horizontal restrictive competition. Regarding the exercise of the activity of insurance mediation, the present regime is defined by Decree-Law no. 38/89/M, which was revised afterwards in several times, respectively by Decree-Law no. 51/94/M, Administrative Regulation no. 27/2001 and Administrative Regulation no. 14/2004. The activity regulated by this regime is the exercise of insurance mediation in life insurance and/or in general insurance, but the respective request must be appropriately composed and presented to the Monetary Authority of Macao. Prior authorisation from the Monetary Authority of Macao to each of these classes is required. Only the natural or legal persons who are authorised as insurance intermediaries by the Monetary Authority of Macao, in terms of this Decree-Law and other complementary provisions, can exercise the activity of insurance mediation. Insurance intermediaries are divided into three types, which are respectively insurance agents, insurance salesmen and insurance brokers. As insurance intermediaries, their remunerations are the commissions and by any other benefits stipulated in the mediation contract. With regard to compulsory insurances, the maximum commission payable to intermediaries may not exceed the percentage set by the notice published in October of each year by the Monetary Authority of Macao, in respect of remuneration of relevant insurances for the following year. When the Monetary Authority of Macao considers it indispensable to defend and maintain fair and healthy competition in 263 Purusan to paragraph 1 of Article 3 of Decree-Lawn no. 27/97/M.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 192 the market, the Authority may, in the same way, or through the publication of a notice, fix the commissions in respect of other classes of insurance.264 When the insurance intermediaries practice unfair competition in order to obtain personal benefit, particularly through the dissemination of false information with respect to insurance companies or other intermediaries in order to discredit them, or by delivering incorrect data to the insured in order to obtain personal benefit, it shall consider the gravity of the breach, to punish by temporary suspension or revocation of authorisation of the exercise of the mediation activities,265 as well as imposing a fine between 5,000 and 50,000 patacas, without prejudice to a more severe punishment that fits the case.266 6. Postal Services The organisational structure of the Macao Post of MSAR is from the Organisational Regulation of the Macao Post, approved by Decree-Law no. 2/89/M altered by Administrative Regulation no. 2/2006. Its Article 1 sets out that the Macao Post “is intended to provide the public postal service …”, and the postal service rendered is specified by Decree-Law no. 88/99/M. The scope of this Administrative Regulation is stipulated in the provision of Article 1, this indicates that “this administrative regulation sets out the general principles to be observed in the provision of postal services and the installation and use of mail infrastructure”. However, the 3rd recital in the preamble of this Administrative Regulation points out the purpose of its formulation, “[t]his administrative regulation makes the legal framework of the provision of postal services by Public Mail Operator, providing for the licensing of private operators for the provision of services not included in the monopoly of the Territory [now Region]”. Whereby the contents of the preamble show that postal services may be provided separately by a public mail operator and private operators, but each has its own scope and cannot overlap. The public mail operator indicated herein is Macao Post,267 which possesses competences, conferred by this administrative regulation, of monopoly services rendered by MSAR, including:268 (1) The acceptance of post, transport and treatment of correspondence of weight less than 2 kg, in order to be delivered to their recipients, in expedited form or not; (2) The manufacture, issuance and sale of stamps and other postal values. 264 Pursuant to paragraph 3 of Article 12 of Decree-Law no. 38/89/M. 265 Ibid, subparagraph e) of Article 31. 266 Ibid, subparagraph e) of Article 32. 267 Pursuant to subparagraph b) of paragraph 1 of Article 2 of Decree-Law no. 88/99/M. 268 Ibid, paragraph 1 of Article 3.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 193 The services of monopoly cited supra are rendered by Macao Post, unless granted to other entities.269 Non-monopolistic postal services can also be provided by MSAR, Macao Post;270 at the same time, Macao Post still has exclusive rights set out by this law, including:271 (3) The manufacture, issuance and sale of stamps and other postal values; (4) The manufacture of philatelic products, notwithstanding that it may be authorised to individuals; (5) The issuance of payment orders for transferring funds through postal demand draft. However, in point (1) it is indicated that in the postal services of “acceptance of post, transport and treatment of correspondence”, the followings do not belong to the monopolistic services by Macao Post:272 – That has gone through by postal institution, or just has paid and stamped in the postal establishment of origin; – To deposit in correspondence collection receptacle or postal establishment; – With the region of Macao, except when carried out for profit, or systematically or by special organisation; – Relating to lawsuit, by order of magistrate or of the law; – Pursuant accepted by international conventions or treaties. The monopoly postal services aforementioned rendered by Macao Post, can be ensured in the normal provision in any condition and circumstance, to avoid the occurrence of unfair competition if they were being rendered by private operators for the purpose of profits, or the affection of which cannot bring profits by lack of private operators in the MSAR. Considering that the scientific and technological innovation and social development, especially the popularity of e-mail, messaging applications of mobile devices etc., it is necessary that these services are monopolised and rendered by MSAR. 7. Aviation Industry Currently, the aeronautical activities in MSAR, which are only limited to civic purposes, are subject to a “Framing Statute of Civil Aviation Activity in Macao” promulgated by Administrative Regulation no. 10/2004, revised by Administrative Regulation no. 18/2008, aiming to establish the general principles which frame the activity of civil aviation in MSAR, and regulating mainly the following issues: the 269 Ibid, paragraph 1 of Article 4. 270 Ibid, paragraph 2 of Article 4. 271 Ibid, paragraphs 4, 5 and 6 of Article 3. 272 Ibid, paragraph 2 of Article 3.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 194 types of air operation, public transport and regime of grant, operators of air transport, air work and general aviation, regulation of air navigation of Macao, licensing of aeronautical personnel, certification of aircraft, certification of organisations of maintenance, Macau International Airport and its rights of grantee, Infrastructure of heliport and public heliport of Macao, utilisations of aeronautical infrastructure of MSAR by aircrafts registered outside of MSAR, sanctions etc. The relevant legal system is entirely established based on this “Framing Statute of Civil Aviation Activity in Macao”. The major statutes are listed in Table 7.2. Table 7.2: The legal system related to civil aviation activity in Macao # Statute Regulating issue 1. Decree-Law no. 27/91/M Approves the Regulation of Ultra-light Aircrafts 2. Decree no. 282/96/M Fixes the rates payable for the use of Macau International Airport 3. Decree-Law no. 10/98/M Approves the System of Aircraft Registration 4. Executive Order no. 25/2003 Approves the Regulation of Air Navigation of Macao 5. Administrative Regulation no. 10/2004 Approves the Framing Statute of Civil Aviation Activity in Macao 6. Administrative Regulation no. 11/2004 Regime of Civil Liability of Air Carriers and Operators 7. Administrative Regulation no. 19/2011 Revises Administrative Regulation no. 11/2004 which regulates Regime of Civil Liability of Air Carriers and Operators 8. Administrative Regulation no. 18/2012 Aerodrome Certification 9. Executive Order no. 45/2012 Establishes the Regime of Fees to Receive by the Civil Aviation Authority for Services Rendered in the Framework of its Powers 10. Dispatch of the Chief Executive no. 169/2012 Approves the template of aerodrome certificate to be issued under the Administrative Regulation no. 18/2012 11. Law no. 2/2013 Law of the Investigation of Accidents and Incidents of the Civil Aviation and of the Information Protection of Air Safety
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 195 In the legal system of civil aviation activity of Macao listed in Table 7.2, the law related to the fixation of rates payable for the use of Macau International Airport contains provision on the protection of fair competition. The law was originally established by Decree no. 282/96/M, but it was subsequently amended several times by: (1) Decree no. 152/98/M – amend Articles 9 and 10 of Decree no. 282/96/M; (2) Executive Order no. 36/2004 – amend several articles of Decree no. 282/96/M, as amended by Decree no. 152/98/M, and paragraphs 2 and 6 of the Annex thereto; (3) Executive Order no. 26/2006 – amend Articles 10 and 14 of Decree no. 282/96/M, as amended by Decree no. 152/98/M and by Executive Order no. 36/2004. (4) Executive Order no. 13/2013 – amend Articles 3, 10 and 14 of Decree no. 282/96/M. Article 1 of this Decree provides expressly that “[f]ees are due by use of Macau International Airport … their equipment, services, areas or the occupation of premises”. The related fees are divided into 3 groups: fees inherent to the airport activities, fees for ancillary activities, fees for complementary activities. The fees inherent to the airport activities can only be settled and collected by the grantee of the operation of Macau International Airport, or the entity to which the necessary competences are granted. 273 To ensure the competitiveness of the Macau International Airport in the market of international aero-transport, the grantee can propose, regarding each item of charge not exempted or reduced yet, to the grantor the exemption or reduction of fees inherent to the airport activities, and the grantor must to approve based on the principles of non-discrimination and fair competition, as well as not having negative effects on the civil aviation sector of Macao.274 Given the object of this Decree sets the service charges, and the grantor who approves the fees is based on one of the principles related to fair competition. The setup of relative fees must consider the market price of the provision of civil aviation services of airport, and it is not allowed to restrict competition by the relative fees, such that the grantee cannot set out any agreement of charge with service providers of other regions, cannot set out charges of predatory pricing or cartels pricing and so on, and it must determine charges under the conditions of a free market economy. In addition, following the reunification of Macao to the PRC on 20 December 1999, the international conventions related to aeronautical activity must be 273 Pursuant to paragraph 3 of Article 4 of Decree no. 282/96/M, which was amended in several times. 274 Ibid, paragraph 4.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 196 published again for the applicability in MSAR. Table 7.3 lists the relevant conventions. Table 7.3: The relevant international conventions related to civil aviation activity in Macao applicable to MSAR # Statute Regulated issue 1. Notice of the Chief Executive no. 20/2001 Concerning the continued application in the Macao Special Administrative Region, the Convention on Offences and Certain Other Acts Committed on Board of Aircraft 2. Notice of the Chief Executive no. 29/2001 Order to publish the notification of the People’s Republic of China on the assumption of part of responsibilities for the continued application in the Macao Special Administrative Region of the Convention on the International Recognition of Rights in Aircraft, done at Geneva on June 19, 1948 3. Notice of the Chief Executive no. 73/2001 Order to publish the notification of the People’s Republic of China on the assumption of part of responsibilities for the continued application in the Macao Special Administrative Region of the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation, done at Geneva on September 23, 1971 4. Notice of the Chief Executive no. 74/2001 Order to publish the notification of the People’s Republic of China on the assumption of part of responsibilities for the continued application in the Macao Special Administrative Region of the Convention for the Suppression of the Unlawful Seizure of Aircrafts, done at Hague on December 16, 1970 5. Notice of the Chief Executive no. 17/2004 Order to publish the translation into Chinese of the Agreement of Transit of International Air Services, signed at Chicago on December 7, 1977 6. Notice of the Chief Executive no. 22/2004 Order to publish the notification by the People’s Republic of China on the application in Macao Special Administrative Region of the Protocol for the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, done at Montreal on February 24, 1988, as well as the authentic text in English of the Protocol, together with their translations into Chinese and Portuguese 7. Notice of the Chief Executive no. 23/2004 Order to publish the translation into Chinese Language of the Convention on the International Recognition of Rights in Aircrafts, done at Geneva on June 19, 1948 8. Notice of the Chief Executive no. 19/2006 Order to publish the notification by the People’s Republic of China on the application in Macao Special Administrative Region of the Convention for the Unification of Certain
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 197 # Statute Regulated issue Rules for International Air Transport, done at Montreal on May 28, 1999, as well as the authentic text in Chinese together with the translations into Portuguese of that Convention 9. Notice of the Chief Executive no. 20/2001 Order to publish the notification of the International Civil Aviation Organisation on the review of the liability limits set out in the Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on May 28, 1999 10. Notice of the Chief Executive no. 33/2012 Order to publish the notification by the People’s Republic of China on its admission to the Convention on International Civil Aviation, done at Chicago on December 7, 1944, as well as two notes on the application of the Convention and Protocols relating to the amendments to the Convention on Macao Special Administrative Region 11. Notice of the Chief Executive no. 49/2012 Order to publish an Amendment Protocol to the Convention on International Civil Aviation [article 3 bis], adopted in Montreal on May 10, 1984 In the overview of the aforementioned legal system and the international conventions in the relevant area, in the regulated civil aviation activity in Macao there is not any provision related to the protection of fair competition. However, after the reunification of Macao, the government of MSAR continued to sign air services agreement with different countries and regions, to ensure that the civil aviation activity of Macao can cover a wider range. The air services agreements between the government of MSAR and other countries and regions are listed in Table 7.4. Table 7.4: Since the reunification of Macao, the air services agreements signed by the government of MSAR # Statue Regulated issue 1. Notice of the Chief Executive no. 18/2001 Concerning the publication of the Air Services Agreement between the Government of Macau Special Administrative Region of the People’s Republic of China and the Government of the Islamic Republic of Pakistan 2. Notice of the Chief Executive no. 61/2001 Order to publish the Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Czech Republic
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 198 # Statue Regulated issue 3. Notice of the Chief Executive no. 2/2002 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Kingdom of Cambodia concerning Air Services 4. Notice of the Chief Executive no. 59/2002 Order to publish an Amendment to the Air Services Agreement Between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of Singapore [The original air services agreement was published by a dispatch, on November 27, 1995, in the Government Official Gazette of Macao, no. 48, Series I – concerning the Air Services Agreement Between the Government of Macao and the Government of the Republic of Singapore] 5. Notice of the Chief Executive no. 3/2004 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the United Kingdom of Great Britain and Northern Ireland concerning Air Services 6. Notice of the Chief Executive no. 26/2004 Order to publish the Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of Iceland 7. Notice of the Chief Executive no. 4/2006 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of Maldives concerning Air Services 8. Notice of the Chief Executive no. 24/2006 Order to publish the Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of France 9. Notice of the Chief Executive no. 25/2006 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Democratic Socialist Republic of Sri Lanka for Air Services Between their respective Areas 10. Notice of the Chief Executive no. 27/2006 Order to publish the Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of Mongolia 11. Notice of the Chief Executive no. 3/2010 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and Japan for Air Services
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 199 # Statue Regulated issue 12. Notice of the Chief Executive no. 27/2013 Order to publish the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Lao People’s Democratic Republic concerning Air Services Although the respective agreements are in line with the Convention of International Civil Aviation, their contents are set out in accordance with the negotiation between the government of MSAR and the respective countries and regions, therefore the objectives of these agreements are different. However, all agreements have one objective identical or similar after induction of these agreements, that is: – in order to promote mutual relations in the field of civil aviation, for the purpose of establishing air services and providing the framework for air services between the government of Macao Special Administrative Region and another contracting party and beyond their respective areas. Regarding the air services agreement signed between the government of MSAR and the government of the Republic of Iceland, there are the following specific objectives: i) to promote an international aviation system based on competition among airlines in the marketplace with minimum government interference and regulation; ii) to facilitate the expansion of international air services opportunities; iii) to ensure the highest degree of safety and security in international air transportation and reaffirming their grave concern about acts or threats against the security of an aircraft, which jeopardise the safety of person or property, and adversely affect the operation of air transportation, and undermine public confidence in the safety of civil aviation. Regarding the air services agreement signed between the government of MSAR and the government of the Democratic Socialist Republic of Sri Lanka, there also exist specific objectives: i) acknowledging the importance of air transportation as means of creating and preserving friendship, understanding and co-operation between peoples of the two parties; ii) to contribute to the progress of international civil aviation. These agreements include provisions related to the protection of fair competition, and the contents of these provisions are principally and substantially
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 200 similar, but only different in their expression and wordings. Some of them are by explicit wordings and others are substantially by concrete expressions regarding the protection of fair competition. The respective provisions focus on three aspects. The first aspect is to protect fair competition. The respective provision is called “principles governing operation of agreed services” in those agreements, or “capacity regulations” in one certain agreement, and one of those agreements refers to it explicitly as “fair competition”. The content regulated by this provision differs from one to another based on the negotiated outcomes between the government of MSAR and the governments of other contracting parties. Regardless of the names of the respective provisions, the meaning of these provisions are similar. The airlines of both contracting parties stipulated by such provisions, in the concrete arrangement of defining the specified routes and operating air services, must be in “fair and equal opportunity” to compete in providing international air transportation governed by the agreement. Such as in paragraph 1 of Article 7 of “Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of France” published by Notice of the Chief Executive no. 24/2006, provides that: “[e]ach Contracting Party assures that the designated airlines by both of Contracting Parties benefit the fair and equal opportunities in operation of agreed services in specified routes and which the respective designated airline or airlines respect this principle.” The second aspect is reasonable pricing. In these agreements an article of “tariffs” is formulated, but its specific content and wordings are different from the negotiated outcomes between the government of MSAR and the governments of other contracting parties. Commonly the “tariffs … shall be established at reasonable levels”, and their airlines should not consult other airlines in fixing tariffs for certain air services. Article 8 of “the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Lao People’s Democratic Republic concerning Air Services” published by Notice of the Chief Executive no. 27/2013, provides that: “1. … 2. The tariffs to be applied by a designated airline(s) of one Contracting Party for carriage to and from the area of the other Contracting Party shall be established at reasonable levels, due regard being paid to all relevant factors, including cost of operation, the interest of users, reasonable profit, the characteristics of each service and the tariffs
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 201 charged by other airlines. 3. The Aeronautical Authorities of both Contracting Parties shall not require their airlines to consult other airlines before filing for approval of tariffs for services covered by the following provisions. 4. …” The third aspect is to prohibit the abuse of a dominant market position. This provision does not exist in all of these agreements, and it is stipulated in the article of “principles governing operation of agreed services” of some agreements, or in the article of “tariffs” of others. No matter whether it is included in which article, it aims at prohibiting the airlines of contracting parties from using its power in the market to hinder competition. Some concrete provisions fixed in agreements are shown below. In the paragraph 3 of Article 6 (Principles governing operation of agreed services) of the Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the United Kingdom of Great Britain and Northern Ireland concerning Air Services, published by Notice of the Chief Executive no. 3/2004, provides that: “[n]either Contracting Party shall allow its designated airline or airlines, either in conjunction with any other airline or airlines or separately, to abuse market power in a way which has or is likely or intended to have the effect of severely weakening a competitor or excluding a competitor from a route” In the subparagraph b) of paragraph 1 of Article 14 (Tariffs) of the Air Services Agreement between the Government of Macao Special Administrative Region of the People’s Republic of China and the Government of the Republic of Iceland, provides that: “[e]ach Contracting Party shall allow prices for air transportation to be decided by each designated airline based upon commercial considerations in the marketplace. Intervention by the Contracting Parties shall be limited to: … protection of consumers from prices that are unreasonably high or restrictive due to the abuse of a dominant position”
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 202 8. Food Labelling In relation to the process of labelling of food ready to be supplied to consumers, it is subject to Decree-Law no. 50/92/M in alteration of Decree-Law no. 56/94/M and Administrative Regulation no. 7/2004. Its preamble indicates the objective of this Decree-Law that is “to ensure the right to information of consumers as set out in the Consumer Protection Act, also contributing to the protection of their health and to prevent unfair or fraudulent competition in the marketing of products”. For this purpose, this Decree-Law regulates the indications on the labelling, product name, list of ingredients, date of minimum durability, language used, entity which is responsible for labelling, net quantity, batch identification, country of origin, special conditions of storage and utilisation, etc., in order to provide the necessary and accurate product information to consumers. Otherwise, improper information could mislead consumers. The Macao Economic Services (MES) has competence to carry out monitoring of the accuracy of the information aforementioned. If MES detects any irregularities, it can make for appropriate sanctions for violations related to the contents and procedures: (1) who sells or has in existence or display for sale foods, intended for public consumption, where indications of labelling determined by this Decree-Law are missing, inaccurate or deficient, have been amended or withdrawn or are not consistent with their actual contents, shall be punished by a fine between 1,000 and 5,000 patacas, inclusive; (2) who sells or has in existence or displaying for sale foods, whose minimum limit of durability indicated on label is found outdated, shall be punished by a fine between 1,000 and 10,000 patacas, inclusive; (3) who displays for sale foods, intended for public consumption, where indications of the date of minimum durability is presented disguised or covered up by overlay of another label or by other mean which render difficult or hinder its reading by the consumer, shall be punished by a fine of 1,000 to 10,000 patacas. When any one of the above circumstances is detected, the respective foods shall be seized and forfeited to the MSAR. If the identical violation has been made within one year starting from the date of notification of punishment, it is deemed as recidivism, the lower limit of relevant fine shall be risen one fourth, but the upper limit remains unchanged.275 9. Finance Sector The current financial system of MSAR was established by the promulgation of Decree-Law no. 32/93/M in 1993. This Decree-Law approved the Legal Regime 275 Pursuant to Article 19 of Decree-Law no. 50/92/M, revised by Decree-Law no. 56/94/M and Administrative Regulation no. 7/2004.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 203 of Financial System which defined the general legal framework applicable to the exercise of financial activities in the Territory of Macao. Under the provisions of this Legal Regime, the financial institutions which can exercise financial activities must be constituted in compliance with legal provisions and authorised in terms of this Legal Regime or in special legislation. The scope of financial activities comprises: (1) taking deposits or other repayable funds; (2) granting loans, including the provision of guarantees and other commitments, leasing and factoring; (3) payment transactions; (4) issuance and management of means of payment such as credit cards, travellers’ cheques and letter of credit; (5) transactions, for own account or on behalf of clients, on instruments of monetary and foreign exchange markets, financial futures and options, as well as operations on foreign exchange, or on interest rates and securities; (6) participation in issues and placements of securities and provision of related services; (7) acting in interbank markets; (8) custody, administration and management of securities portfolios; and (9) management of other assets.276 In addition, once the financial institution gets authorised by law, it can also exercise the business of a credit institution, specifically: (1) financial advisory services; (2) acquiring financial holdings in companies; (3) provision of business information; (4) hire safes and custody value; (5) commercialisation of insurance contracts; and (6) other similar operations which the law does not prohibit.277 Moreover, financial institutions may also be authorised in the practice of buying and selling, for third parties, of securities or instruments carried through monetary, financial or exchange markets, or in acceptance of investors’ orders relating to these securities or instruments.278 To effectively promote the authorised exercising activities, the financial institutions may promote and publicise externally by advertising, but Article 13 of this Legal Regime sets out certain prohibitive provisions, which prohibit the following advertising activities: (1) through advertising or promotional activities, financial institutions provides, to public, financial information or other data this is not truthful, or presents in deceptive way financial information or data; (2) that may affect the relations of normal competition between financial institutions; and (3) that disturb the credit system or disrupt the normal functioning of the monetary, financial and foreign exchange markets.279 For credit or financial institutions authorised to exercise the business of credit institutions, this Legal Regime regulates the competition between these institutions being protected, its paragraph 1 of Article 112 provides that: 276 Pursuant to paragraph 1 of Article 2 of Decree-Law no. 32/93/M. 277 Ibid, Articles 16 and 17. 278 Ibid, paragraph 1 of Article 2 and Article 117. 279 Ibid, paragraph 1 of Article 13.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 204 “[i]t is prohibited that the credit institutions sign contracts or agreements among themselves, or use means of any natures, which aim at or can lead to a dominant position on monetary, financial or foreign exchange markets, as well as adopt other restrictive practices of susceptible competition that cause changes in normal operating conditions of those markets.” In this provision, even though its subject specifically relates to credit institutions, based on the provision of paragraph 1 of Article 2 of this Legal Regime, the credit institutions referred to by the previous paragraph include financial institutions authorised to engage in the operations of credit institutions; in the other words, financial institutions not authorised to engage in the operations of credit institutions are not subject to this provision. In addition, this prohibitive provision is divided into two parts, the first part is of that “[i]t is prohibited that the credit institutions sign contracts or agreements among themselves, or use means of any natures, which aim at or can lead to a dominant position on monetary, financial or foreign exchange markets”; the second part is of that “[i]t is prohibited that the credit institutions … adopt other restrictive practices of susceptible competition that cause changes in normal operating conditions of those markets”. Regarding the first part of the provision, it indicates that “[i]t is prohibited that the credit institutions sign contracts or agreements among themselves, or use means of any natures”, its prerequisite is that the relevant contract, agreements, or means of other nature must be agreed with between credit institutions; if they are agreed with between a credit institution and another non-credit institution, or between non-credit institutions, they are not subject to this provision. At this time, although they might reach a dominant position on the monetary, financial or foreign exchange markets, they are also not prohibited. Moreover, the object or effect of abovementioned “contracts or agreements, or use means of any natures” must achieve “a dominant position on monetary, financial or foreign exchange markets”, otherwise they are not prohibited. The three different markets herein indicated are: monetary markets, financial markets and foreign exchange markets. If, and only if, the respective credit institution reaches a dominant position in one of these markets as the object or effect, these “contracts or agreements, or use means of any natures” are only prohibited. Regarding the second part of the provision, although it does not state explicitly the subject to be prohibited, the respective subject is likely to the credit institutions indicated in the first part of same provision. In the provision of this part, “other restrictive practices of susceptible competition” is not necessary to the “changes in normal operating conditions of those markets” as object [for the purpose], but as long as those reach this effect, they shall be prohibited.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 205 10. Imports and Exports Macao signed the General Agreement on Tariffs and Trade (GATT) on 11 January of 1991, along with the special relationship with the Republic of Portugal, and became a member-region, as well as becoming a founding member-region from the establishment of World Trade Organisation (WTO) since 1 January 1995. In this regard, the Administration of the Macao Territory has led to a number of legislative measures in the internal legal system in Macao, abolishing certain parts which were in conflict with the normative rules instituted by the WTO, in order to make the internal legal system of Macao fall into line with these normative rules. To this end, the former government of Macao published Decree-Law no. 53/95/M which terminated the effects of a series of legal instruments, extended its application to Macao, stipulated by the Republic of Portugal, which were namely: (1) Decree-Law no. 46829, dated 5 January of 1966, published in the Official Gazette no. 6 on 5 February of 1966; (2) Decree-Law no. 46828, dated 5 January of 1966, published in the Official Gazette no. 6 on 5 February of 1966; (3) Decree-Law no. 578/70, dated 24 November of 1970, published in the Official Gazette no. 50 on 12 December of 1970. These normative regulations were approved when the Republic of Portugal accessed to GATT in 1962. The repeal of these normative regulations aimed to eliminate confusion in the outline of the effectiveness of the international framework regime which resulted from the agreement by the application of Article VI of GATT of 1994. Decree-Law no. 53/95/M aims to combat against the competition impelled by exporters of other countries by dumping prices and countervailing prices, in a view to protect the economic activities in the territory of Macao. Thereafter, to alleviate the burden on the export industry of the territory of Macao and in line with the then economic objectives enabling the activities of this industry to develop in furtherer competitive conditions, the former Governor of Macao, issued Dispatch no. 50/GM/98 on 18 June 1998, which provides as follows: (1) levy of 5% charge of fee on account of issuance of certificatory documents of origin of Macao referred to export quotas for goods; (2) 10% of levied charge of fees revert to the general budget of the territory of Macao, 40% to the Industrial and Commercial Development Fund (FDIC) and 50% to Macao Trade and Investment Promotion Institute (IPIM). Under such an arrangement, the levied fees can be clearly established for the purpose of re-investing in the resources required for trade development, sustained by specific departments to promote and facilitate the economic development of Macao. 11. Freight Forwarding Industry Currently, the freight forwarding service rendered by companies in MSAR is subject to Decree-Law no. 7/96/M, which regulates that the freight forwarding
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 206 service must be rendered by trading companies which meet requirements established as freight forwarding companies. Freight forwarding companies engage in the provision of services to third parties as part of planning, control, coordination and direction of the necessary operations to implement the formalities and procedures required in the delivery, reception and circulation of goods or merchandise, and must obey the requirements established in this Decree-Law.280 Freight forwarding companies must obtain relevant licences to engage in these freight forwarding activities, and may exercise all necessary and convenient behaviours to the ordinary provision of these services, as well as possessing the rights conferred by this Decree-Law and assume its respective obligations. One of the obligations stipulated by subparagraph d) of Article 12 of this Decree-Law is to “[r]efrain from behaviours that express unfair competition”. However, this Decree-Law has no further clear indication of which behaviours constitute unfair competition and which are prohibited by this Decree-Law. So, it applies to the provisions related to “Unfair Competition” as set out in the Commercial Code to determine which behaviours exercised during the process of freight forwarding activities are behaviours of unfair competition. Once behaviours of unfair competition are confirmed, under the provision of subparagraph d) of paragraph 1 of Article 16 of this Decree-Law, “it is punishable by a fine from 15,000.00 to 150,000.00 patacas”, and the graduation of the fine depends on the gravity of violation, the fault of the perpetrator and the relevant economic ability rising from the respective behaviour of unfair competition. If the behaviour of unfair competition causes damage to customers of a third party, the respective fine shall be increased to between 30,000.00 and 300,000.00 patacas. In the case of recidivism, the maximum amount of the applicable fine shall be doubled. Recidivism refers the perpetrator being guilty of unfair competition within one year after the decision on punishment.281 Furthermore, if the perpetrator is guilty three times over a period of less than two years of behaviour of unfair competition, besides imposing a fine and regardless of its amount, the perpetrator will be prohibited from engaging in freight forwarding activities for two years.282 12. The Statistical Information System of MSAR The present system of statistical information of MSAR was established in 1996, and has been developed based on a regulatory framework which has developed over 2 decades. Under the provision of Article 1 of Decree-Law no. 62/96/M, “[t]he Macao [now MSAR] Statistical Information System, …, ensures the obtainment of statistics of interest to the social and economic development of Macao”. 280 Pursuant to Article 1 of Decree-Law no. 7/96/M. 281 Ibid, Article 17. 282 Ibid, Article 18.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 207 Taking into account this statistical information system has developed proactively a supporting function in the economic development, one of the fundamental principles established by this Decree-Law involves the non-intervention policy of Administrative Authorities, which is the principle of statistical confidentiality. Paragraph 1 of Article 7 of this Decree-Law, provides that “[t]he statistical confidentiality is aimed at safeguarding the privacy of citizens, to preserve the competition between economic operators and guarantee the trust of informants in the statistical system”. Thus, the Statistics and Census Service, as an organisation of statistics compilation of this statistical information system, shall measure, through autonomous techniques and statistical methods, correctly and accurately the official statistics, so that the related information does not affect the economic entities and commercial practices in its markets. This is in order to attain the objective of fair competition, and to effectively protect the privacy of consumers and their rights not to be infringed. 13. Activity of the Television Broadcasting by Satellite Currently, the television broadcasting by satellite in MSAR is bound by a regime approved by Decree-Law no. 3/98/M, altered by Administrative Regulation no. 6/2004. This Decree-Law aims to issue 2 kinds of licence: the first is to licence television broadcasting by satellite, particularly involving two aspects: (1) installation and operation of systems of telecommunications of television broadcasting by satellite; and (2) provision of telecommunications services of television broadcasting by satellite; the second is the allocation of a licence of other systems and services of space telecommunications or telecommunications via satellite. This regime stipulates explicitly that once the telecommunications companies with headquarters and place of effective management in Macao, demonstrate their technical competence and adequate economic and financial capacity, they may request to the Chief Executive, through the Bureau of Telecommunications Regulation, a licence for the installation and operation of a system or provision of telecommunications services of television broadcasting by satellite. Then, the Bureau of Telecommunications Regulation organises and instructs the licensing process and considers the request. The Chief Executive fixes the terms and conditions of the activities, and grants a licence in form of dispatch of the Chief Executive. So far, the MSAR has issued relative licences to the following companies, as shown in Table 7.5.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 208 Table 7.5: In MSAR, the companies granted licences of television broadcasting by satellite and the relative legislations Company YearNumber of legislation Description Telesat – Satellite Communications Limited 1999 Decree no. 206/99/M Confers to the Telesat – Satellite Communications Limited, a licence to install and operate a system of television broadcasting by satellite 1999 Decree no. 207/99/M Confers to the Telesat – Satellite Communications Limited, a licence to install and operate a system of satellite management 2014 Dispatch of the Chief Executive no. 136/2014 Renews the Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, conferred to “Telesat – Satellite Communications, Limited”, to install and operate a communications system of television broadcasting by satellite 2014 Dispatch of the Chief Executive no. 163/2014 The endorsement to the firm “宇宙衛星通信服務有限公司” in Portuguese “Telesat – Comunicações por Satélite, Limitada” and in English “Telesat – Satellite Communications, Limited”, in the Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, is considered as being made to the “宇宙衛星通信服務股份有限公司 ”, in Portuguse “Telesat – Comunicações por Satélite, S.A.” and in English “Telesat – Satellite Communications, Limited” China Satellite TV (Group) Limited Company 2000 Dispatch of the Chief Executive no. 232/2000 Authorises the “China Satellite TV (Group) Limited Company” to provide telecommunications services of television broadcasting by satellite Satellite television MASTV, Limited Company 2004 Dispatch of the Chief Executive no. 46/2004 Determines that the “Satellite television MASTV, Limited Company” is licenced to provide the telecom- munications services of television broadcasting by satellite
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 209 Company Year Number of legislation Description Macau Lotus Satellite TV Media Limited 2008 Dispatch of the Chief Executive no. 318/2008 Licences “Macau Lotus Satellite TV Media Limited” to provide the telecommunications services of television broadcasting by satellite 13.1. Licence Granted to the “Telesat – Satellite Communications Limited” For the protection of fair competition, in the attachments of Decrees, no. 206/99/M and no. 207/99/M, which granted two licences to Telesat – Satellite Communications Limited, the relevant contents are provided in the point 20 “Relations with other operators”: “[i]n relations with other operators the operator must respect the principles of equality, non-discrimination and fair competition.” In this clause, the content of licence does not allow the operator and other companies which are similarly licenced practicing any breach of fair competition, in particular reaching agreement or common practice between operators, causing distortion of the service market of television broadcasting by satellite. In addition, in the licence of television broadcasting by satellite granted to this company through Decree no. 206/99/M, there is still a clause related to “pricing”, which is determined in paragraph 2 of point 3 “Commercial structure” of “General plan to 15 years” of attachment II of this Decree: “[i]t is intended to adopt a flexible and sufficient competitive pricing policy, in order to attract a significant number of clients.” The price mentioned in the “flexible and sufficient competitive pricing policy” pointed out herein shall not be charged excessively high, but is a price which can attract a large number of customers to watch the television broadcasting by satellite provided by this company, and the related price must be a reasonable amount; otherwise, an excessively low price is likely to be considered as a predatory price affecting fair competition. 13.2. Licences Granted to the “China Satellite TV (Group) Limited Company” and “Satellite television MASTV, Limited Company” After the licence of telecommunications services of television broadcasting by satellite granted to Telesat – Satellite Communications Limited, the MSAR in 2000 and 2004 granted respectively licences of similar services to “China Satellite TV (Group) Limited Company” and “Satellite television MASTV, Limited Company”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 210 Although both are similar licences, the licences of former and the latter are not formally and substantially identical, but they have clauses related to the protection of fair competition. In point 9 “Commercial operation” of Attachment I “General Development Plan of 15 years” of Licence no. 1/2000 approved by Dispatch of the Chief Executive no. 232/2000, and in point 9 “commercial operation” of Attachment I “General Development Plan of 15 years” of Licence no. 1/2004 approved by Dispatch of the Chief Executive no. 46/2004, both are similarly indicated: “[a]doption of flexible market strategy, competitive prices and comprehensive services.” The “competitive prices” pointed out herein can be interpreted in an identical way with the “flexible and sufficient competitive pricing policy” aforementioned. Relative prices of both must be in the normal range in the telecommunications services market of television broadcasting by satellite, being able to provide comprehensive services with quality. A determination of a lower price can improve the competitiveness in that market and attract more customers to watch television broadcasting services rendered by this company. 13.3. Licence Granted to the “Macau Lotus Satellite TV Media Limited” Following the three licences of telecommunications services of television broadcasting by satellite aforementioned, in 2008, the government of MSAR approved the fourth licence of the same type through the promulgation of Dispatch of the Chief Executive no. 318/2008, enabling the “Macau Lotus Satellite TV Media Limited” to provide the relevant services. But among the clauses of this licence, there is not a clause which regulates this company to protect fair competition, especially in terms of the services pricing abovementioned. 14. Private Notary In 1990, the former government of Macao promulgated the Decree-Law no. 81/90/M, which altered the Notary Law, aiming to create a new body of notary function, permitting increased speed in the practice of notary behaviours, without losing the security and legal certainty, in order to respond to the sustainable needs of notary acts by society. By then, as a special institute, private notaries have been providing notarial functions. This Decree-Law was revoked after 9 years of enforcement, the former Government of Macao promulgated, on 1 November 1999, by Decree-Law no. 66/99/M – Statute of the Private Notaries, to complement the new “Notary Code”, as well as to confer the legal status of private notaries. In the provisions of this Decree-Law, by a specific chapter the “Guarantees of impartiality, duties and rights
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 211 and responsibilities” are stipulated. Article 11 provides for the duty of ethics of private notaries and sets out expressly “[p]rivate notaries must, in particular, refrain from the practices of unfair competition”. For those practices that constitute practices of unfair competition, the provisions of Articles 156 to 173 of existing Commercial Code apply. In the case of private notaries who violate their duty of ethics, or exercise practices of unfair competition, the circumstances expressly enumerated in paragraph 1 of Article 18 (Disciplinary penalties) of that Decree-Law are applicable to them and disciplinary penalties are imposed to them, which: “1. The private notaries are subject to the disciplinary penalties of up to 2 years of administrative suspension or licence revocation when violate the duties to which they are subject, in particular, where: a) Serious irregularities are verified in acts performed; b) There is a serious breach of the duty of confidentiality; c) Books or documents are not found, or book or documents have signs of flaw; d) Amounts are charged higher than they should be; e) Deposit of the amount due are not made in time; f) Fails repeatedly to comply with tax obligations; g) Are not present while any practice is their responsibility; h) Refuse, unreasonably, by act or omission, the examination of books and documents; i) Leave, for any reason, for practicing law without applying for a licence suspension or termination of the exercise of private notary functions; j) Are pronounced, or have been designed day for trial, or convicted of seriously dishonourable felony.” In the aforementioned legal provisions, there are not specific circumstances that set out practices of unfair competition, and the unfair competition in practice is diverse. It would be difficult to enumerate these practices explicitly and concretely one-by-one, only that its existence can be found from the object or effect by execution of notary behaviour. Therefore, once it is confirmed that private notaries violate their duty of ethics, penalties can be imposed in conformity with the provision of Article 18 of the aforementioned Decree-Law. In the case of private notaries who have the penalty of administrative suspension imposed, it means that they are disqualified from exercising the notary function during the period of suspension.283 Thereafter, their function can only be resumed after the authorisation by the Chief Executive, independently on new 283 Pursuant to paragraph 2 of Article 18 of Decree-Law no. 66/99/M.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 212 nomination, but they still must comply with the requisites for nomination.284 In the case of private notaries whose licence has been revoked, it means that they are disqualified from future exercise of notarial functions.285 So, the person who has been disqualified as a private notary who wants to assume again the function of private notary, must still meet the requisites for nomination in order to regain the nomination by the Chief Executive.286 15. Intellectual Property Rights The early law which regulated the industrial property rights in Macao appeared in 1995, but the law was not established in Macao, and it was the “Code of Industrial Property Rights” of the Republic of Portugal which was extended from Portugal to produce effect in Macao by the publication of Decree-Law no. 16/95, through Official Gazette, no. 36, Series I, dated 4 September 1995. However, the first law related to industrial property rights set out in the Territory of Macao was the Decree-Law no. 56/95/M, dated 6 November of the same year, but this was merely an independent regime relating to trademark protection. In other words, the protection of other natures derived from industrial property can only apply for the aforementioned extended Decree-Law, but this Decree-Law was still inadequate, especially as it did not cover the layout-designs (topographies) of semiconductors and biotechnological inventions in the field of plants which are regulated by the Trade-Related Aspects of Intellectual Property Rights (TRIPS). Therefore, after 4 years of the extension of its effect to Macao, this legal regime of industrial property rights was revised and also localised. Decree-Law no. 97/99/M, which was published through Official Gazette, no. 50, Series I, dated 13 December of 1999, approved the Legal Regime of Industrial Property, and still applies today. Since then, the Macao, China, as a member of WTO, possesses a legal mechanism for protection of industrial property which meets the provisions of TRIPS. 15.1. Legal Regime of Industrial Property The Legal Regime of Industrial Property is extremely important to protect fair competition. The 5th recital of the preamble of Decree-Law no. 97/99/M has a fundamental point of consideration, which indicates that “[t]he technical documentation contained in the patents certainly constitutes an important factor for new companies to have prior awareness in their technological area, in order to better prepare for a global market where they have to face over stiffer competition”. Therefore, fair competition contained in the object stipulated in this Legal Regime 284 Ibid, paragraphs 1 and 2 of Article 24. 285 Ibid, paragraph 2 of Article 18. 286 Ibid, paragraphs 3 and 4 of Article 24.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 213 must be protected. This conforms with the provision of Article 1 of Decree-Law no. 97/99/M, “[t]his decree-law regulates the assignment of industrial property rights to inventions and other creations and the distinctive signs provided for therein, aiming in particular to ensure the protection of creativity and technological development, fair competition and the interests of consumers”. In the provision of Article 5 of this Legal Regime, the contents of industrial property right is expressly stipulated, “[t]he industrial property right gives the holder full and exclusive enjoyment, use and disposal of the inventions, creations and distinctive signs, within the limits, conditions and restrictions established by law”. However, the application of an industrial property right by the director of Macao Economic Bureau is not necessarily granted. The provision of Article 9 of this Decree-Law enumerates the general reasons to reject the grant of industrial property rights, one of which is related to fair competition, “[r]ecognition that the applicant intends to practice unfair competition, or that this is possible irrespective of his intention”. Apparently, the reason of this refusal is to protect the interests of competitors of applicant and consumers. For the protection of industrial property rights, especially in the aspect to ensure fair competition, this Legal Regime does not have any related provision, but the respective works are executed, by law, by the Customs of Macao Special Administrative Region. 15.2. Organisation and Functioning of Customs of MSAR Since the reunification of Macao on 20 December 1999, the Customs of Macao Special Administrative Region was formally set up by the promulgation of Administrative Regulation no. 21/2001, dated 22 October 2001, which established its organisation and functioning. This Administrative Regulation was altered by Administrative Regulation no. 25/2008. Among its organisational units, the Department of Intellectual Property was set up and is responsible for the legal protection of intellectual property rights. This Department set up a Division of Inspection, one of its competences is “to develop actions necessary to prevent, combat and punish illegalities in the field of protection of intellectual property, aiming at, inter alia, the strengthening fair competition and the fight against counterfeiting”. 15.3. Protection of Copyright and related Rights The Legal Regime of Industrial Property approved by the aforementioned Decree-Law no. 97/99/M is to protect industrial property rights and its related rights. However, the MSAR enacted a specific protection to copyright which belongs to intellectual property rights, promulgated by the “Alteration to the Regime of copyright and Related Rights” approved by Law no. 5/2012, dated 10 April 2012,
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 214 which revised the “Literary and Artistic Works and Copyright” established by Decree-Law no. 43/99/M. In Article 1 of Law no. 5/2012, its object is entrenched, “[t]his law amends the rules of copyright and related rights, approved by Decree-Law no. 43/99/M, on 16 August 1999, adapting it to international standards of protection derived from the characteristics of information society”. Nevertheless, a clear scope of protection is still subject to the provision of Article 1 of Decree-Law no. 43/99/M: “1. Are works protected by copyright the original intellectual creations in the literary, scientific and artistic fields, whatever the type, form of expression, merit, the communication mode or objective; 2. Ideas, processes, systems, operational methods, concepts, principles or discoveries are not, per se only and as such, protected by copyright. 3. The protection given by copyright presupposes the externalisation of the work, but is independent of its disclosure, publication, use or economic operation. 4. The work is original where is an outcome of own creative effort, and not mere ownership, total or partial, of someone else’s creation.” The first part of Article 1 of this Decree-law provides for that “works are protected, as long as original”; and the second part enumerates clearly and concretely some works which are original, but not limited to the listed original works. A derivative work and composite work produced by the original, likewise are protected by the same manner.287 For the protection given to works that have been disclosed or published, once the title of the work is distinctive, it shall not be confused with the title of any other work of the same genre by other author, and the protection shall extend to the title.288 However, this Decree-Law sets out a provision of exclusion of protection, which are: (1) daily news and reports of miscellaneous events with the character of mere information, in any disclosed form; (2) petitions, allegations, complains and other texts submitted by written or verbally to public authorities or services; (3) text presented and speeches given to assemblies or other collegiate bodies, political and administrative bodies, or in public debates on matters of common interest; and (4) political speeches. To the texts referred to by points (2), (3) and (4), the author possesses the exclusive right to publish them or authorise other persons to publish 287 Pursuant to Article 3 of Decree-Law no. 43/99/M, revised by Law no. 5/2012, “[d]erivative works are those resulting from the transformation of a pre-existing original work, for example arrangements, orchestrations, dramatizations, cinema adaptations and translations”; “[c]omposite works are those in which incorporates, in whole or in part, an existing original work with turn”. 288 Ibid, Article 4.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 215 them, in the form of a collection or separately; in other words, the publication shall be protected. In the case of the texts referred to in point (4) are by confidential nature, or where disclosure of such texts in any way can lead to the damage of the honour or reputation of the author or third person, the public disclosure of such texts would have been prohibited; as agreed with by the author or the third person, the prohibition shall be excluded; or if, due to evidence against the existence of a legitimate interest right higher than the underlying prohibition of public disclosure of the texts, it is not prohibited by judicial decision.289 In addition, Article 6 of this Decree-Law provides for that official works do not benefit from protection. What are official works? The Decree-Law explicitly provides that official works refer to “the texts of convention, laws, regulations, reports or decisions made by the authorities and their translations”. However, if those texts contain protected works, the respective public authorities may, within its statutory duties, use these protected works, without the consent of authors and not giving any right to the author. In short, Decree-Law no. 43/99/M explicitly provides for the protection of copyright and related rights, in both content and form. However, the relevant protection is not limited to this, this Decree-Law also extends to the protection given by other legal provisions, which can be given in accordance with unfair competition, legislation of industrial property or other legislations. The unfair competition herein referred to is subject to the provisions of Articles 156 to 173 of the existing Commercial Code. 16. Motor Vehicles Tax The legislation applied to the payment of motor vehicles tax in MSAR is Law no. 5/2002, revised by Law no. 1/2012. The Government of MSAR shall collect the motor vehicle tax only under the following conditions: (1) the transmissions to the consumer of new motor vehicles realised in MSAR; (2) the imports of new motor vehicles for personal use of the importer; (3) The giving for their own use of new motor vehicles, realised by economic operators involved in the commercial cycle of them, in particular sellers, importers and exporters.290 This Law defines clearly that consumers are the end purchasers of new motor vehicles;291 the collectable motor vehicles tax is calculated on the basis of taxable price, 292 which is fixed administratively by the Committee of Evaluation of Motor Vehicles in reference to all factors available to new motor vehicles, rather than depending on the real selling price fixed to the respective new motor vehicle in accordance with the system of free competition in MSAR; in other words, the taxable price of new motor vehicle 289 Ibid, Article 5. 290 Pursuant to Article 2 of Law no. 5/2002, revised by Law no. 1/2012. 291 Ibid, subparagraph 3 of Article 1. 292 Ibid, Article 13.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 216 is different from the price before levying tax on the selling price in the market. The real selling price fixed to the respective new motor vehicle in accordance with the system of free competition in MSAR is deemed as the market price, which is the normal selling price of the respective new motor vehicle in the market and should be in a reasonable price range; if this real selling price is not fixed in the system of free competition, it belongs to an unfair competitive behaviour. This violation is not in the scope of application of the Regulation of Tax on Motor Vehicles, but is subject to the Consumer Protection Law, commercial law and other relevant legislations. 17. Road and Intercity Passengers Transport Hitherto, the land border of Macao only has two ports connecting to Zhuhai, Province Guangdong of China – Gongbei Port and Hengquin Lotus Port; travelling to Hong Kong can only be done by sea. The direct land way to Hong Kong will only be available following the completion and official opening of the Hong Kong-Zhuhai-Macao Bridge. However, considering that the relevant works of bridge construction of Macao and of Hong Kong are lagging behind, it is difficult presently to determine the opening date. The road and intercity passengers transport service of Macao was regulated in 2004 by promulgation of Administrative Regulation no. 4/2004. This Administrative Regulation approved the “Regulation of Road and Intercity Passengers Transport”, by which the services in this aspect is regularised and applies solely to the road and intercity transport of passengers, whether they are carried in heavy vehicles or light vehicles. This Regulation defined expressly road and intercity passengers transport, which is “road transport services across the border of Macao Special Administrative Region, but part of the journey within the boundary of the Macao Special Administrative Region”.293 The entity which is intending to exercise these services must be limited to a company legally established and which has proved that it meets the requirements of the business, as well it must hold the licence issued by the Land, Public Works and Transport Bureau.294 The requirements accessing to the business comprise 3 aspects, which are respectively suitability, technical and professional capacity, and recognition of financial capacity. With regard to suitability, the company, including its legal person per se, its directors, managers or any other persons who ensure the effective and operational directive of the company, have not been sentenced, with res judicata, by practicing unlawful or unfair competition.295 293 Pursuant to subparagraph 1 of Article 2 of the Regulation of Road and Intercity Passengers Transport, approved by Administrative Regulation no. 4/2004. 294 Ibid, paragraphs 1 and 2 of Article 4. 295 Ibid, paragraph 2 and subparagraph 7 of paragraph 1 of Article 8.
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 217 If the respective company or the relevant person has been sentenced for practicing unlawful or unfair competition, it cannot obtain the licence to render road and intercity passengers transport services. Thus it can be understood that, the unlawful or unfair competitive behaviours practiced before issuance of the licence, are behaviours essentially not related to road and intercity passengers transport services. In addition, the respective company which was sentenced with res judicata will not be qualified or ever issued a licence. 18. Labour Relations Currently, the Labour Relations Law applied to MSAR is subject to Law no. 7/2008 revised by Law no. 2/2015, its scope relates to labour relations in all activity areas, but does not include the followings: (1) legal relations of public employment that confer the identification of worker of the Public Administration; (2) labour relations established between spouses or persons with relation of de facto marriage; (3) labour relations established between persons with family ties to the second degree and who are living in communion of table and housing; (4) relations established under learning contracts or the occupational training system integrated to labour market; (5) the labour relations established with non-resident worker; (6) the labour relations with seafarers; and (7) the part-time work.296 In the labour relations established between employer and employee, the working conditions are regulated by general or specific mandatory laws of the activity sector concerned, by company regulations and by employment contracts.297 While concluding employment contracts, the parties shall define the conditions according to the principle of good faith.298 The obligations with which employees must comply are set out by this Law, one of which is that the employee must “be loyal to the employer, in particular, not dealing on own account or someone’s account in competition with him, not to disclose information regarding the organisation of company, production methods or business”.299 In the first half of this provision, it provides that the employee per se or, on behalf of other person, cannot engage in the same activity of the employer, otherwise the behaviour of unfair competition shall be practiced within employment in the labour relations, to the detriment of the legitimate interest of the employer. In the second half of this provision, as the employee is familiar with, in varying degrees, the internal organisation of the employer’s company, the methods and technologies used for production, and any information about the business, especially in terms of financial, technical and human resource etc. If the employee 296 Pursuant to Article 3 of Law no. 7/2008, revised by Law no. 2/2015. 297 Ibid, Article 4. 298 Ibid, Article 7. 299 Ibid, subparagraph 5 of paragraph 1 of Article 11.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 218 publishes or discloses such information to the competitors of his employer, allowing them to obtain commercial information and even confidential information, and enabling them to adopt certain correspondent measures and practices, it may, thereby, lead to hindering fair competition. Regarding the obligation violated by the employee aforementioned, this is applicable to Article 97 of this Law, provided that “[t]he regime of offences by violation or breach of the rules laid down in this Law shall be governed by the provisions of this Chapter, applying complementarily the Criminal Code, the Labour Procedural Code and the general regime of administrative offences”. As the violation aforementioned involves unfair competition, it is likewise applicable to the relevant provisions in the Commercial Code. Article 80 of this Law provides for that “[w]henever the offence results from omission of an obligation, the application of sanction and the payment of fine do not release the compliance of offender, if it is still possible”. Once an offence has been committed, that is, the employee has already generated a competitive relationship with his employer, or the company information of his employer has been leaked, so as to damage has been constituted to his employer. Thereafter, it is hard to restore the status before the interests of the employer who has been damaged. 19. Integrity To prevent and suppress the corruption engaged by entrepreneurs in the private sector, the MSAR defined the respective legal regime in 2009 by promulgation of Law no. 19/2009. In this regime, it sets out the provision related to the protection of fair competition. Not only this, it sets out the definition of “unfair competition”. Subparagraph 1 of Article 2 stipulates that “‘unfair competition’, constitutes unfair competition any behaviour of competition which objectively reveals contrary to the rules and to the honest usages of economic activity”. Meanwhile, the Commercial Code has the identical provision, its Article 158 sets out the “general clause” of unfair competition, which is that “[u]nfair competition is any act of competition that objectively reveals itself to be in breach of the norms and honest usage of economic activity”. Whether the former or latter, the relevant competitive behaviour must be objective, and must be manifested, as well as it must violate the norms and the honest usages of the economic system, then it can be considered as a behaviour of unfair competition. In other words, if a practitioner has only the motive or planning of unfair behaviour, but this motive or planning is not realised, this cannot be considered as behaviour of unfair competition; in addition, if it violates only the norms of economic activity or only the honest usages of economic activity, it is not in full compliance with requirements of the provision, nor constitutes behaviour of unfair competition. This Law establishes the criminal liability in the aspects of passive bribery
Core Provisions I of Fair Competition of Macao:Restrictive Competition of Relevant Industries and Sectors 219 and active bribery of entrepreneurs in the private sector. In the aspect of passive bribery, paragraph 1 of Article 3 of this Law provides that “[w]ho, exercising tasks, including the tasks of management or administration, to any entity of the private sector, even improperly constituted, which by themselves or, through its consent or ratification, by an intermediary, ask for or accept, for themselves or to a third party, that is not appropriate, material or non-material advantages, or its promise, as a compensation of behaviour or omission that constitutes a violation of his functional obligations, shall be punished with imprisonment of up to one year or a fine”. This behaviour of passive bribery in itself is not necessarily behaviour of unfair competition, but when an unfair competition is caused by this behaviour of passive bribery, or it manifests objectively competitive behaviour that breaches norms and honest usages of economic activity, the sanction to the practitioner shall be up to two years imprisonment or a fine. In the aspect of active bribery, paragraph 1 of Article 4 of this Law provides that “[w]ho, by himself, or through its consent or ratification, by an intermediary, gives or promises the person mentioned in the previous article [Article 3], or a third party with knowledge of that, material or non-material advantages, that is not appropriate to follow the end indicated in paragraph 1 of previous article, shall be punished with imprisonment up to six months or with a fine”. This behaviour of active bribery in itself is not necessarily behaviour of unfair competition, but when an unfair competition is caused by active bribery, or it manifests objectively competitive behaviour that breaches norms and honest usages of economic activity, the sanction to practitioner shall be up to one year imprisonment or a fine. Besides that, the provisions of Criminal Code apply complementarily to the aforementioned behaviour. 20. Conclusion Of all the legislations on fair competition, the provisions related to the prohibition of restrictive competition or antitrust are the most important. These laws aim to effectively protect fair competition between enterprises. If these laws did not exist, it would not only endanger the economic activities and survival of enterprises, but also harm the welfare and interests of consumers, and even jeopardise the socio-economic development of Macao. Therefore, the former government of Macao and the government of MSAR have introduced, through the establishment of laws and regulations of industries and sectors, provisions to prohibit restrictive competition in various degrees and different forms, including horizontal and vertical restrictive competition. Certain provisions of restrictive competition are stipulated in an explicit way, others are in an implicit way. Under existing laws and regulations, 19 fields of economic activity are affected by provisions that prohibit restrictive competition, comprising government
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 220 procurement, protection of consumers, transportation, advertising activity, insurance, postal services, aviation, financing, food labelling, import and export, freight forwarding, the statistical information system of MSAR, television broadcasting by satellite, private notary, intellectual property rights, motor vehicles tax, road and intercity passengers transport, labour relations, and integrity (anti-corruption). Through the analysis of the laws and regulations in respect of the aforementioned 19 fields of activity, it can be concluded that the provisions related to the protection of fair competition can be divided into 3 levels: the first level is provisions with a superficial or conceptual nature. These laws and regulations stipulate that behaviours of the relevant industries and activities must be carried out in compliance with the principle of fair competition; the second level contains provisions of a narrative manner. In general, these laws and regulations directly prohibit enterprises in relevant industries or activities from implementing or adopting agreements, behaviours or practices which hinder, restrict, distort or harm competition; the third level has provisions of an explicit and specific nature. These laws and regulations set out clearly and expressly that behaviours which infringe fair competition are prohibited. If an enterprise exercises any of the enumerated behaviours, they will be punished by law. The provisions of anti-unfair competition in the 3 levels aforementioned have various advantages. The functions of the provisions in the first and second levels are similar and both have general provisions to protect fair competition. The provisions in the first level must be in harmony with the “Regulation of Competition between Entrepreneurs” set out in the Commercial Code. This means it can be established whether the relevant behaviour infringes the provisions of fair competition; the generalised provisions in the second level have similar meanings as set out in the provisions of that Regulation, so it also must consider the concrete situation of relevant behaviour to decide whether it infringes the provisions of fair competition. Regarding the provisions of the third level, these provisions indicate specifically which behaviours infringe fair competition, or the behaviours of unfair competition, so it facilitates competent bodies or courts to make decisions based on actual circumstances.
221 Chapter 8 Core Provisions II of Fair Competition of Macao: Abuse of Dominant Market Position in Relevant Industries and Sectors The development of entrepreneurs in any region relies on their ability to make profits, enabling them to survive in the market. In 2001, the gaming industry of MSAR was opened up to more competition, resulting in the gaming industry having 6 licenced operators. Since the first new gaming right operator began trading in May 2004, the rapid development of the gaming industry has fostered tremendous growth of the MSAR economy, and the gaming industry has become the leading industry of MSAR. This has also encouraged directly and indirectly related industries, especially the tourism, hotels and relevant wholesaling and services, etc. In this regard, the ecological model of entrepreneurs in MSAR has been changing gradually, from simple and unique services provided by entrepreneurs to professionalism and multidirectional services. Moreover, foreign investments are increasing. Capital to establish new business does not only originate from MSAR, but also from foreign investors. However, other key elements for the development of entrepreneurs themselves are the high demand for human and material resources which are not currently available in the economy. The shortage of material resources is an issue which can be solved easily, but the shortage of human resources, inter alia, particularly of skilled workers, is hard to be solved in the short term. Under the regulation of Law of the Relations of Work, persons with special skills are not free-flowing and are regulated by the government, resulting in barriers to the development of commercial entrepreneurs in the region of Macao. At this time, only the commercial entrepreneurs who possess higher financial ability can sustain, by higher salary, their specialised personnel and attract needed specialised personnel in the market. For other smaller entrepreneurs, the lack of human resources makes it difficult to survive and compete with other entrepreneurs existing in the market. In fact, larger entrepreneurs not only possess higher financial capacity, but also higher capacities in diversified aspects, including capacities of management, powers rendered by specialised personnel, richness of materials, etc., resulting in competition between entrepreneurs with large scale and SMEs being biased in favour of the larger producers. Since the divergence of capacities existing
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 222 between entrepreneurs in the market, a healthy market must exist between different kinds of entrepreneurs and in different scales. Therefore, the government of MSAR assures that the activities practiced by different industries per se can be carried out in a relatively level playing field: firstly, entrepreneurs in certain industries which are regulated by law cannot abuse their dominant positions; secondly, to the SMEs, MSAR has established measures supporting SMEs, enabling them to survive in the market through financial and technical aids. 1. Provisions which Prohibit the Abuse of Dominant Position of Market in the Present Legislation of MSAR Commercial entrepreneurs operate for profit in the market. Commercial entrepreneurs of different types and scales can develop continuously by their economic powers. In the uninterrupted expansion of their businesses, commercial entrepreneurs try to gain more profit in competitive markets and achieve higher market share, expecting to dominate the market they occupy and reach dominant positions. In MSAR, laws regulate certain key industries, inter alia, which affect the livelihood of people, expressly the telecommunications, aviation, Internet service etc. If an enterprise is in a dominant position within these particular markets, the law regulates its operation. Moreover, industries involved in areas of significant public interests are likely to be subject to regulation of dominant positions, such as: public administration and public health. From this point of view, the prohibition of abuse of a dominant position regulated by the legislation of MSAR is divided respectively into two categories: prohibition of abuse of administrative dominant position and prohibition of abuse of commercial dominant position. To know clearly which areas are subject to the regulation of a dominant position, Table 8.1, which contains provisions related to dominant positions, amongst fair competition-related laws of MSAR, lists 19 laws. Table 8.1: Legislation of MSAR involving in dominant position listed chronologically by area of activity # Area of activity Legislation Objective 1. Public health Decree-Law no. 6/96/M Approves the legal regime of infractions against to public health and against the economy 2. Public administration Dispatch of the Chief Executive no. 203/2010 Publishes the “Principles and Criteria determinant to the refusal of authorisation to the exercise of private activities after the cession of functions by part of personnel to
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 223 # Area of activity Legislation Objective which refer to Article 19 of Law no. 15/2009”, as well as the formats of forms to use for the effects of application of authorisation 3. Internet services Administrative Regulation no. 24/2002 Establishes the system of access and exercise of the activities of rendering internet services 4. Gaming Law no. 16/2001 Defines the legal regime of the operation of gaming in casinos 5. Tele- communicationsLaw no. 14/2001 Define the Law of Bases of Telecommunications Dispatch of the Chief Executive no. 157/2002 Grants to the Companhia de Telecomunicações de Macau, S.A.R.L., the rights to install and operate a public network of telecommunications and provide terrestrial mobile telecommunica- tions services of public use, by the terms and conditions contained in the Licence no. 1/2002 Dispatch of the Chief Executive no. 158/2002 Grants to the Hutchison – Telefone (Macau), Limitada, the rights to install and operate a public network of telecommunications and provide terrestrial mobile telecommunica- tions services of public use, by the terms and conditions contained in the Licence no. 2/2002 Dispatch of the Chief Executive no. 159/2002 Grants to the Smartone – Comunicações Móveis, S.A., the rights to install and operate a public network of telecommunications and provide terrestrial mobile telecom- munications services of public use, by the terms and conditions contained in the Licence no. 3/2002 Administrative Regulation no. 16/2002 Establishes the system of the installation and operation of external infrastructure of telecommunica- tions Administrative Regulation no. 7/2002 Establishes the system of access and exercise of the activities of the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 224 # Area of activity Legislation Objective operator of public networks of telecommunications and of service providers of terrestrial mobile telecommunications for public use. Administrative Regulation no. 41/2004 Establishes the system of inter- connection of public networks of telecommunications Dispatch of the Chief Executive no. 185/2005 Grants to the Companhia de China Unicom (Macau) Limitada, the right to operate a public network CDMA2000 1X of terrestrial mobile telecommunications and provide roaming mobile telecommunications Dispatch of the Chief Executive no. 235/2006 Grants to the Companhia de China Unicom (Macau) Limitada, the right to operate a public network CDMA2000 1X of terrestrial mobile telecommunications and provide the correspondent terrestrial mobile telecommunications services for public use. Administrative Regulation no. 5/2006 Organisation and functioning of the Bureau of Telecommunications Regulation Dispatch of the Chief Executive no. 171/2007 Authorises the Companhia de Telecomunicações de Macau, S.A.R.L., to install and operate a public network WCDMA of terrestrial mobile telecommunica- tions and provide the correspondent terrestrial mobile telecommunica- tions services for public use Dispatch of the Chief Executive no. 172/2007 Authorises the Hutchinsom – Telefone (Macau), Limitada, to install and operate a public network WCDMA of terrestrial mobile telecommunications and provide the correspondent terrestrial mobile telecommunications services for public use Dispatch of the Chief Executive no. 173/2007 Authorises the Companhia de China Unicom (Macau) Limitada, to install
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 225 # Area of activity Legislation Objective and operate a public network CDMA2000 1X EV-DO of terrestrial mobile telecommunica- tions and provide the correspondent terrestrial mobile telecommunica- tions services for public use Dispatch of the Chief Executive no. 350/2009 Authorises the Smartone – Comunicações Móveis S.A., to install and operate a public network WCDMA of terrestrial mobile telecommunications and provide the correspondent terrestrial mobile telecommunications services for public use Administrative Regulation no. 41/2011 System of installation and operation of public networks of fixed telecommunications 1.1. Public Health The present Criminal Code of MSAR sets out provisions and sanctions concerning certain crimes, such as crimes against persons, crimes against property, crimes against peace and humanity, crimes against life in society, crimes against the Region etc., but there is no provision regarding some particular act or activity, inter alia, of crimes against economic activity. To this end, the former Legislative Assembly published the Law no. 6/96/M, which regulates “Legal Regime of Offenses against Public Health and against the Economy” and fills the gap in this regard for the Macau region. In this Law, the following behaviours are considered illegal, including: (i) illegal slaughter and sale of animals for public consumption; (ii) produce, prepare, make, manufacture, transport, store, hold in deposit, sell, have in existence or displaying for sale, import, export or trade in any way, for public consumption, food or abnormal food additives likely to create danger to life or serious threat to the physical integrity of another person; (iii) other violations against the genuine, quality or composition of food or food additives; (iv) holding of substances or utensils that can be used in the counterfeiting of food or food additives; (v) price higher than that set out by the legal regime or the industry; (vi) hoarding of goods by sellers or purchasers; (vii) illegal destruction and export; (viii) refusal of supply;
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 226 (ix) fraud on merchandise; (x) pyramid selling”.300 Additionally, this Law also stipulates some offenses which are not considered as crimes but were established as administrative violations, including: (i) issue of improper documentation and before the time limits established by law; (ii) for the examinations or manifests, refuse or falsify declarations and information; (iii) exercise of economic activities without complying with formalities subject to legal or regulatory registration; (iv) exercise of economic activities in violation of acts or forms established by law or regulation.301 This Law regulates the relevant punishments to natural persons or legal persons who violate the abovementioned practices. By name of other person, according to Article 2 of this Law, either by legal person or enterprise, or even an entity established improperly or an association without legal personality, as its member, representative or holder exercises by his intention illegal behaviour is punishable; for legal persons, according to Article 3 of this Law, either by legal person or enterprise, or even an entity established improperly or an association with legal personality, only if its member, representative or holder in the name of this entity or by collective interest exercising the abovementioned crimes or administrative illegal acts, the respective entity must assume the relevant responsibility. The relevant responsibility is set out accordingly in the form of imprisonment or fines. Regarding the sanction of illegal behaviours, they are explicitly set out in the provision of each kind of violation, including imprisonment and fines. The established imprisonment is the upper limit of a specified period; the fine is established with upper and lower limits. The authority makes a sanction consonant to the severity and the negative effect of the illegal behaviour. There are five factors that determine the penalty, of which two factors are related to the protection of fair competition: (i) “to have a violation caused abnormal change in market prices”. This situation points out that, as long as the perpetrator of the violation leads to the price of goods or services being abnormal in their market, he may incur higher penalties in the range of corresponding punishment subject to the relevant violation. The indicated “abnormal price” herein is based on the market price. As long as the relevant price is unreasonably higher than the market price, such as a cartel price, or the relevant price is unexplainably lower than the market price, which is a predatory price, it is considered as an abnormal price. So, what is the market price? This is to be determined by free market economy, rather than subject to be controlled by someone, some persons or legal person; (ii) “to have the offender dominant position in the market of goods or services object to the infringement”. This situation points out that, as long as a perpetrator is in a dominant position in the relevant market of 300 Pursuant to Articles 19 to 28 of Law no. 6/96/M. 301 Ibid, Articles 29 to 32.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 227 goods or services, regardless of whether the violation uses its dominant position, it will be punished. So then, if the relevant violation is made using its dominant position, it will be subject to higher penalties. 1.2. Public Administration In 2009, the government of MSAR published Law no. 15/2009, which defines the Fundamental Provisions of Statute of Personnel of Direction and Chiefs, and entrenches the rights and obligations of “personnel of direction and chief” after leaving their position of authority. Who is the “personnel of direction and chief”? They are defined as civil servants in the middle and high levels within the government of MSAR, belonging to the category of management and administration. Pursuant to paragraph 1 of Article 2 of this Law, “consider as personnel of leader and chief the personnel who exercise activities of management, coordination and control in the public services and entities”. This clause points out continuously that, positions of direction includes director and deputy director. Positions of chief include department head, division head and section head. However, the position of section head, which possesses characteristics of exception, can only be created in a unit subordinated to the organisation with an administrative nature. The definition of these positions is compatible with the provision of Article 62 of Basic Law of MSAR, which sets out the hierarchical units within government. Nevertheless, the Basic Law and this Law do not define explicitly the ‘unit of sector’ and the position of sector head that exist presently in some public agencies. In fact, unit of sector and correspondent sector head existed before the reunification of Macao. In the functioning of MSAR, as long as the public agencies and institutes engage in organisational restructuring, unit of sector and position of sector head must be revoked. The provisions of this Law set out expressly and specifically certain restrictions on works of the positions of personnel of direction and chiefs after the termination of their “appointment on regular basis” (nomeação em comissão de serviço in Portuguese). Holders or former holders of direction (directors, deputy directors, or former directors and former deputy directors), who intend to engage in private activities within 6 months from the date of termination of their appointment on regular basis, must apply in advance for authorisation of the Chief Executive. Those who intend to work, without remuneration, for non-profitable organisations, only need to notify in writing, in advance, to the Chief Executive. Regarding the application of authorisation, the Chief Executive can refuse their applications or authorise conditionally their applications, in order to protect the image of impartiality and integrity of the Public Administration, especially where former holders of direction are in given situations within one year prior to the termination of their duties. In these given situations, there are three situations in which holders
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 228 or former holders of direction have a position of dominance with respective entities, 302 being respectively: “have exercised duties of supervision, control, inspection of entity where seek to exercise private activity or of entity with that is in relationship of dominance”, “have represented the Public Administration signing contract with the entity where seek to exercise private activity or with entity with that is in a relationship of dominance” and “have participated in granting financial and fiscal incentives to entity where seek to exercise private activity or entity with which is in relationship of dominance, except such incentives have been granted to the exercise of a bound power where if the mere verification of presupposition legally established”. In these provisions, the respective former official who has represented government has a specific relationship, which is foreseen by law, with an enterprise over a period of time in the past. In order to avoid the respective former official using the information obtained, while assuming his duties, to work for an employer by which he may be recruited, thereby enabling this enterprise to obtain internal information of government, especially the non-public political information and strategies so as to make commercial deployment or decision in lucrative nature. In spite of the respective official having terminated his/her job in Public Administration and cannot use public power (jus imperii), he/she shall not abuse the administrative power by exercising duties, as well as considering the government possesses administrative dominant position of the MSAR, in order to avoid the respective administrative power being abused in any form. Therefore, through the legal stipulation, the prohibition of incumbent officials who abuse administrative power is extended to leaving officials, which prohibits them from being employed within a specified period by an enterprise which has commercial relationships with the government. This is commonly known as the “cooling off” approach. 1.3. Internet Services The provision of Internet services is presently based on the Law of Bases of Telecommunications established by Law no. 14/2001, subparagraph 1 of paragraph 2 of Article 6, which indicates that the government is competent to establish “[r]egime for access to the operation activities of public network of telecommunications and for provision of telecommunications services of public use and regulations of its operation”. Hence, the government of MSAR promulgated Administrative Regulation no. 24/2002, which aimed to establish “the regime of access and exercise of providing activity of Internet services”. Entities which provide Internet services are required to obtain a licence in accordance with the provisions of this Administrative Regulation, but the licence does not grant the right 302 Pursuant to paragraph 3 of Article 9 of Law no. 15/2009.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 229 to exercise the economic activities subject to specific regime of access, especially the activities of operation and promotion of gaming.303 In other words, only the licenced service providers can exercise the activity of provision of Internet services. In the stipulation of the exercise of activity, in order to determine effectively which behaviours disrupt fair competition in the provision of Internet services, Article 23 of this Administrative Regulation sets out explicitly and non-exhaustively 7 specific behaviours, which are respectively: (i) “[d]iscriminatory practices in relations with other providers or the public”; (ii) “[t]he practice of predatory pricing, including sales of products or services potentially generating medium and long-term damages, integrated into an elimination strategy of a competitor or a group of competitors”; (iii) “[p]ratices that restrict the freedom of choice of the operator by the user”; (iv) “[t]he practice or diffusion of denigration acts of the company, services or commercial relations between competitors”; (v) “[a]greements, concerted practices of association of companies, in whatever form they take, which distort, restrict or hinder competition”; (vi) “[c]ross-subventions that subvert competition”; (vii) “[u]nfair attraction to customers”. Point (ii) aforementioned regulates excessive low prices which are prohibited, but this Administrative Regulation also provides for excessively high and unreasonable high prices. Article 19 sets out that “[t]he prices must be globally fixed [by the service providers] at values as close as possible to the cost of services, taking into account the need to obtain a commercial revenue relative to made investment”. This means that the service providers cannot receive an amount lower than the cost of providing Internet services, and also cannot price excessively higher than cost, implying a cartel price. The revenue is the service fee set by the provider excluding the cost of service. This can only recover the investment related to the provision of the Internet service in the past, and the new investment aiming at the continuous provision and improvement of the Internet service in the future. Moreover, in the relevant provision which establishes a notification mechanism, this requires the provider to inform the relevant government agency of its intention to change the prices of rendered services. If, and only if, the service provider practices unfair competition or hinders the development of the market, the relevant government agency shall command the service provider to alter its price.304 Beside the 7 behaviours aforementioned which are considered as unfair competition, this Administrative Regulation sets out, in the commercial practices that the provision of Internet service in form of “tying” is equally prohibited, but it can be exempted in some circumstances. Pursuant to paragraph 1 of Article 22 of this Administrative Regulation, “[t]he services must be rendered, in desegregated form, by the provider and who cannot, unless authorisation of the government, put 303 Pursuant to Article 2 of Administrative Regulation no. 24/2002. 304 Ibid, Article 12.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 230 the users in situation of having to contract a particular service or product to obtain the main service and product”. In addition, its paragraph 2 sets out that “[i]t is forbidden to the provider the utilisation of susceptible advertising forms which lead users in error about the conditions of subscription and characteristics of services”. If a service provider exercises the prohibitive behaviours provided for by Articles 22 and 23 of the referred Administrative Regulation, it shall be fined between 20,000 and 120,000 patacas. For the imposition of fines, the amount is determined in accordance with the severity and the guilt of the offender. In the case of recidivism, the minimum value of the fine is increased one third and the maximum value remains unchanged, that is, the amount of the fine is between 26,667 and 120,000 patacas, and the respective penalties does not prejudice other sanctions provided by law. In addition, the offender also is liable for applicable civil prosecution. In the meanwhile, when the service provider exercises behaviours which violate fair competition or abuses a dominant position, the competent government agency shall suspend or revoke the licence of the service provider,305 as well, the provider has no right to obtain any indemnity.306 1.4. Gaming Industry In the second half of the last century, the gaming industry of Macao had been operating as a monopoly, as the industry had only one gambling provider. After the reunification of Macao, in order to foster the regional development and the development of the gaming industry and to accelerate economic growth, the government of MSAR promulgated, in September of 2001, Law no. 16/2001, which regulates the Legal Regime of Operation of Games of Chance in Casino. This legal regime establishes a regime of grant, by public tender or restricted tender of pre-qualification choosing and granting appropriate enterprises as grantees of casino licences. With respect to maintaining the operation of games of chance in this Region, this legal regime stipulates specifically the “prohibition of restrictive practices of competition” to grantees. Its Article 21 provides that: “1. The grantees carry out their activities in healthy and fair competition, with respect for the principles inherent in market economy. 2. The government treats all grantees without discrimination and ensures compliance with the rules aimed at protecting competition, including the existence of a healthy and fair competition between grantees. 3. The agreements and concerted practices are prohibited, whatever form they take, between grantees or companies belonging to their 305 Ibid, subparagraph 7 of paragraph 1 of Article 26. 306 Ibid, paragraph 3 of Article 26.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 231 groups, which may prevent, restrict or distort competition between grantees. 4. Abusive operation is prohibited, by one or more grantees, of a dominant position in the market or in a substantial part of it, which is likely to prevent, restrict or distort competition between grantees. 5. Except where expressly stated to be justified by dispatch of the Chief Executive, agreements, decisions, practices or facts prohibited by paragraphs 3 and 4 are void. 6. Violation of the provisions of this article shall constitute an administrative offence, subject to criminal or civil liability that may be underlying.” Provision paragraph 1 of this article ensures the practices of the grantee must be compatible with the present model of the market economy of Macao and must be in conformity with the application to the economic principle of laisser-faire, as well as exercising and operating the games of chance in healthy and fair competition. The “healthy and fair competition” indicated herein must comply with the provisions of the “Regulation of Competition between Entrepreneurs” of the Commercial Code. Provision paragraph 2 of this article stipulates that the government of MSAR must conduct itself in a manner of impartiality, fairness, and in a non-discriminatory way to tackle the contracts and any related to grantees, to protect the grantees themselves and between them to they can operate their business with healthy and fair competition. Provision paragraph 3 of this article prohibits agreements or concerted practices, in any form, between two or more grantees, companies belonging to their groups, or grantees and companies belonging to other groups which may impede, restrict or distort competition. This means that, firstly, the agreement or concerted practice must be reached by more than one enterprise, that is to say, only one grantee or one company belonging to its group cannot reach agreement or concerted practice which may impede, restrict or distort competition; secondly, if a decision made between two or more grantees, enterprises belonging to their groups, or grantee and enterprise belonging to other groups, which may impede, restrict or distort competition, this is not subject to this provision. Regarding to “whatever form they take”, this is not limited to the form of “in writing” provided for by Article 154 of Commercial Code, and the form of “verbal” or even “sense”307 is 307 The paragraph 3 of Article 21 of “Legal Regime of Operation of Games of Chance in Casino” established by Law no. 16/2001 provides for “whatever from they take” that, generally, can be interpreted in forms of written, verbal and sense. The former two are used commonly in legal provisions; the latter rarely appears, but, in the legal regime of competition, it is often incorporated to one of anti-competitive agreements or conducts. Its meaning indicates that an operator in the market intends to exercise or exercises practically
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 232 also regarded as the form of this provision. Provision paragraph 4 of this article is very precise, it is prohibited for one grantee to abuse, or several grantees jointly to abuse, a dominant position in the market or in the substantial part of it, in order to impede, restrict or damage fair competition amongst grantees. The market indicated herein is not an ordinary market, it is the market of games of chance. However, the extent of the dominant position which is occupied by one enterprise or occupied jointly by several enterprises pointed out by this provision is not set out expressly by this legal regime and its relevant legislations. Provision paragraph 5 of this article sets out specific exemptions, rather than general exemptions. It stipulates that the prohibited acts set out by paragraphs 3 and 4 of the same article are not absolute situations. These acts are not subject to prohibitive provisions and are exempted if, and only if, justifications are reasonably stated. Then the Chief Executive can issue a dispatch of an external normative nature. The violation provided by paragraph 6 of this article must be a joint liability. Firstly, it points out that the behaviours provided by paragraphs 1 to 5 of this article are deemed as administrative offences; secondly, the violators are also likely to bear underlying civil or criminal liabilities. Article 43 of this legal regime stipulates the sanction of “administrative offences”. Paragraph 1 of this article sets out that “[t]he system of offences for breach or incompliance, attributable to the grantees or managerial enterprises, to the provisions of this law, in complementary regulation or in contracts of grant is determined in Administrative Regulation”. In this provision, “breach or incompliance … to the provisions of this law” indicates that the grantee violates the provisions of Law no. 16/2001. Article 21 of this Law relates to fair competition. With respect to “complementary regulation”, which is a set of legal instruments ensuring this law is executed effectively and achieves its objective, its legal form can be any form other than the form of law. The complementary regulation is generally represented by forms of, inter alia, administrative regulation, dispatch of the Chief Executive, etc., which complete, in different issues, the legal regime of games of chance. Table 8.2 lists the related complementary regulations to year 2014. With respect to “contracts of grant”, its concrete and precise contents are determined by the contract of the relevant tender awarded by the Chief Executive and signed, after negotiation, by the government of MSAR and awarded to the bidding enterprise. The respective contract of grant must be published in the Series II anti-competitive conducts, and while other operators are aware of their conducts exercised in the absence of consortia, collusion, and so on, these operators exercise correspondent anti-competitive conducts on their own at the same time, their results may impede, restrict or damage competition as well as distorting a normal market.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 233 of the Official Gazette.308 Table 8.3 lists the contracts of grant related to games of chance and their relevant instruments published in the Official Gazette to year 2014. With respect to “the system of offences …, attributable to the grantees or managerial enterprises … is determined in Administrative Regulation”, the Administrative Regulation stipulated for this system of offences is not defined within the present legislation. Nevertheless, the offences of this aspect can still be sanctioned by law, which is based on provision paragraph 2 of this article, it is that “[t]he offences referred to in the preceding number of an administrative nature, governed by Decree-Law no. 52/99/M, of 4 October, and the related sanctions are imposed by the Government”. According to provision paragraph 1 of Article 3 of the Decree-Law no. 52/99/M, “[t]he substantial and procedural regimes applicable to administrative offences are set out in the laws and regulations that provide for and sanction them”; its paragraph 2 provides that “[t]he regimes referred to in the preceding paragraph shall comply with the provisions of this decree-law”; its paragraph 3 provides that “[i]n the absence of provision in the laws and regulations referred to in paragraph 1, it shall be applied subsidiary and subsequently the provisions of this decree-law and, mutatis mutandis, the appropriate adaptions of the Code of Administrative Procedure, the general principles of criminal law and criminal procedure law”. Thus, the system of offences for breach and non-compliance applicable to the provisions of Law no. 16/2001, its complementary regulations or contracts of grant, attributable to the grantees or managerial enterprises, is in the application, in priority, to the provisions of administrative regulation to be set out for this purpose, and then Decree-Law no. 52/99/M, Code of Administrative Procedure, Criminal Code, Criminal Procedure Code etc. According to provision paragraph 3 of Article 43 of Law no. 16/2001, “[t]he payment of fines for administrative offences mentioned in the preceding paragraphs shall not prejudice the criminal procedure that may arise place”. This clearly points out that, in addition to sanctions for administrative offences, there is also a joint liability in criminal matters. According to provision paragraph 4 of this article, “[b]y the payment of fines is responsible the grantee or the managerial enterprise and, jointly and severally, the respective shareholders that are holders of value equal or higher than 10% of the capital, even though the enterprises have meanwhile been dissolved or ceased operation for any reason”. However, the relative sanction is time-related. According to Article 7 of Law no. 52/99/M, provides that “[t]he procedure for applying the sanctions shall expire in 2 years from the date of the practiced offence”; and “[t]he sanctions expired after 4 years from the date in which the penalty decision has become unimpugnable”; as for “[t]ime limits of procedure and sanctions are suspended and break off under the appropriate provisions of the criminal law”. 308 Pursuant to paragraph 6 of Article 11 of Law no. 16/2001.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 234 1.4.1. Provisions guaranteeing fair competition in complementary regulations Following the “Legal Regime of Operation of Games of Chance in Casino” established by Law no. 16/2001, the government of MSAR and the Legislative Assembly formulated a series of regulations and laws in order to complete the provisions of tender of grants related to the operation of games of chance and the implementation of its operation. Table 8.2: Complementary regulations related to Law no. 16/2001 # Regulation Regulated issues 1. Administrative Regulation no. 26/2001 Regulates the public tender for the granting of the operation of games of chance in casino, the contract of grant and the requirements of suitability and financial ability of bidders and the grantees 2. Administrative Regulation no. 34/2001 Amends Article 75 of Administrative Regulation no. 26/2001 3. Dispatch of the Chief Executive no. 215/2001 Defines the part of the annual premium payable by the grantees in return for granting a concession for the operation of games of chance in casinos 4. Dispatch of the Chief Executive no. 216/2001 Creates the Committee of the first public tender for the award of grants for the operation of games of chance in casinos 5. Dispatch of the Chief Executive no. 217/2001 Concerns the opening of a public tender for the award of three grants for the operation of games of chance in casino 6. Dispatch of the Chief Executive no. 250/2001 Determines the legal regime for the association of competing companies in the public tender for the award of grants for the operation of games of chance in casino, opened by Dispatch of the Chief Executive no. 217/2001, including the terms in which such association may be admitted 7. Dispatch of the Chief Executive no. 259/2001 Extends the period of the present contract of the exclusive operation of games of chance 8. Administrative Regulation no. 4/2002 Amends Administrative Regulation no. 26/2001 9. Administrative Regulation no. 6/2002 Defines the conditions of access and exercise of the activity of promotion of games of chance in casinos 10. Administrative Regulation no. 10/2002 Gives to the promoters of games the partial exemption of tax on commissions or other remunerations paid to them 11. Dispatch of the Chief Executive no. 26/2002 Concerns the provisional award of three grants for the operation of games of chance in casinos
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 235 # Regulation Regulated issues 12. Dispatch of the Chief Executive no. 76/2002 Accepts the proposal of award submitted by Sociedade de Jogos de Macau, S.A., and awards to it one of the three grants for the operation of games of chance in casinos put out to public tender 13. Dispatch of the Chief Executive no. 142/2002 Accepts the proposal of award submitted by Wynn Resort (Macau), S.A., and awards to it one of the three grants for the operation of games of chance in casinos put out to public tender 14. Dispatch of the Chief Executive no. 143/2002 Accepts the proposal of award submitted by Galaxy Casino, S.A., and awards to it one of the three grants for the operation of games of chance in casinos put out to public tender 15. Law no. 5/2004 Relates to the legal regime of the grant of credit for games or bets in casinos 16. Dispatch of the Chief Executive no. 30/2004 Grants to Sociedade de Jogos de Macau, S.A., exceptionally, the exemption from the payment of profits tax, related to the profits produced by the operation of games of chance in casinos 17. Dispatch of the Secretary for Economy and Finance no. 63/2004 Approves the “Form on the disclosure of personal data of key employees of the promoters of game” 18. Administrative Regulation no. 23/2005 Amends Administrative Regulation no. 10/2002 19. Dispatch of the Secretary for Economy and Finance no. 43/2005 Approves the models of “License” of the promoters of games of chance in casinos, natural persons and legal persons 20. Administrative Regulation no. 27/2009 Amends Administrative Regulation no. 6/2002, concerning the payment of commissions or other remunerations to be paid to the game promoters 21. Dispatch of the Secretary for Economy and Finance no. 83/2009 Defines the upper limit on commissions or other remunerations which may be paid by the grantees to promoters of games of chance in casinos 22. Law no. 10/2012 Relates to the conditions of entering, working and playing in the casinos 23. Administrative Regulation no. 26/2012 Relates to the regime and requirements of supply of machinery, equipment and systems of games Amongst the legislation listed in the Table 8.2, there are only two regulations related to the provision of fair competition. The first is Administrative Regulation no. 26/2001, which regulates “the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 236 public tender for the award of grants for operation of games of chance in casino, in particular in their procedural aspects, the contract of grant and the requirement of suitability and financial ability of the bidders to a grant for the operation of games of chance in casino and of the grantees, including the respective verification procedures”. The provision related to the protection of fair competition is set out in subparagraph 3 of paragraph 3 of Article 7 (Decision on the admission of the proposals of award) of this Administrative Regulation, it provides that “the proposals of award are excluded: … resulting from illegal and restrictive practices of competition”. It is defined in the procedure of the opening proposal of “public tender”, which constitutes an important step in the open tender process. As long as the tendering committee determines that the proposals submitted by bidding companies violate formally or substantially fair competition, the respective proposals shall not be accepted by the tendering committee. The practices violating fair competition referred to by this provision indicates the practices which restrict competition, if bidding companies elaborate and submit proposals by practices which “hinder competition” or “distort competition”, these practices otherwise are not subject to this provision. Another provision protecting fair competition in this Administrative Regulation is stipulated in the section “awarding contract” of public tender, its subparagraph 4 of paragraph 2 of Article 79 provides that “[t]he Chief Executive may not award all or some of grants in particular where: … [t]here are strong signs of collusion between bidders, namely through practices, acts or agreements that may distort competition”. In the case of this provision, only one company participating is not possible to engage in collusion; for “there are strong signs of collusion”, although there is not conclusive evidence, the information in the hands of the tendering committee is obviously justified and can presume, between two or more bidding companies, practices, acts or agreements which may distort competition. Nevertheless, considering that the wording “namely” used in this provision represents a non-exhaustive form, explicitly of “… collusion between bidders, … through practices, acts or agreements that may distort competition, the Chief Executive may not award …”. Herein, in the case of collusion between bidders formed through practices, acts, or agreements that may “hinder” or “restrict” competition, the Chief Executive likewise may not award the grant. The second one is Administrative Regulation no. 26/2012, which regulates “the regime of supply and requirements of machinery, equipment and systems of game”. Under this regime, only those manufacturers of gaming machinery which fulfil the suitability criteria must obtain the respective authorisation given by the Gaming Inspection and Coordination Bureau, in order to supply gaming machinery in the MSAR. However, if the respective manufacturers violate fair competition, the authorisation to supply gaming machinery shall be revoked. Subparagraph 5 of paragraph 3 of Article 12 of this Administrative Regulation provides that “[t]he
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 237 revocation must be based, inter alia, on … act or conduct that prevents, restricts or distorts competition”. But this Administrative Regulation does not set out any penalty for this violation, but complements Law no. 16/2001, Article 43 of this Law, which provides for sanctions of administrative offences, and commitment to necessary civil and criminal liability. 1.4.2. Provisions protecting fair competition in contracts of grant of games of chance Through the promulgation of Law no. 16/2001 which established “Legal Regime of Operation of Games of Chance in Casino”, the games of chance of MSAR entered a new era, from only one company with exclusive rights to three companies awarded grants, thus the industry of games of chance developed in an environment of open competition. The MSAR then signed with grantees contracts of grant for the operation of games of chance and other games in casinos as well as some instruments of modifications – see Table 8.3. Table 8.3: Contracts of grant for the operation of games of chance and relevant instruments # Date Official Gazette Objective of contract 1. 2002/04/03 No. 14, Series II Contract of grant for the operation of games of chance or other games in casino in the Macao Special Administrative Region – the Sociedade de Jogos de Macau, S.A. 2. 2002/07/03 No. 27, Series II, Supplement Extract from the deed of the Contract of grant for the operation of games of chance or other games in casinos in the Macao Special Administrative Region – the Wynn Resorts (Macau), S.A. 3. 2002/07/03 No. 27, Series II, Supplement Extract from the deed of the Contract of grant for the operation of games of chance or other games in casinos in the Macao Special Administrative Region – the Galaxy Casino, S.A. 4. 2002/12/26 No. 52, Series II Extract from the deed signed between the Macao Special Administrative Region and the Galaxy Casino, S.A. – Amendment to the contract of grant for the operation of games of chance or other games in casinos in the Macao Special Administrative Region 5. 2005/05/04 No. 18, Series II Extract from the deed signed between the Macao Special Administrative Region and the Sociedade de Jogos de Macau, S.A. – First
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 238 # Date Official Gazette Objective of contract amendment to the contract of grant for the operation of games of chance or other games in casinos in the Macao Special Administrative Region – Declaration 6. 2005/05/11 No. 19, Series II Extract from the deed signed between the Macao Special Administrative Region and the Sociedade de Jogos de Macau, S.A. – Appendix to contract of grant – Investment plan 7. 2006/09/20 No. 38, Series II Extract from the deed signed between the Macao Special Administrative Region and Wynn Resorts (Macau), S.A. – First amendment to the contract of grant for the operation of games of chance or other games in casinos signed between the Macao Special Administrative Region and the Wynn Resorts (Macau), S.A. on 24 June of 2002 8. 2013/10/09 No. 41, Series II Extract from the deed signed between the Macao Special Administrative Region and the Sociedade de Jogos de Macau, S.A. – Deed of amendment to the contract of grant for the operation of games of chance or other games signed between the government of Macao Special Administrative Region and the Sociedade de Jogos de Macau, S.A. Among the contracts of grant signed between the MSAR and three grantees which were awarded the operation of games of chance, Article 87 provides for “prohibition of restrictive practices of the competition”. The MSAR signed firstly on 28 March 2002 with the Sociedade de Jogos de Macau, S.A. the contract of grant for the operation of games of chance or other games in casinos,309 its Article 87 provides that: “1. The grantee has obligation to exercise its activity in healthy and fair competition, with respect for the principles inherent in market economy; 2. The grantee has obligation to not sign agreements and not exercise concerted practices, whatever form they take, together with other 309 In reference to the “Contract of grant for operation of games of chance or other games in casino in the Macau Special Administrative Region – the Sociedade de Jogos de Macau, S.A.”, published on 3 April 2002, in the Official Gazette of the Macao Special Administrative Region, no. 14, Series II, Supplement, p 1511.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 239 grantees or companies belonging to their groups, which may prevent, restrict or distort competition. 3. The grantee has obligation to not operate abusively dominant position in the market or in a substantial part of it, which may prevent, restrict or distort competition.” Provision paragraph 1 of this article is principally similar to provision paragraph 1 of Article 21 of Law no. 16/2001, as both regulate that the practices of grantees must be in harmony with the present model of the market economy of Macao, and in conformity with the economic principle of laisser-faire applicable to this model, as well as the grantees exercise and operate games of chance in healthy and fair competition. Provision paragraph 2 of this article is principally similar to provision paragraph 3 of Article 21 of Law no. 16/2001, as both prohibit concerted practices between two or more grantees, companies belonging to their groups, or grantees and companies belonging to other groups, in any form, which may prevent, restrict or distort competition. Provision paragraph 3 of this article is different from provision paragraph 4 of Article 21 of Law no. 16/2001. If the respective grantee is in a position of dominance in the market or the substantial part of it, the terms of the contract of grant do not ban this dominance. Only the respective grantee which abuses its position of dominance which may prevent, restrict or distort competition is prohibited. This is noteworthy that, firstly, if the respective grantee is not in a position of dominance in the market or the substantial part of it, but this grantee and other grantees jointly are in a position of dominance in the market or the substantial part of it, which may prevent, restrict or distort competition, it is not subject to this stipulation; secondly, if the respective grantee abuses its dominant position in the market or the substantial part of it, but which “may not” prevent, restrict or distort competition, it is also not subject to this stipulation. On 28 June 2002, the MSAR signed the “Contract of grant for the operation of games of chance or other games in casino in Macao Special Administrative Region” respectively with other two grantees – Wynn Resort (Macau), S.A.310 and Galaxy Casino, S.A.311 in which Article 87 of both provides for the “prohibition of 310 In reference to “Extract from deed signed between the Macao Special Administrative Region and the Wynn Resort (Macau), S.A. – Contract of grant for the operation of games of chance or other games in casino in the Macao Special Administrative Region”, published on 3 July, 2002, in the Official Gazette of the Macao Special Administrative Region, no. 27, Series II, Supplement, p 3424. 311 In reference to “Extract from deed signed between the Macao Special Administrative Region and the Galaxy Casino, S.A. – Contract of grant for the operation of games of chance or other games in casino in the Macao Special Administrative Region”, published, on 3 July,
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 240 administrative offences”, but its provision paragraph 2 is different from the corresponding contract signed with the Sociedade de Jogos de Macau, S.A., namely: “2. The grantee has obligation to not sign agreements and not exercise concerted practices, whatever form they take, together with other grantees, with sub-grantees or managerial companies of grantees referred to the operation of games of chance or other games in casino, which operate in Macao Special Administrative Region, or with companies belonging to their groups, which may prevent, restrict or distort competition”. In comparison, the content of this provision is revised and more clearly indicates the types of violation to fair competition. This revision has three aspects: firstly, it revised originally from “grantees” to “grantees in Macao Special Administrative Region”. This revision considered the background of grantees, so restricting the application of this provision solely to companies registered and granted activities in Macao Special Administrative Region; secondly, “sub-grantees” was added to the revised contract and it was not foreseen as a subject in the original contract of grant. Considering that the government of MSAR agreed to award to a grantee and subsequently its granted rights for the operation of games of chance, the sub-grantees, in the revised contract, are covered by this term; thirdly, in the subjects is added “managerial companies of grantees referred to the operation of games of chance or other games in casino”, this is more appropriate to the operation of games of chance, which was a situation not foreseen in the early stages of the award of grant. The respective managerial companies function in operation of games of chance, and are subject to the stipulation protecting fair competition. If these managerial companies engage in agreements or concerted practices, outside the Macao Special Administrative Region, which may prevent, restrict or distort competition, this term is not applicable. 1.5. Telecommunications Industry The industry of telecommunications of Macao had been operated by one company which has exclusive licence with monopolistic nature granted by the former Government of Macao. By the development of information technology, the development of the industry of telecommunications, inter alia of digitalised telecommunications, tends to be diversified and high-end technology, so that different generations and different standard formats are commonly utilised in different places of the world have been exploited. In this regard, since the Law no. 14/2001 which establishes the Law of Bases of the Telecommunications was 2002, in the Official Gazette of the Macao Special Administrative Region, no. 27, Series II, Supplement, p 3285.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 241 published on 20 August 2001 by the MSAR, the telecommunications market opened and under the supervision by the newly established Bureau of Telecommunications Regulation, permitted new operators to enter into the market. In order to ensure the effective functioning of the telecommunications market, through the provisions of this Law, determines the base of policy, as well as the construction, management and operation of telecommunications networks, and the general framework that the rendering of telecommunications services have to obey. Regarding the services of terrestrial or satellite broadcasting, especially the services of television diffusion and radio broadcasting, they are not subject to the regulation of this Law.312 In the policy of telecommunications as set out by this Law, the priority is to open gradually the construction of public telecommunications networks and the provision of public telecommunications services to better benefit the public and to create more jobs, to improve competitiveness and promote socio-economic sustainable development. Furthermore, equality and transparency of the conditions of competition need to be protected, as well as promoting diversified services, striving to increase the rendering of telecommunications services and responding to the users need for increased services and improving the standard of service quality.313 Article 8 of this Law provides that the “guarantee of competition” is subject to two specific aspects: ensuring the equality of the conditions of competition and prohibiting practices which violate fair competition and abuse dominant positions. (a) Ensuring the equality of conditions of competition. This provision requires that the operators of public service telecommunications must safeguard the utilisation of their networks by all the operators of telecommunications in equality of conditions of competition, permitting the interconnection of the networks of telecommunications utilised by other operators of public service of telecommunications, in order to guarantee the access and the communications between the users of services rendered by different operators.314 (b) Paragraph 2 of Article 8 of this Law provides for, in a generalised form, the prohibition of practices which violate fair competition and abuse of dominant positions, listing explicitly in non-exhausted form the practices which violate fair competition, which are respectively: (i) discriminative practices in the ambit of the relations with the other operators of telecommunications; (ii) discriminative practices in the ambit of the relations between the operators of telecommunications and the general public; (iii) agreements or concerted practices between operators of telecommunications or associations of enterprises, in whatever form they take, that have effect of which distort, restrict or prevent competition; (iv) all forms of 312 Pursuant to Article 1 of Law no. 14/2001. 313 Ibid, Article 2. 314 Ibid, paragraph 1 of Article 8.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 242 cross-subvention or other practices that subvert competition or freedom of choice for users, namely unfaithful attraction to customers.315 In the Commercial Code which regulates the unfair competition in general in MSAR, or in the provisions which regulate commercial activities, the definition of a dominant position does not exist. Hence, the Law of Bases of the Telecommunications regulates specifically the dominant position, but only the dominant position of operators of telecommunications. In other words, it provides for the definition of “dominant position of the operators of telecommunications” to be applicable to this Law. Pursuant to paragraph 3 of Article 8 of this Law, “it is considered that has the dominant position of telecommunications the operators, alone of in concert with other operators, does not suffer significant competition in relation to other operators”. In order to determine whether the operators of telecommunications are in the dominant position prescribed by this Law, paragraph 4 of Article 8 of this Law provides for 5 major factors to consider, which are respectively: (i) owned market share; (ii) the ability to influence market conditions, including prices and market access by other operators; (iii) the control of the means of access to services by users; (iv) the financial and commercial profitability; (v) the degree of diversity of products and services offered. Although the factors to consider to enable the assessment by law of whether the operators of telecommunications are in dominant position are outlined, these provisions do not set out expressly and concretely objective criteria of these factors to consider. Therefore, it is difficult to define a dominant position through statutory quantitative criteria. For effective implementation of the provisions of this Law, the Administration must expressly set out objective and quantitative criteria by other provisions in an open manner. 1.5.1. Installation and operation of external telecommunications infrastructure For the effective development and functioning of telecommunications industry, under the provision of paragraph 2 of Article 6 of Law no. 14/2001, the government of MSAR has the right to establish a regime of access to the activities of operation of public networks of telecommunications and of provision of telecommunications services for public use, as well as regulations of respective activities. Therefore, the Administrative Regulation no. 16/2002 which regulates the installation and operation of external telecommunications infrastructure was established. The infrastructure indicated herein, which is considered to be the external telecommunications infrastructure, is based on cable, fibres, optical, radio-electricity or other electromagnetic system linking the MSAR.316 For the 315 Ibid, paragraph 2 of Article 8. 316 Pursuant to paragraph 2 of article 1 of Administrative Regulation no. 16/2002.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 243 installation and operation of the respective infrastructure, an operator must obtain licence by law, but the holder of the licence does not confer the right to licensees to provide directly the telecommunications services to the public.317 In other words, the licensees must also obtain a licence to provide telecommunications services in order to become operators of telecommunications. The licensees who obtain the licences of respective infrastructures must ensure the utilisation of their infrastructures by all local operators of telecommunications in the equality of conditions of competition. Therefore, paragraph 2 of Article 18 of this Law provides the prohibition of the respective licensees exercising any practices which disturb fair competition or construe the abuse of a dominant position, and lists expressly in non-exhausted form the respective practices, which are respectively: (i) discriminative practices in relations with local operators of telecommunications; (ii) the predatory pricing, namely sales potentially jeopardising in the medium and long term integrated into a strategy of eliminating a competitor or a group of competitors; (iii) practices that restrict the freedom of choice of other operators; (iv) practice or dissemination of denigration acts on the enterprise, services or commercial relations between competitors; (v) agreements or concerted practices or association of enterprises, in whatever form they take, which distort, restrict or prevent competition; (vi) cross-subsidies that subvert competition. In the content stipulated by this Administrative Regulation there is a mention of dominant position, but it does not point out clearly how to judge whether an enterprise is in a dominant position. However, this Administrative Regulation is one of the statutes of the legal regime of telecommunications of MSAR, and cannot violate the Law of Bases of Telecommunications. Furthermore, the contents stipulated by them should be consistent. Hence, the dominant position indicated in this Administrative Regulation should be the same as the provision of paragraph 3 of Article 8 of the Law of Bases of Telecommunications. If licenced operators of telecommunications conduct practices which distort equality of conditions of competition or abuse a dominant position, they shall be fined between 70,000 and 650,000 patacas, and the precise amount of fine is subject to the severity of the offences and the guilt of the violator. In case of recidivism, the minimum value of the fine is increased by one third and the maximum value remains unchanged.318 317 Ibid, Article 2. 318 Ibid, subparagraph 3 of paragraph 1, paragraph 2 and paragraph 3 of Article 20.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 244 1.5.2. Regime of interconnection of public networks of telecommunications Based on the promulgation and enforcement of the Law of Bases of Telecommunications, the installation of public networks of telecommunications by various operators is permitted. In order to make the networks operate non-individually which increases the choices of network for users, through Administrative Regulation no. 41/2004, the MSAR established a Regime of Interconnection of Public Networks of Telecommunications, which “establishes the regime of interconnection of all public networks of telecommunications in an environment of equality of conditions of competition, in order to ensure that this takes place in a timely manner and at reasonable costs”. In order to realise the interconnection of public networks of telecommunications, all operators must engage in negotiations. If one of the interconnection entities is the operator of the basic network of telecommunications, they must comply with legal principles and sign an interconnection agreement; otherwise, all interconnection entities must negotiate about the concrete arrangement of interconnection and sign an agreement or a regulation of arrangement. The respective agreement or regulation of arrangement must be presented to, and are required to confirm by government, in the period of five days counted from the signing date. Once the government recognises that the contents of the respective agreement or regulation of arrangement of the interconnection damage public interests or infringe fair competition, the government can, by appropriately justified decision, determine that the parties proceed to the alterations to the content of agreement or regulation of arrangement.319 In case of the aforementioned agreement or regulation of arrangement which is not signed is discovered, or the time-limit presenting the agreement or regulation of arrangement to government is passed, the violator shall be imposed on a fine from 10,000 to 100,000 patacas.320 During the operation of interconnection, once conflicts occur between the parties of the interconnection, any party can request the intervention of government within 30 days from the date of verification of the fact that gave rise to conflict, to be solved by the government of MSAR. Regarding the contents of the resolution, the government should treat all parties of interconnection with absolute equality, and each party must have full opportunity to express their points of view related to the conflict, being ensured of the application of the adversarial principle. Within 60 days starting from the date of complete composition of dossier with the elements the government must proceed and make a decision having in consideration the following factors, which are respectively: (i) the legal and regulatory provisions; 319 Pursuant to Article 9 of Administrative Regulation no. 41/2004. 320 Ibid, subparagraph 3 of paragraph 1 of Article 16.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 245 (ii) the public interest; (iii) the interests of users; (iv) the promotion of equal conditions of competition; (v) the diversification and innovation in services delivery; (vi) the promotion of investment in telecommunications infrastructure; (vii) the technical feasibility; (viii) the market positions of the parties.321 Thus, the conflict between the parties of interconnection has the opportunity of being legally resolved, and therefore in the process of resolution, either direct or indirect conflict, or competition between them or practice of unfair competition implemented by them, the government must analyse in terms of promoting fair competition, to solve the conflict, as well as imposing a solution of fair competition on the decision which solves the conflict. 1.5.3. Public networks of fixed telecommunications In the past, the public networks of fixed telecommunications of Macao were supplied only by one public utility. Until the end of 2011, the government of MSAR promulgated Administrative Regulation no. 41/2011, which establishes the “Regime of installation and operation of public networks of fixed telecommunications”, permitting enterprises which obtain licences issued by the government to set up and operate services through networks of fixed telecommunications. Since then, the long-standing monopolistic service through networks of fixed telecommunications rendered by one enterprise has been broken. The public networks of fixed telecommunications indicated by this Regime “is considered as the networks of telecommunications, based on cables, optical fibres, radio-electricity or other electromagnetic systems, which connect local fixed points, among them, points outside the MSAR, and which support services of telecommunications for public use”. This legal regime is mainly composed of the licensing and the exercise of activities of the public networks of fixed telecommunications. Operators must obtain licences by law, as well as they must comply with the provisions and conditions set out when licensed; otherwise, the Chief Executive can suspend or revoke the respective licence by promulgation of a dispatch of the Chief Executive, as well as imposing a fine. In the respective stipulated circumstances, one of which is “the practice of acts which distort the conditions of competition or that result in abuse of dominant position”, the licence can be suspended. 322 But this Administrative Regulation does not set out the imposition of a fine for this violation. Thus, if acts of unfair competition are determined, penalties legally established may apply and also this may involve civil and criminal liabilities. 321 Ibid, Article 15. 322 Ibid, subparagraph 2 of paragraph 2 of Article 14.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 246 1.5.4. Services of mobile telecommunications Since the promulgation of Law of Bases of Telecommunications in 2001, the development of telecommunications of MSAR entered a new era. In accordance with subparagraph a), paragraph 2 of Article 6 of this Law, the Administrative Regulation no. 7/2002 which has been promulgated in 2002, it provides for the regime of access and exercise of the activities of operators of public networks of terrestrial mobile telecommunications and of suppliers of terrestrial mobile telecommunications services for public use. The exercise of activities of operators of public networks of telecommunications and of suppliers of terrestrial mobile telecommunications services of public use is subject to licensing, in terms of this Administrative Regulation. Therefore, this regime is mainly divided into licensing and exercise of activity. The issue of a licence must be adopted in the form of a public tender, or in the form of a restricted tender with pre-qualification, if and only if, in terms of specific regulation of each tender to be approved by executive order. Since then, mobile telecommunications services of MSAR was formally opened, terminating the unique operator of mobile telecommunications services and opening up the services of terrestrial mobile telecommunications to be rendered by more operators. Regarding the licenced operators, when allocating frequencies to operators, the government of MSAR must consider the availability of radio-electric spectrums, and its effective and efficient utilisation, as well as guaranteeing the conditions of competition. 323 To this end, this Administrative Regulation has exclusive provisions on operators in relation to fair competition, which indicate clearly that operators of services of terrestrial mobile telecommunications must ensure the utilisation of their networks by all operators of telecommunications in equality of conditions of competition. In addition, they are prohibited from any practices which violate fair competition or abuse of a dominant position, listing non-exhaustively eight precise prohibitive practices: (i) discriminative practices in the ambit of relation with the public; (ii) discriminative practices in the ambit of relation with other operators, namely in the supply of interconnection; (iii) the practice of predatory pricing, namely sales potentially generating jeopardises in medium and long term integrated into a strategy eliminating a competitor or a group of competitors; (iv) practices that restrict the freedom of choice of other operators by part of users; (v) the practice and dissemination of denigration acts on the company, services or commercial relations between competitors; (vi) agreements or concerted practices or associations of enterprises, in whatever form they take, which distort, restrict or prevent competition; (vii) cross-subsidies that subvert competition; 323 Pursuant to paragraph 1 of Article 15 of Administrative Regulation no. 7/2002.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 247 (viii) unfair attraction to customers.324 In addition, there are also two commercial practices being prohibited: firstly, the services must be provided in an unbundled manner, the licenced entities shall not put the users in a contract determined service or product to obtain principal service or product, unless authorisation by government; secondly, it is forbidden for the licenced entities to use advertising which misleads users about the conditions of subscription and the characteristics of services. Furthermore, the government may request clarification by the licenced entities about certain commercial practices, those licenced entities must provide the required information within 5 working days. If licenced operators engage in the prohibitive behaviours aforementioned, this Administrative Regulation provides for that these operators shall be imposed with a fine between 70,000 and 650,000 patacas depending on the severity of the offence and the guilt of the offender. In the case of recidivism, the minimum value of the fine is increased one third and the maximum value remains unchanged. The respective punishment does not prejudice to other penalties provided by law and civil and criminal liability which are covered.325 Meanwhile, the Chief Executive may suspend or revoke the licence in question and the licenced entity has no right to any indemnity.326 (A) Issue of licence After the promulgation of Administrative Regulation no. 7/2002, there are 3 forms of licence issued by Dispatch of the Chief Executive in relation to operating public networks of telecommunications and providing services of terrestrial mobile telecommunications for public use: Firstly, the provisional licence holders provided under the Administrative Regulation no. 32/2000 shall be assigned licences to operate the identical activities, within 90 days from the date of entry into force of Administrative Regulation no. 7/2002;327 secondly, the licence must be issued through public tender set out by Article 5 of this Administrative Regulation; thirdly, a licence to be issued to the original grantee of public services of telecommunications, in accordance with Article 29 of this Administrative Regulation. Table 8.4 lists dispatch of the Chief Executive relating to these issues. 324 Ibid, Article 24. 325 Ibid, Article 26. 326 Ibid, paragraphs 1 and 3 of Article 27. 327 Ibid, paragraph 1 of Article 28.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 248 Table 8.4: Dispatches of the Chief Executive which issued the operation of public networks of telecommunications and the provision of services of terrestrial mobile telecommunications for public use Year Dispatch of the Chief ExecutiveObjective 2002 Dispatch of the Chief Executive no. 157/2002 Grants to the Companhia de Telecomunicações de Macau, S.A.R.L., the right to install and operate a public network of telecommunications and to provide services of terrestrial mobile telecommunications for public use, under the terms and conditions of licence no. 1/2002 2002 Dispatch of the Chief Executive no. 158/2002 Grants to the Hutchison – Telefone (Macau), Limitada, the right to install and operate a public network of telecommunications and to provide services of terrestrial mobile telecommunications for public use, under the terms and conditions of licence no. 2/2002 2002 Dispatch of the Chief Executive no. 159/2002 Grants to the Smartone – Comunicações Móveis, S.A., the right to install and operate a public network of telecommunications and to provide services of terrestrial mobile telecommunications for public use, under the terms and conditions of licence no. 3/2002 2005 Dispatch of the Chief Executive no. 185/2005 Grants to the Companhia de China Unicom (Macau) Limitada, the right to operate a public network CDMA2000 1X of terrestrial mobile telecommunications and to provide the services of roaming mobile telecommunications 2005 Dispatch of the Chief Executive no. 235/2005 Grants to the Companhia de China Unicom (Macau) Limitada, the right to operate a public network CDMA2000 1X of terrestrial mobile telecommunications and to provide the services of terrestrial mobile telecommunications for public use 2007 Dispatch of the Chief Executive no. 171/2007 Authorises the Companhia de Telecomunicações de Macau, S.A.R.L., to install and operate a public network WCDMA of terrestrial mobile telecommunications and provide the corresponding services of terrestrial mobile telecommunications for public use 2007 Dispatch of the Chief Executive no. 172/2007 Authorises the Hutchison – Telefone (Macau), Limitada, to install and operate a public network WCDMA of terrestrial mobile telecommunications and provide the corresponding services of terrestrial mobile telecommunications for public use 2007 Dispatch of the Chief Executive no. 173/2007 Authorises the Companhia de China Unicom (Macau) Limitada, to install and operate a public network CDMA2000 1X EV-DO of terrestrial mobile telecommunications and provide the corresponding services of terrestrial mobile telecommunications for public use
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 249 Year Dispatch of the Chief ExecutiveObjective 2009 Dispatch of the Chief Executive no. 350/2009 Authorises the Smartone – Comunicações Móveis, S.A., to install and operate a public network WCDMA of terrestrial mobile telecommunications and provide the corresponding services of terrestrial mobile telecommunications for public use The licences listed above can be renewed with a period to be approved by dispatches of the Chief Executive in accordance with the Administrative Regulation no. 7/2002. (B) Terms ensuring fair competition contained in licences The functioning of public networks of terrestrial mobile telecommunications and the provision of services of terrestrial mobile telecommunications for public use play a crucial role in the development of the region, as well as affecting the internal and external connection and communication and amongst of individuals, enterprises and government, forming one of fundamental elements of societal functioning, so its influence cannot be ignored. Thus, the operation and the provision of services of respective networks must be subject to the supervision of the government of MSAR as well. Certain terms and conditions have been included in the respective issued licences, so the licenced operators and services providers abide by the contents of licences and some general requirements to operate their businesses. To guarantee fair competition on the operation and provision of services of the respective networks, the licences of services of terrestrial mobile telecommunications for public use issued by the aforementioned Chief Executive have three features. The first feature is in the term “suspension and revocation by incompliance”, the licence can be suspended or revoked by the Chief Executive when the licensee does not comply with the terms and conditions under which it is assigned. In this term, there is no detail to indicate which acts impede fair competition, or what constitutes of abuse of a dominant position. So, in the application of law, these behaviours are those indicated by Article 8 of Law no. 14/2001 – Law of Bases of Telecommunications. However, as long as the respective behaviours are made by the licensee himself, whether intentionally or unintentionally, it falls within the scope of this term. The second feature is in the term “duty of licensee”. This indicates that “[r]eport to the Government the signing of contracts with other entities within the licenced activities, identifying the parties and the subject of the contracts, with description of the services to be provided, reserving the Government the right to determine its rectification when there is evidence of practices that distorts equality of competitive conditions or that constitutes in abuse of dominant position”. These
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 250 behaviours are subject to Article 8 of Law no. 14/2001 – Law of Bases of Telecommunications. However, the respective behaviours must be made within the scope of contract signed mutually by the licensee and other signing party, and the respective infringement is not necessarily related to the licensee, and may be made unilaterally by the counter-party of contract. In other words, no matter which party of the respective contract violates fair competition or abuses dominant position, both are bound by the terms of the contract. The third feature is in the term “prices”. This indicates that “[w]hen the prices are considered likely to distort the conditions of competition, or unreasonable when compared to prices practiced by similar operators in this region, the Government may, in a reasoned decision, determine the alteration, namely by setting maximum values of the prices”. This points out that the price of provision of services of terrestrial mobile telecommunications for public use must comply with the principle of fair competition, and the respective price compared with the price of other services providers providing similar services is reasonable. This provision sets out two circumstances whereby the Government can order the operators to alter the respective prices when any one circumstance occurrs. The first circumstance is “the prices are considered likely to distort the conditions of competition”, in which “the conditions of competition” indicates that the price-related provision established in the “Regulation of Competition between Entrepreneurs”, Title X of Book I. The second circumstance is “the prices are …unreasonable when compared to prices practiced by similar operators in this region”. This term expresses that the price of the service must be reasonable in the relevant service market in the MSAR. This price can be different to the price of similar service rendered by other operators, but cannot deviate from the reasonable range of the market price, otherwise, the price of the service is deemed as an unreasonable price. If this unreasonable price is lower than the normal price range in the market, it is deemed as a predatory price; if it is higher, it is deemed as a cartel price. 2. Policies of Governmental Aids 2.1. Enterprises in the MSAR In the last few decades, the economic development of MSAR has been rising steadily boosted by two important and dramatic turning points. The first is the reform and openness of Mainland China in 1978. This caused the population of Macao to increase because of a huge amount of Chinese immigrants besides its natural increment, stimulating domestic demand of Macao; on the other hand, it brought a large increase in the labour force in a short term to the society of Macao. The second is the opening up of the gaming industry in 2001 after the reunification of Macao to China. It was expected that the gaming industry in a fair competition
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 251 would significantly impact on economic growth and also was expected to promote vigorously the development of tourism industry and the industries of its vertical services and related industries. Since the openness of the exclusive right of gaming, the companies set up in the MSAR have been increasing, only in 2008 when the global financial crisis appeared, the newly established companies in Macao slowed down slightly. However, the overview of the last decade, the established companies in Macao rose from 14,746 in 2002 to 43,753 in 2013, approaching an increment of 2.97 times – see Table 8.5. Table 8.5: Between 2002 and 2013, the number of companies established in MSAR Year Newly incorporated companies by value of capital (MOP) No. of dissolved companies Total number of companies < 50,00050,000 – 99,999100,000 – 499,999500,000 – 999,999 ≥ 1,000,000No. of newly incorporated companies 2002 670 374 79 38 26 1,187 99 14,746 2003 907 526 89 46 29 1,597 179 16,164 2004 1,270 697 120 91 37 2,215 177 18,202 2005 1,962 858 134 63 55 3,072 264 21,010 2006 2,104 761 150 62 33 3,110 254 23,866 2007 2,402 759 141 64 39 3,405 339 26,932 2008 1,999 534 116 48 41 2,738 447 29,223 2009 1,699 210 526 37 57 2,529 469 31,283 2010 1,910 275 663 64 79 2,991 492 33,782 2011 2,378 276 601 78 72 3,405 511 36,676 2012 2,452 286 692 76 106 3,612 501 39,787 2013 3,119 331 825 68 138 4,481 515 43,753 Source: - Annual and seasonal “Company Statistics” published by the Statistics and Census Services Bureau: http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=95c4621a-073a- 4548-8615-d81e50479056 Likewise since 2002, the economic growth of MSAR was surprisingly high, from 56.299 billion Patacas in 2002 to 413.417 billion Patacas in 2013, an increase of 7.34 times. This indicates clearly that, through the commercial activity of the newly established companies, the economic development of Macao is promoted and the economy achieved an unprecedented high growth. Apparently, large scale enterprises have boosted the economic growth of Macao and play an important role and perform a significant function. Small scale enterprises or those with weaker
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 252 economic strengthen which often cannot compete with large scale enterprises or with economic strengthen in commercial activities and might be forced to close down. The advantages of diversified small businesses are their creativity and flexibility, and they can respond quickly changed in demand in the market. Large scale enterprises often cannot do this. The MSAR has long recognised these characteristics and problems, therefore it defined certain strategies and measures, so as to the existing SMEs continue to maintain operations and preserve their uniqueness and value in society. 2.2. Aids Provided to Enterprises 2.2.1. Scheme of “Subsidy for Interest of Corporate Financing Loan” The rapid development and fast increase in revenue of the gaming and tourism industries of MSAR has fostered growth and development of the operations and businesses of different enterprises. Meanwhile, in responding to this rapid development which leads to the operation of enterprises, available capital may not be able to meet the need for expansion, resulting to the delay of an enterprise’s development. In other words, it may cause the economic development of certain industries in the region of Macao to be reduced. From a macro perspective, the overall economic development of Macao would be restricted due to a lack of capital for expansion, affecting the long-term and sustainable development of Macao. In this regard, in the policy promoting the sustainable development of commercial enterprises in 2009 of MSAR, the scheme of “Subsidy for Interest of Corporate Financing Loan” was established by the promulgation of Administrative Regulation no. 16/2009, under the form of a subsidy for loan interest, giving financial incentives to private enterprises investing in the MSAR. However, not all enterprises can be subsidised, the interest subsidy was only made to the enterprises rendering financing loans to industries listed in Revision I of the Classification of Economic Activities, approved by Decree-Law no. 55/97/M. But, this Administrative Regulation stipulates clearly that the investments by enterprises operating financial activities or economic activities in the regime of public concession or sub-concession are excluded from this subsidy scheme. The government of MSAR grants interest subsidies to enterprises investing in the respective industries, expecting to promote the development of relevant industries and areas of Macao through the respective enterprises, including: (i) promotion the entire economic development of MSAR; (ii) increment of the competitiveness of economic activities of specific industries; (iii) promoting the diversification and modernisation of economic activities in the region; (iv) effective implementation of the measures and practices of environmental protection; (v) encouragement and assistance of technological reform and transformation of
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 253 enterprises; (vi) promotion of modernisation of installations of enterprises which improves the conditions of operations, safety or hygiene.328 In order to clarify the implementation of this subsidy scheme, it provides for the following 10 kinds of investments which can be granted the interest subsidy by the government of MSAR: (i) completed the acquisition of an installation of industrial or commercial building within six months from the date of the application; (ii) issued the respective licence of works related to construction of installation within six months from the date of the application; (iii) issued the respective licence of works related to expansion of installation within six months from the date of the application; (iv) issued the respective licence of works related to reparation or renovation of installation within six months from the date of the application; (v) completed the acquisition of new equipment, new machines and new vehicles for cargo transportation used for the production process or company’s activities and complied with the terms of licensing of respective economic activities, within six months from the date of the application; (vi) completed the acquisition of software used for production process or activities of company within six months from the date of the application; (vii) completed the acquisition of intellectual property right within six months from the date of the application; (viii) completed of signing commercial concession contract or franchise contract within six months from the date of the application; (ix) completed the acquisition of materials and equipment with energy efficiency, and equipment used for control, mediation and analysis, within six months from the date of the application; (x) completed the acquisition and installation of heating and cooling system, utilising energy of renewable sources, within six months from the date of the application.329 Albeit this scheme has set out clearly the investment projects which can obtain interest subsidies, there are other requisites needed to be fulfilled: the respective investment projects must be provided loans from a bank licenced to operate in MSAR. The amount of the loan is not less than 300,000 patacas, and the pataca must be the currency of loan; specify the periodical frequency of reimbursement of capital and interest and the repayment period of loan; specify the purpose to what the credit intends and the date and the start date. Relatively to the following investments, the minimum amount of loan which would be gained interest subsidy reduces to 100,000 patacas: (i) the improvement of capacity of project and the conception of products, through the introduction of processes that intend to conception and production assisted by computer; (ii) improvement of quality management system, through the support of introduction of equipment of control, mediation and testing and of quality guarantee; (iii) the implementation of electronic data transfer system; (iv) the improvement of environmental protection; 328 Pursuant to Article 2 of Administrative Regulation no. 16/2009. 329 Ibid, Article 5.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 254 (v) the improvement of working environmental and safety conditions. The beneficiary whose application obtained approval can receive an annual subsidy of a loan in the maximum amount of 10 million patacas, the subsidy is granted for a maximum period of 4 years starting from the repayment of loan, in spite of the period of loan contract is longer. The amount of granted subsidy is calculated on the outstanding principle, and the reference level of interest of subsidy is 4%, to be allocated on an annual basis. In this scheme, the total amount of investment which is granted a subsidy is not less than 300,000 patacas, and the beneficiary must obtain a bank guarantee to qualify for the interest subsidy. The respective provision is that the beneficiary must deliver an autonomous bank guarantee to the Monetary Authority of Macao, this amount is equal to the amount of interest subsidy obtained made payable to the Industrial Development and Commercialisation Fund. The guarantee is valid for a period correspondent to the instalments contractually established which benefit from the subsidy, adding 3 months. By such provision the MSAR offers a guarantee of the functioning of a financial resource to beneficiaries which are granted interest subsidies. Through a bank guarantee, the risk is transferred to the insuring bank; but the most important thing is that, it gives an important message to the beneficiary, which is that the beneficiary must implement the obligations of the loan contract. That is, the beneficiary must repay the loan to the bank in accordance with the provisions of the loan contract. 2.2.2. “Plan of Support to Young Entrepreneurs” Since the opening up of the gaming industry, the socio-economy of Macao has had an unprecedented vitality and success, and under the impetus of foreign investment and investment of large scale enterprises, the local SMEs have been placed in a difficult position. The government of MSAR has introduced various supporting programmes for SMEs, to enable SMEs to receive timely assistance of external resources to strengthen their competitiveness. In addition, the major casinos, hotels and the related services have entered into operations, giving the local labour market a large number of employment opportunities, enabling residents of different age groups to have many choices of jobs. In addition, the jobs offer high wages, driving dramatic activities in the employment market, thereby reducing the desire of residents to run their own businesses. In this regard, the government of MSAR has considered that the healthy and balanced development of industrial markets must have the participation of new enterprises; otherwise the economy of MSAR shall be dominated by large scale enterprises. So in 2013, in accordance with the promulgation of Administrative Regulation no. 12/2013, the MSAR launched firstly the “Plan of Support to Young Entrepreneurs”, aiming at granting
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 255 supporting amounts which must be repaid, in order to provide assistance to the younger generation of MSAR, who are capable and who intend to create their first own business, to operate commercial enterprises engaging in industrial and commercial activities. In the policy address of 2014, the purpose of “Plan of Support to Young Entrepreneurs”, was that it “aims to provide an amount of refundable aid, interest-free, young people of Macao who want to start their own business, but with lack of sufficient capital, in order to encourage them to explore new options and opportunities”.330 In order to implement this plan, the aforementioned Administrative Regulation provides expressly for “Macao youth who creates their firstly own business”, permitting qualified youth apply for assistance of business creation. The age of “Macao youth” referred herein must be permanent resident of MSAR whose age is between 21 and 44; the “creation of own business” points out that, before registering in the Financial Services Bureau to exercise any industrial and commercial activities in MSAR, the Macao youth who makes the application to the plan has never started up a business, by the name of entrepreneur of natural person, in the Financial Services Bureau and has not held any commercial entrepreneur, which had applied to start up business in the Financial Services Bureau, with funding more than 50%.331 In other words, a commercial entrepreneur who is eligible to the application, such as the case of a natural person, he must be a Macao youth who creates his first business; in the case legal person, it shall be held by a Macao youth with funding more than 50% who is creating a business for the first time. The respective application made by commercial entrepreneur must point out the purpose of aid; otherwise this entrepreneur shall not obtain the amount of aid. The respective purpose includes: (i) acquisition of needed equipment for operations of the commercial enterprise; (ii) carrying out of improvement works of the spaces where the commercial enterprise operates; (iii) signing contracts of commercial concession or franchise; (iv) acquisition of the right to the exclusive use of technology; (v) acquisition of intellectual property rights; (vi) activities to promote and disseminate; (vii) operational fund of the commercial enterprise. Independent to natural person or legal person, a commercial entrepreneur who has been approved a financial aid can be granted a supporting amount up to 300,000 patacas, with interest exempted. The beneficiary commercial entrepreneur must repay the supporting amount in semi-annual instalments, starting from the date of approval for a maximum period of 8 years. The first instalment must be repaid in the first 18 months after the date of approval. A commercial entrepreneur who applies to the Plan of Support to Young 330 “Policies Report of Fiscal Year 2014”. Macao Special Administrative Region, p 167. 331 Pursuant to Article 3 of Administrative Regulation no. 12/2013.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 256 Entrepreneurs must register in the Financial Services Bureau for the purpose of levying tax in order to exercise commercial activities, and must fulfil the following conditions: (i) if the commercial entrepreneur is a natural person, he must be a Macao youth who creates his first business; if the commercial entrepreneur is a legal person, it must be funding by a Macao youth, with funding more than 50%, who creates his first business; (ii) the tax situation and the contributory situation for Social Security Fund of the commercial entrepreneur should be normal and complying with legal provisions; (iii) the commercial entrepreneur which operates in MSAR must be less than 2 years; (iv) the commercial entrepreneur in operation must hold a licence or document of similar nature legally issued for exercising their proposed activities. As this plan is to support youth to create his first business and the youth has principally limited capital for creating a business, the government of MSAR has to ensure the supporting amount granted to those beneficiary commercial entrepreneurs can be eventually repaid, this plan specifically provides for such a guarantee mechanism. Once the beneficiary commercial entrepreneur is not able to repay, the Administration can approach the guarantor to repay the balance. Whether the beneficiary commercial entrepreneur is a natural person or legal person, he must assume the debt amount in full, as well as providing a bank draft equal to the supporting amount as a guarantee. If the supporting amount is higher than 100,000 patacas, the beneficiary commercial entrepreneur must assign a guarantor to assume the supporting amount in full, and this guarantor must an eligible permanent resident of MSAR; if the beneficiary commercial entrepreneur is a legal person, the Macao youth who is the first time creating business should be the guarantor to assume the responsibility for supporting amount in full. 2.2.3. “Plan of the Development and Support to Fishery” This supporting plan has a unique character and is different from other supporting plans as it is focused on a highly regional competition, which is hard to maintain and presently is a declining industry in MSAR, which is the local fishery industry. In this regard, the MSAR promulgated on 2 April 2007 the Dispatch of the Chief Executive no. 93/2007, which approved “Regulation of Plan of the Development and Support to Fishery” and stipulated the regime of the Plan of the Development and Support to Fishery, which entered into force on 28 March 2007. In accordance with the provision of paragraph 2 of this Dispatch, the objects of this supporting plan are those fishermen who exercise the fishing activities in fishing boats registered in MSAR and those proprietors of fishing boats registered in MSAR which exercise the fishing activities. The fisherman or the person who exercises fishing activities must be resident of MSAR, and can be a permanent resident or also non-permanent resident.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 257 Paragraph 4 of this Dispatch stipulates explicitly the usages of the supporting amount to apply for, which must be the followings: (i) relieve or alleviate the difficulties in the exercise of fishing activities resulting from the occurrence of extraordinary, unpredictable and force majeure situations, namely the situations resulting from natural disasters, epidemics, etc.; (ii) reparation of fishing boats; (iii) reparation and substitution of installations or equipment; (iv) acquisition of fishing tools and equipment more effective; (v) installation of nautical instruments and refrigerators or refrigerant compartments; (vi) purchase of fuel, participation in specialised training courses likely to increase the fishing productivity, as well as in the implementation of any favourable activities to the fishing development authorised by the Marine and Water Bureau; (vii) purchase or construction of fishing boats. Presently, if item (i) of usage of aid is proposed, the applicant may be granted an interest-free supporting amount up to a maximum of 50,000 patacas; for item (ii) to (vi), the applicant may be granted a maximum amount of 500,000 patacas; for item (vii), the applicant may be granted a maximum amount of 800,000 patacas. No matter how much is granted, the beneficiaries shall repay the supporting amount by instalment within six years from the date of authorisation by dispatch. Each instalment is a semi-annual amount. The first repayment term starts 8 months after the dispatch of authorisation. If the beneficiary intends to repay the debts earlier, he may apply to the Fund of the Development and Support to Fishery at any time. However, for the beneficiary of usage of item (i), may be permitted to extend the term of repayment of the granted supporting amount;332 in order to be granted the supporting amount, the applicant, except for item (i), must provide a guarantee according to the conditions prescribed in the dispatch of authorisation.333 But in exceptional circumstances, an applicant who does not provide a guarantee in accordance with the provisions may still be granted a maximum supporting amount of 50,000 patacas.334 Under normal circumstances, once an application is authorised, a beneficiary cannot apply for the supporting amount for the same fishing boat before the loan is fully repaid, unless the occurrence of extraordinary, unpredictable situation or force majeure situations, or when a beneficiary has repaid 50% or more of loan and do not have an adverse repayment record and the new application is reasonable. In case of the new application, the unpaid loan must be deducted from the newly granted supporting amount. In accordance with the provisions of the Dispatch of the Secretary for the Public Works and Transport no. 28/2007, the Plan of the Development and Support 332 Pursuant to subparagraph 2 of paragraph 8 of the Dispatch of the Chief Executive no. 93/2007. 333 Ibid, paragraph 7. 334 Ibid, subparagraph 1 of paragraph 8.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 258 to Fishery began accepting applications from 30 April 2007.335 This Plan is still in force. 2.3. Aids Provided to SMEs 2.3.1. Definition of SMEs There are no uniform criteria internationally on how to define small and medium enterprises (SMEs). Different regions or countries take a range of factors into consideration, such as their economic status, population, social development, industrial structure etc. to define the delimitation requisites for SMEs. Based on these factors, the size of SMEs of MSAR differs from other regions or countries. In the US, Japan and Taiwan, the definition of SMEs carries different objective assessment factors, but their common point is the size of the enterprise. The size is assessed by various indicators, which generally are the number of employees, amount of capital and turnover etc.336 In principle, SMEs are a group of enterprises whose sizes are in between enterprises of middle scale and small scale. But from a practical point of view, what constitutes the middle scale and small scale enterprises is difficult to define, as these criteria are not fixed and depend on different regions or countries, different periods and different economic development, social conditions, and even differences in industries. Nevertheless, the indicators that are used to define SMEs are the number of employees, amount of capital and total assets, sales revenue etc. In Macao, the government aims to protect SMEs and ensure the sustainable development of SMEs, thereby providing diversified products and services in the market, by providing subsidies and thereby safeguarding their survival. If the government does not define what constitutes SMEs, it is hard to distinguish which enterprises need the aids from government. Identifying the size of enterprises has to consider the scale of the enterprise. Some scholars pointed out that, scale of enterprise refers to the amount of capital, turnover, and number of employees.337 In addition, the definition of enterprises as large scale or small scale does not have absolutely objective conditions. Their regulations and changes are subject to the factors of economic environment, technological innovation, and even public interest etc. of regions or countries, therefore the definitions of SMEs must be current and relevant, but different regions and countries generally consider the number of employees and assets. Due to these variables, SMEs occupy an essential 335 Ibid, paragraph 10. 336 In reference to 郭永中著：《澳門中小企業與國家比較研究》. Polytechnic Institute of Macao, June of 2007, First Edition, pp 35-45. 337 In reference to 于宗先著：〈中小企業的定義及其演變〉，載於段樵、伍鳳儀、劉常勇編：《中小企業之經營與政府政策》. 2003. Hong Kong, Chinese University Press, p 3.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 259 economic position in the regional economy, especially in a market-oriented economy. In the activities of market-oriented economy, the SMEs have the flexibility that large scale enterprises often lack. They complement the shortcoming of large scale enterprises. However, the deficiency of SMEs per se hinders their development, which requires the government to implement favourable policies, such as financial subsidies, thereby permitting the development of SMEs into becoming one of the promotional plans of national and regional economic development. The nature of these measures or plans are quite broad, including, for example, finance, taxation, marketing, R&D, exportation policy, technology transfer, on-the-job training and even more, 338 so large scale enterprises and SMEs complement mutually, enabling the market economy to develop in a more balanced and competitive fashion. There should be a clear and objective distinction between large scale and small scale enterprises. However, there is no provision in the present Commercial Code related to large scale enterprises, SMEs or a line demarcating between them. Nevertheless, in the policy supporting the development of SMEs, the government of MSAR determined by law the conditions which constitutes SMEs, as long as an enterprise fulfils these conditions it is deemed as a SME, and is eligible to apply for financial aid. (A) Criteria legally fixed by government In general commercial activities, the scale, number of enterprises and their activities in the market can often reflect the economic situation in the region. In the micro-economic area of Macao, the large commercial enterprises which are leading the economic development are few in numbers. But presently, due to the rapid development of the gaming, tourism and their related industries, these industries are dominated by a few large enterprises. But, what is a large enterprise? The government of MSAR has not defined legal criteria for determining the size of enterprise. Until 2003, even though the economy in the region of Macao was expanding because of the opening up of the gaming industry, but also due to this reason, economic growth relied heavily on the gaming industry and its directly or indirectly related enterprises. This situation encouraged the government of MSAR to adopt appropriate remedial measures, making laws for aiding the development of SMEs. For the effective implementation of the relevant policies of aids, the government of MSAR firstly stipulated a definition for the scale of SMEs in the region of Macao. In accordance with Article 7 of the Administrative Regulation no. 9/2003 “Plan of Support to Small and Medium-Sized Enterprises”, SMEs refers to 338 Harvie, C. & Lee, B.C., (2002). The Role of SMEs in National Economies in East Asia. UK: Edward Elgar Publishing, Inc., p 10.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 260 that commercial entrepreneur of natural person or legal person operates enterprise which fulfils the following requisites: (i) registered in the Financial Services Bureau for the purpose of taxation; (ii) not more than 100 employees; (iii) these employees must execute the respective works in MSAR. If an enterprise is operated by a commercial enterprise of a legal person, 50% or more of capital of the enterprise must be owned by residents of MSAR. It is noteworthy, considering the definition of SMEs is laid down in the Plan of Support to Small and Medium-sized Enterprises rather than based on the commercial market in Macao, which is the conditions that SMEs can obtain the government of MSAR to provide financial support, therefore the requisite (i) is to provide that the enterprise must be an enterprise in the region of MSAR, and at least, with the tax registration in the Business Tax; moreover, in the requisite (iii) provided for that resident of MSAR must own a capital more than 50%. Thus, the beneficiaries of this plan are the local enterprises in the region of MSAR. Although this definition has a third requisite, this requisite is only the number of people employed by the enterprise. Combining these requisites, the plan still does not consider the economic power of enterprises defined as SMEs, such as the amount of capital, turnover, etc. which is different from other countries or regions. According to the stipulations of this Administrative Regulation, the aforementioned definition is only applicable to enterprises which apply for the Plan of Support to the Small and Medium-sized Enterprises, or that is to say, if the enterprises do not apply for the plan, they are not subject to this Administrative Regulation. So they are not deemed as SMEs and their economic activities are not regulated by this Administrative Regulation. For example, for the effect of taxation, the government of MSAR does not determine enterprises by their overall scale, but they are only divided by their financial ability into 2 categories for the purpose of levying tax: the first category is enterprises which are included into group A of Profits Tax, they have higher ability of capital and operational profit. In accordance with the provision of paragraph 2 of Article 4 of Law no. 21/78/M, revised by Law no. 6/83/M and the Law no. 4/90/M, any enterprise which fulfils the following three requisites can be included into this group and tax is levied according to relevant provisions: (a) public limited companies, companies limited by share and cooperative companies; (b) companies of any nature with individual interest and are not confused in the persons of their members, with registered capital not less than 1 million patacas, or which taxable profits are not, on average of last three years, more than 50 thousand patacas; (c) other natural or legal persons which, having duly organised accounting, have opted for this group, in a statement to be delivered by 31 December of the year to which respects the tax, unless they have commenced their activities in the last quarter of this year, in case of which the respective declaration may be submitted by 31 January of the following year. The second
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 261 category of enterprises which are included in Group B, is any enterprise which is not included into the group A. Apparently, the criteria of this classification is not suitable for the SMEs, as it only considers the nature and business situation of an enterprise by focusing on taxation, thus excluding another important factor of the size of personnel, therefore, these requisites cannot be regarded as the criteria to determine the scale of an enterprise. (B) Criteria of commercial entrepreneur The government does not determine the category of enterprises which participate in the economic activities in the market; therefore, enterprises in the market define by themselves the criteria which determine the scale of enterprises in order to fulfil their own commercial activities and development, so as to engage commercially in their business development. For example, the branch of Hong Kong and Shanghai Banking Corporation which is established and operating in Macau determines the classification of SMEs by the following factors: (i) their turnover are lower than one million patacas; (ii) cottage business; (iii) their management consists of a few key decision makers; (iv) are private owned enterprises; (v) limited financial transparency.339 These factors defining the SMEs are broader than the legal requirement of the government of MSAR. Four requisites, such as there is provision of lower turnover, the size of business, management is more concentrated, lower transparency, are not mentioned in the legal requirements; contrarily, these are the essential characteristics of SMEs, especially sales turnover which is a sign of financial ability, is not considered by the legal criteria. Even though the economic system of MSAR is still tiny, this factor should not be ignored. This is an example showing that the legal provision and the condition of operation in market are inconsistent. 2.3.2. The role played by the government for the development of industries and trades of SMEs The geographic area of Macao is small, the population is also small but has a high density, therefore the industrial and commercial development is restricted and not well developed. Although the reclamation of new lands has been carried on over the past decades and the policy of immigration pushes economic growth according to the established goals, there are still many problems, such as insufficient human resources and land resources, shortage of funds, uneven levels of technology and management etc., which have inhibited the development of Macao over a long 339 In reference to 蕭志成著：〈開放博彩業後澳門中小企業所面對的挑戰與機遇初探〉，載於《中小企業發展與綜合競爭力提升》, p 91, published by Research Centre of the University of Macau, September 2004.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 262 period of time. Large enterprises are few in number, mainly public utilities, banks and insurance companies, and enterprises operating in the gaming industry. Nevertheless, they account for less than 1% of Macao enterprises, so more than 99% of enterprises are SMEs. Hence, the government of Macao needs to ensure the equilibrium situation of economic and commercial activities in the market and, according to the actual situation of the market, ensuring the economy and trade is conducted with effective fair competition. Under the supervision of the law, two categories of policy can be classified enabling the economy of Macao to expand economic growth. The first category of policy is to supervise the specific enterprises which operate in an orderly way; the second category of policy is to guarantee the SMEs which develop sustainably under a good operational conditions. To this end, the government of MSAR has laid the cornerstone of these directions in the general goal of the policy addresses of the fiscal year 2006, with the objective that commercial and economic policies developed by all public agencies can be implemented with efficient and orderly coordination. The general goal is that: “to take advantage of opportunities in order to create better conditions for development, increase the advantages that Macao possesses in terms of competitiveness, promote regional economic cooperation, strengthen efforts to support SMEs, promote the restructuring and transformation of the economy, foster the leading industry, stabilise the activities of the traditional sectors, support the newly emerging industries, accelerate the pace of economic recovery, maintain and consolidate the strength of the economic development of Macao, in order to establish a solid base for a long term, stable and healthy development of economy of Macao”.340 This general goal defined in the policy addresses brought a commercial opportunity of sustainable development for enterprises of large scale and SMEs, therefore boosting their development, with proactive support of the government of MSAR, which gives favourable conditions and support, whether it is self-development or it is dependent on governmental resources for sustainable development. 2.3.3. Favourable policies to SMEs: Internal trades in Macao In the “Session of Questions and Answers of Policy Address of 2006”, the Secretary for the Economy and Finance of the government of MSAR said “ninety-nine percent of enterprises in Macao are SMEs, the policies established by 340 Policies Report, area of economy and finance, of the Government of Macao Special Administrative Region, downloaded from the portal of Government of MSAR, http://www.gov.mo.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 263 the government of MSAR are absolutely favourable to SMEs and support the sustainable development of SMEs in the region”.341 Hence, the content of this policy addresses the determination of the government of MSAR to ensure the sustainable development of SMEs, and to strive for a sound and prosperous commercial community in Macao, with different means and measures to guarantee commercial and economic activities to achieve a balanced development. 2.3.4. Policies and plans of aids to SMEs For the supports rendered to the SMEs, the government of MSAR considers and provides, from many angles, the targeted necessities which are appropriate to their operations and development. On one hand to solve their urgent needs, on the another hand for the sustainable development and increment of competitiveness in the market, as well as to formulate policies and implement correspondent measures, and assist directly and indirectly the SMEs to solve their difficulties and to overcome barriers encountered in their operations. (A) Plan of Aids to SMEs Since the occurrence of the financial crisis in Hong Kong in 1997, the local economy had been weaken for years, so local people reduced their consumption of good and services. Till to the end of March 2003, the world discovered firstly the severe acute respiratory syndrome (SARS) in human beings who were infected avian influenza H5N1, commonly known as atypical pneumonia or SARS, and there was an outbreak in Hong Kong, leading to a more rapid decline in the economy in the region. At that time, business enterprises in Macao were severely hit, especially the smaller scale business, such as retailing and consumer services industries were severely tested. Therefore, at that time the government of MSAR provided aids to those SMEs in order to rescue them and to stop them being closed because of operational difficulties, so that provided financial aids in the aspects of management, applied technologies, etc. The Plan of Aids to SMEs is a strategic plan implemented through the promulgation of Administrative Regulation no. 9/2003 on 12 May 2003 by the government of MSAR.342 In this Plan, there are no provisions exempting the practices or agreements related to horizontal restriction, vertical restriction, abuse of a dominant position which hinder competition; contrarily, the government of MSAR granted an amount of aids, to SMEs which has to be repaid, based on two situations provided for by the Plan of Aids to SMEs: (i) the first situation is that needs to 341 〈譚伯源：政策必向中小企業傾斜〉, page B1 of Macao Daily, 26 November 2005. 342 “Plan of Aids to SMEs”, stipulated by Administrative Regulation no. 9/2003, and revised in different aspects respectively by Administrative Regulations no. 14/2006, no. 2/2009, no. 11/2012 and no. 12/2013.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 264 improve the operational conditions. The respective amount of aids is mainly to be used to purchase needed equipment for the operation of enterprise; carrying out works of renovation, reparation and amplification of space where the enterprise operates; signing commercial concession contracts and franchise agreements; acquisition of the right to the exclusive use of technology; acquisition of intellectual property rights; activity of promotion and dissemination; improvement of operational ability or competitiveness of enterprise; operational capital of enterprise;343 (ii) the second situation is to solve the economic and financial difficulties resulting from the occurrence of extraordinary and unpredictable circumstances, force majeure, in particular those resulted from natural disasters and epidemics. The respective amount of aids is to assist the financial needs of SMEs which are in these difficult situations. This financial support provided by the government aims to save enterprises caught in the aforementioned two reasons to prevent their collapse and to enable them to survive, to ensure the diversification of commercial and trading activities in the market and to provide the sufficient participants of economic activities in the market to guarantee and reach the situation of effective and fair competition, as well as to ensure stable employment in the labour market. Eligible SMEs could apply for financial support starting from 19 May 2003, fixed by the Dispatch of the Secretary for the Economy and Finance no. 44/2003. This Plan is still in force. The respective deadline for application is fixed by a dispatch of the Secretary for the Economy and Finance. It can be seen clearly from the starting date for application of this Plan, the intention to define this Plan was to solve the operational difficulties of enterprises resulting from the serious influence to the economy of the region caused by SARS of that time. During that period, the economic status of MSAR was influenced, by internal and external factors, such as casinos and hotels had been built and put into operation one after another, the experience of international financial tsunami in 2008, the continuous influx of individual tourists from China, etc., the SMEs were tested by confronting more rigorous competition and the lack of operational resources in the market, especially the outdated business model, rising rents, old equipment etc., the amount of aid of this Plan was also raised correspondently. Table 8.6 lists the correspondent changes. The prerequisite that enterprises applying for financial support must be SMEs prescribed by this Administrative Regulation; moreover, two more conditions have to be fulfilled: firstly, the enterprise is in an appropriate economic, financial or organisational status to meet the responsibility to be assumed; secondly, the enterprise has operated in Macao for at least two years. 343 Pursuant to Article 4 of Administrative Regulation no. 9/2003.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 265 Table 8.6: Amount of aid and period of repayment, till to 2013 of the implementation of the Plan of Aids to SMEs Year of implemen-tation Legal base Amount of aid (patacas) Longest period of repayment 2003 Administrative Regulation no. 9/2003 $100,000* 6 years 2006 Administrative Regulation no. 14/2006 $300,000 8 years 2009 Administrative Regulation no. 2/2009 $500,000 2012 Administrative Regulation no. 11/2013 $600,000 Remarks: * When the applicant SMEs are in the aforementioned second situation, an amount of aid which has to be is up to 200,000 patacas. As long as the SMEs fulfil these two conditions, they can apply to the competent body, namely the president of the management board of Industrial and Commercial Development Fund, for the amount of aid. Then a specific evaluation committee shall analyse the application and make recommendations, and then the management board of Industrial and Commercial Development Fund shall make a decision.344 To ensure that the aid is used for the purpose stated in application, the SME is subject to inspection by the Department of Inspection of Economic Activities of Macao Economic Services.345 (B) Scheme of Credit Assurance to SMEs and Scheme of Credit Assurance to SMEs for Specific Project Since 2003, the government of MSAR assists SMEs, which have viability, by public finance resources and by form of long-term interest-free loans, to consolidate the competitiveness in the market, through the aforementioned Plan of Aids to SMEs; on another hand, the government also launched two plans, which are respectively the Scheme of Credit Assurance to SMEs and the Scheme of Credit Assurance to SMEs for Specific Project, aiming to assist SMEs to obtain financing from bank, by providing credit assurance, to achieve their goals. For the effective implementation of these two schemes, the Administrative Regulation no. 19/2003 establishes the criteria of SMEs which are eligible for them. Article 5 of this Administrative Regulation sets out that: “1. …, SMEs are operated by commercial entrepreneurs, natural or legal person, and that verify cumulatively the following requisites: 344 Pursuant to Articles 8 and 9 of Administrative Regulation no. 9/2003, revised by Administrative Regulations no. 14/2006, no. 2/2009, no. 11/2012 and no. 12/2013. 345 Ibid, Article 16.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 266 (1) are registered for tax purposes in the Financial Services Bureau; (2) have in their service up to 100 staff; (3) that the staff mentioned in previous subparagraph exercise their activity in MSAR. 2. In the case of SMEs operated by commercial entrepreneur, legal person, more than 50% of the share capital must be held by residents of Macao.” Comparing this definition with the SMEs provided for by the Plan of Aids to SMEs stipulated by Administrative Regulation no. 9/2003, both are identical, which is conducive to the government of MSAR to make principally an uniformed criteria for providing different kinds of schemes of aid, and not resulting in the same enterprise to be a beneficiary of a certain scheme but excluded from another scheme. This ensures consistency in public policy. However, the objects stipulated by different laws are SMEs, which meet the target of these schemes, and fortunately the conditions which require SMEs to fulfil are the same, so this provision can be presumed as the definition of SMEs in MSAR; otherwise, those conditions can only be deemed as individual conditions applicable to the relevant Schemes. The Scheme of Credit Assurance to SMEs and Scheme of Credit Assurance to SMEs for Specific Project established by the Administrative Regulation no. 19/2003 were entered into force on 15 July 2003, both started to accept applications from 18 August 2003 determined by Dispatch of the Secretary for Economy and Finance no. 61/2003. Both schemes are still in force and accept applications. Apparently, these schemes are a long term strategic measures which are promoted to aid SMEs to compete continuously in the market. a) The Scheme of Credit Assurance to SMEs The Scheme of Credit Assurance to SMEs, established by the aforementioned Administrative Regulation, aims to assist SMEs to obtain needed funds from banks for their development. The development herein referred to does not exploit in details in the respective Scheme by itself, but it can be sure that it must achieve a positive influence to the business of SMEs, such as increasing profit, expanding markets, raising the quality of services, improving performance, expanding business, recruiting more employees etc. In this scheme, the government of MSAR does not provide pecuniary assistance but credit assurance to the banks for SMEs, with an upper limit of 50% of the amount of loan which each SME applies to the bank, and does not exceed to 1.5 million patacas. However, this assurance does not include interest costs and other payable items. The repayment period of the bank loan starts
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 267 from the date the contract of loan is signed, the longest term is five years.346 Enterprises applying for credit assurance must meet the criteria of SMEs set out by this Scheme; moreover, they also need to fulfil the following four conditions: (i) the applicant enterprise must be in adequate economic, financial or organisational situations to meet the responsibilities which intend to assume in the repayment period; (ii) exercise activity in the MSAR for at least one year; (iii) in the MSAR, not a debtor of any entity; (iv) they must contribute to the Social Security Fund. Provided that enterprises meet these four conditions, they can raise application for the credit assurance from a bank to the Chief Executive, then the Evaluation Panel of the Scheme of Credit Assurance to SMEs examines the application and issues a reasoned opinion, then sent to the Chief Executive to make a decision on the respective application.347 b) The Scheme of Credit Assurance to SMEs for Specific Project The establishment of this scheme is equally subject to the Administrative Regulation no. 19/2003, providing assistance for two purposes to SMEs: the first purpose is to assist SMEs to obtain needed financing from banks for developing specific projects. The respective specific projects are particularly in the following areas: (i) innovation and transformation of enterprise; (ii) promotion and dissemination of the brands per se commercialised. The brands operating by the enterprise herein referred to are those brands must be legally operating, including self-owned brands, brand agency and retail etc.; (iii) improvement of product quality. The second purpose is to assist the SMEs to obtain bank loans to address problems, due to they are subject to influences of abnormal and unpredictable situations and force majeure, especially the natural disasters and epidemics and facing a cash flow difficulty in the short term. In the scheme, the government of MSAR does not provide pecuniary assistance but does provide credit assurance to the banks for SMEs. The upper limit of the amount of credit assurance is 100% of the amount of the bank loan applied for by each SME, and not exceeding one million patacas. However, this assurance does not include interest and other payable items. The repayment period of bank loan of respective provided credit assurance is starting from the date signing the respective contract of loan, the longest term is five years.348 Enterprise applying for credit assurance for specific project must meet the criteria of SMEs set out by the Administrative Regulation no. 19/2003; moreover, they also need to fulfil the following four conditions: (i) the applicant enterprise must be in adequate economic, financial or organisational situations to meet the 346 Pursuant to Articles 9 and 10 of Administrative Regulation no. 19/2003. 347 Ibid, Articles 11, 12 and 14. 348 Ibid, Articles 16 and 17.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 268 responsibilities which intend to assume in the repayment period; (ii) exercise activity in the MSAR for at least one year; (iii) in the MSAR, not a debtor of any entity; (iv) contributes to the Social Security Fund. Provided that the enterprise meets these four conditions, it can apply for the credit assurance for specific project from a bank to the Chief Executive, then the Evaluation Panel of the Scheme of Credit Assurance to SMEs for Specific Project examines the application case and issues a reasoned opinion, then sends this decision to the Chief Executive to make a decision on the respective application.349 (C) Program of Aids to the Distinctive Old Shops in Medium, Small and Micro Size To assist the development of SMEs, it is not only the duty of the government of MSAR, but also the responsibility of business associations, to enable the enterprises of their industries to have sufficient competitiveness and ability to survive in the market. Instead, the measures generated from the protection of development of enterprises were not initiated by the government, but business associations sought these strategies in the light of challenges and crisis facing their members. This Program was organised by the Joint Business Association of Food and Beverage Industries of Macao, assisted by the Association of the Promotion of Economy of Macao and sponsored by the Macao Foundation. The first term started from 2008, with a period of two years. Food shops which apply for aids must satisfy the following qualifications: (i) required to have an effective licence issue by the Civic and Municipal Affairs Bureau or the Macau Government Tourism Office; (ii) provide less than 50 seats; (iii) more than 10 years of business; (iv) 15 or less employees per shift; (v) products should be in characteristics of Macao and with value of conservation. The government of MSAR allocated 20 million patacas through the Macao Foundation, which are targeted to financially support 100 enterprises. The areas of financial aid are hardware installations, inter alia, improvement of façade décor of enterprises, signs, internal finishes, equipment maintenance and upgrade etc., in order to increase the competitiveness of respective enterprises in the market. In the first term of the Program, 126 enterprises submitted applications and 101 enterprises were funded, in a total amount of financial aid of 17 million patacas was given out.350 Additionally, this Program also provides supporting services to food shops in 9 aspects, including: (i) administrative formalities: advisory and agency relating to formalities of application for foreign workers; advisory of other governmental 349 Ibid, Articles 18 and 21. 350 《“扶助中小微型飲食特色老店計劃＂總結報告》，澳門經濟建設協進會出版, October 2010, pp 7-9.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 269 formalities related to food and beverage business; (ii) advisory services: provide opinions of business plan, organisation, coordination, control, decision making; (iii) financial management; (iv) operational management: provide opinions of quality control, management of ingredients and other materials, kitchen management; (v) customers management: provide opinions of classification of customers, customers psychology and consumer habits, customers run-off rate, good handling of customers’ complaints and challenges; (vi) marketing and sales; (vii) training and development planning; (viii) provision of information services; (ix) site vocational and practical training, focusing on the present status of shortage of human resources and time of medium, small and micro-sized enterprises in the food and beverage industry to carry out training, the expert advisory team will suggest, based on working experiences, practical tips, as well as visiting personally the enterprises in order to provide on-site programs of on-the-job training and professional training services to SMEs.351 During the first three terms of this Program, more than 200 qualified SMEs have been aided. The fourth term of application started in May of 2014, the conditions which must be met by the food establishments which apply aids were adjusted, now being: (a) provide less than 100 seats; (b) more than 8 years of business; (c) 40 or less employees per shift. Apparently, the conditions after adjustment are lower down the thresholds for application and are more in line with the needs of the food establishments in the market. 2.3.5. Other policies assisting the development of SMEs The government of MSAR knew that the operation and development of SMEs were in very difficult situations. On one hand they need financial support to overcome difficulties or strengthen operations, and on the other hand they need technical assistance. The government uses public funds to support the development of SMEs and defines policies of aids principally by the provision of law, which are legally binding. In addition, there are still a number of supporting measure of an administrative nature determined in the policy addresses of the government of MSAR, through high-level public policies, forming and adapting progressively in a way of one after another, then executed by public agencies which assume relevant duties. In the financial year of 2014, these public policies were involved various aspects, including: effective implementation of the measures of aid, fostering the competitiveness of enterprises, strengthening and improving business support services, and raising the qualification of human resources, etc., which included the relevant working projects and plans.352 351 Ibid, p 6. 352 “Policy Address of Fiscal Year 2014”. The government of Macao Special Administrative Region of the People’s Republic of China, 12 November 2013, pp 58-63.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 270 (A) In the aspect of effective implementation of the measures of aid a) Continuation of the effective implementation of several plans of aid to the SMEs The text aforementioned has described several plans assisting the development of SMEs introduced by the government of MSAR, the implementation of these plans brings great benefits of skills in different aspects, such as the finance, management, exercise of activities, etc., to the SMEs, and raises their competitiveness in the market. Therefore, the MSAR will review regularly the implementation of these respective plans, and will intensify the support periodically for the effective policies, such as increasing the amount of aid of the relevant plans, increasing technical support, assisting the SMEs to enhance their capacity building, etc. b) Continue to support the development of SMEs through Industrial and Commercial Development Fund Strengthening the analysis for the applications of financial aids to the Industrial and Commercial Development Fund, in order to understand clearly the applications which use financial aids. On one hand to determine the effective use of the amount of aid; on the other hand to support financially the activities which elevate the operational level and competitiveness of the SMEs, as well as helping the SMEs to expand in local and foreign markets and in finding opportunities of commercial cooperation. c) Granting financial support to SMEs for creation of its business website An effective platform of information technology enables consumers to receive the latest information, bringing enormous business opportunities for SMEs. However, knowledge, technology, capital and talents are the issues that hinder SMEs in establishing their websites; they can only establish websites through the providers of information technology available in the market. However, this additional work will be necessary and brings financial pressure to the SMEs, so the government of MSAR will start a fund, under the Industrial and Commercial Development Fund, to establish a program to support the SMEs to establish websites, in order to help the SMEs use the electronic network to publicise and promote their business. d) Effective mitigation of the difficulties of lack of human resources experienced by SMEs Technical skills and labour are in short supply in Macao. Therefore, a further study will be engaged in to simplify the application procedure for foreign employees, permitting the processing of each application to accelerate and deal with them realistically in detailed analysis and approval. By doing this there is an expectation of a timely alleviation of difficulties of SMEs in human resources, so that the purpose of supporting the development of enterprises would be achieved.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 271 (B) In the aspect of fostering the competitiveness of enterprises a) Boosting the modernisation of business management In order to promote the innovation and transformation of SMEs, provide training programs of entrepreneurship and business capacity, and continue to implement “Incentive Program for International Certification/Accreditation of Management Systems”; support the SMEs to implement the systematic management and obtain international certification; strengthen the services of consultancy and information of management systems; incentivise the enterprises and organisations to encourage their employees to obtain certification of qualification; give assistance to SMEs in the creation of a complete accounting system and in the improvement of financial system; provide the opportunities of training to the SMEs, raising the business management level and the quality of managers and employees of enterprises; promoting the application of information technology, improving the business productivity. b) Support to SMEs for raising the competitiveness of its activities Organise thematic activities, relevant training courses and out-going visiting activities for the SMEs, organise training courses and study tours by them of franchise or chain shops. Strengthen the cooperation between commercial chambers or associations of local and other regions, assisting the SMEs to raise their business competitiveness. c) Assisting SMEs to develop new markets Support SMEs to strengthen external cooperation, building up cooperation platforms, opening up new markets. Assist SMEs to seize development opportunities offered by “Base of Reform and Development Plan of the Region of Pearl River Delta” and “Framework Agreement on Guangdong-Macao Cooperation”, opening the market of Mainland China. Take advantage of Economic and Cultural Office of Macao in Taiwan, assisting SMEs to engage in trade exchanges and cooperation with enterprises of Taiwan. d) Support to SMEs for participation in the development of Hengqin Island Promote actively and assist the industrial sectors to participate in the development of Hengqin Island. Promote the investment environment and favourable policies of Hengqin Island to SMEs, organise exchange and study delegations, assist the enterprises which are interesting in investment in Hengqin Island in coordination and communication with Zhuhai, provide administrative support and services to SMEs which are involved in the development of Hengqin Island.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 272 e) Support SMEs in the exploration and development of products and services of Macao brand Valorise the functions of “Macao Ideas” to attract the accession of more SMEs of Macao, strengthening the propaganda of “Macao Ideas” in local and international levels through the website, publications, and the installation of “Macao Ideas” in the oversea fairs and expositions, promoting, namely, the functions of “Macao Ideas” such as the purchase centre of products and services of brand of Macao. Perform, in experimental form, the exhibition and promotion of products of Macao in short duration at commercial areas of cities of the Mainland China, under a form and image of “Macao Ideas”, aiming at publicising the products, services and business opportunities of Macao and facilitate the penetration of the products and services of the Macao brand in the national and foreign markets. f) Support SMEs in exploring the market of Mainland China through the implementation of “Dynamic Week of Macao” Boost the publicity in the Mainland China of the products, services and specialties of Macao and goods of Portuguese language countries through the implementation of “Dynamic Week of Macao”, seeking to create a platform of exchange and cooperation between the Mainland China and the SMEs of Macao. (C) In the aspect of strengthening and improvement of business support services a) Optimisation of services for SMEs Provide assistance to the local SMEs to increase their business capabilities through the provision of a series of services, namely the implementation of workshops for the respective sectors and rendering advisory services of an economic and commercial nature. Encourage the re-packaging of business products and interviews to entrepreneurs, for gradual establishment of the brand and image of their products. b) Appreciation of functions of MBSC and SMEC Promote the integration of the services and resources of Macao Business Services Centre (MBSC) and of Small and Medium-sized Enterprises Centre (SMEC), to optimise the services targeted to the SMEs. c) Improvement of business matching services Improve the business matching services and strengthen its publicity, so as to enlarge the market network of the SMEs, promoting business cooperation.
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 273 d) Promotion of the application of e-commerce Encourage the SMEs to adopt e-commerce, helping them to enlarge their networks of publicity. (D) In the aspect of raising the qualification of human resources a) Continued implementation of diversified professional training courses Implement occupational training courses to people of different sectors and levels, giving support to training of more qualified personnel for the various sectors and creating a reserve of scholarship for qualified personnel, taking into account the necessity of human resources and the adequate diversification of the economy, with attention particularly focused on strengthening of training in several sectors, namely of exhibitions and conventions, retail sales, domestic services, and between others. The Labour Affairs Services Bureau planned to implement in 2014 about 400 courses, providing about 10,000 training places. b) Conducting specialised training courses Implement specialised occupational training courses, developing training courses focused on supervisional management and advanced management skills, aligning them to the training series of professional certification, provided to the personnel of middle management level, a way of training for their professional career growth. Develop diversified supports and models of learning, to help trainees to implement their continuous training, in accordance with the promotion in their professional career and the needs of development of the enterprises and the economy in general. The Macau Productivity and Technology Transfer Centre (CPTTM, Centro de Produtividade e Transferência de Tecnologia de Macau) planned to implement about 900 courses, providing training places of not less than 20,000, including courses opened to public and by request of enterprises. c) Increased training for middle-aged persons Continue the implementation of “Training Plan to Support Employment Aimed at Middle-Aged Individuals”, in order to raise competitiveness in the employment of middle-aged persons, to increase the employment choices of persons and their development spaces. d) Further implementation of “Training Courses of the 2nd Vocational Aptitude” Organise actions comprising three independent but interrelated levels of training, including basic, intermediate and advanced, to encourage citizens to acquire new skills and knowledge for the purpose of lifting continuously their employability.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 274 e) Strengthening vocational training for the most deprived classes Organise continuous training courses in accordance with the needs of the most disadvantaged social classes, and plan the organisation or co-organisation with social enterprises of specialised occupational training courses for disabled persons. f) Support for local residents in obtaining national or international certification Cooperate with local or oversea professional associations and institutions courses for certification of professional qualification, providing assistance to trainees to obtain certification of professional qualification, with local, international or the Mainland China’s recognition. Strive to encourage residents to obtain certification of occupational qualification at a national level, intensifying the provision of services of information and support for exams. Proceed to the introduction, promotion and organisation of professional and occupational public examinations, at a national and international level, with incidence focussed, in priority, on the areas of food safety management, commerce, beauty professionals, in conformity with the needs of development of local economy, implementing the “Program of Lifting English Level to Work”, in order to provide professionals of the different sectors of appropriate tests in the evaluation of commercial English. g) Increasing employment capacities of young and middle-aged individuals Engage in strengthening cooperation with educational institutions and relevant organisations, providing support to secondary and university students, who will finish their studies to enhance their integration capabilities in the labour market. Launch a series of continuing education plans in favour of active workers, such as the “Training series on fundamental employability”, the “Training series of administration and management capability” and the “Training series of sectorial/professional development capability”, among others. Continue to organise various competitions of occupational skills for teenagers, planning the organisation of the “General competition of skills on the multi-media software Adobe for secondary students of Macao” to be held in the second quarter of 2015. Continue to offer the “Learning Courses” and “Training Program for Trainee Technicians”, providing teenagers with an initial training that unites learning in school with the probation in enterprise. h) Strengthening the development and cooperation with Guangdong Province in technical and professional evaluation of the area Train, in cooperation with Guangdong, Macao personnel to perform functions in judges of technical tests, adding skills tests of different levels to the presently existing tests, providing more choices to workers who intend to obtain, through examination, the certificate of professional skills. Continue to deepen cooperation
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 275 with Guangdong in the area of technical tests of the models “1 test 2 certificates” and “1 test multiple certificates”. i) Complete promotion of professional technical tests for the construction sector To train, in close cooperation with institutions involved in Hong Kong, Macao technical people to acquire knowledge about the functioning of skills tests of the construction industry, in order to enable the implementation of skills tests for different types of work for the sector, promoting the respective professional development. 3. Conclusion Although the major issue of this chapter refers to the “abuse of a dominant market position”, its content is divided into two parts, which are related to the market share accounted for by enterprises. The first part is where enterprises account for a high or extremely high market share. They are subject to regulation when they are in a dominant position in the relevant markets. Therefore this part of the discussion is related to the laws and regulations which stipulate the abuse of a dominant market position. The second part is where enterprises account for a low and even extremely low market share. Since the government of MSAR aims to maintain the diversity of the economy and its healthy development, if small enterprises do not gain assistances or aid from government, it is likely that they will be lost to the market and eventually close down. Hence, this part of the chapter presents the policy of aids, and the relevant legislations, rendered to local SMEs by the government of MSAR. Regarding the discussion in the first part, it indicates that in the legislations of MSAR the prohibition of a dominant market position of enterprises can be classified as the prohibition of the abuse of an administrative dominant position and the prohibition of the abuse of a commercial dominant position. The former regulates the areas of activity which are in public health and public administration; the latter regulates the areas of activity which relate to Internet services, gaming and telecommunications services. With regard to legislations of public health and public administration, there are only generalised provisions of what constitutes a dominant position, and when abuse of this position is prohibited. With regard to legislations of Internet services and telecommunications and their services, if Internet services providers and telecommunications services providers render services at unreasonable prices, especially predatory prices, competitors will be gradually driven out the relevant market, enabling existing competitors to become oligopolists and even monopolists, and thereby attain a position of dominance in the relevant market. This form of unreasonable price
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 276 which shall hinder, restrict or distort competition is prohibited. Furthermore, other different forms of unreasonable prices of Internet services and telecommunications services which harm fair competition are likewise prohibited. To the legislations of gaming, section 1.4.2 of this chapter discussed the legislation related gaming and pointed out “…concerted practice” which is prohibited, but these legislations do not stipulate which kinds of practice are deemed as a concerted practice. At this point, it should be covered by the Commercial Code. However, the “Regulation of Competition between Entrepreneurs” of the Commercial Code provides merely and explicitly that “[a]ll agreements or practices … preventing, falsifying or restricting competition are forbidden …”, so concerted practice herein is not included. So, if grantees of gaming exercise “a concerted practice which prevents, falsifies or restricts competition”, it is not covered by the “Regulation of Competition between Entrepreneurs” of the Commercial Code. Thus, for the protection of fair competition, the respective stipulation of the Commercial Code has to be revised, enabling it to have a more far-reaching and general applicability and coverage. This is the only way to achieve the required international level of fair competition legislation. In sum, at the international level, including the competition law of the EU, the Rules on Competition of the TFEU set out specifically the two central rules which ensure fair competition, one of which is the prohibition of abuse of dominant positions. In comparison with the provisions of that the “Regulation of Competition between Entrepreneurs” of the Commercial Code which merely forbid restrictive competition, viz. there is no stipulation in relation to enterprises abusing a dominant market position. Nevertheless, this chapter discussed, in the branch law of the economy and the relevant legislations which exist when enterprises abuse their dominance of position in the relevant market which does not hinder, restrict or distort competition, this behaviour is not prohibited. Then, the “Regulation of Competition between Entrepreneurs” of the Commercial Code acts as the general provision of fair competition legislation of MSAR. However, the branch law of fair competition has defects in its applicability, so this must be addressed in future revisions of the legislation. Although the present branch laws related to the protection of fair competition stipulate enterprises in a dominant position, there does not exist in the legislations in force in MSAR, any provision, methodology or indicator of how to determine if an enterprise is in a dominant position in the relevant market, except the Law of Bases of Telecommunications applicable to the industry of telecommunications. Considering that the dominant position is not defined, in general form in the legislation, it is difficult for the administrative authority or judicial authority to assess whether the enterprise concerned abuses its dominant position, and this is not
Core Provisions II of Fair Competition of Macao:Abuse of Dominant Market Position of Relevant Industries and Sectors 277 conducive to the implementation of competition law. Regarding the discussion of the second part, competition between enterprises in a free economy market is often the survival of the fittest, but under a healthy and diversified economy, there must be the operations of SMEs of various industries, by their flexible and changeable businesses and rapid responses, that bring new commercial concepts and new directions of development to the society. Therefore, MSAR has established, through the promulgation of law, a policy of aids to enterprise in various forms, especially strategic measures and arrangements in the aspects of finance, management and operational skills of SMEs. Firstly, whereas some enterprises find it hard to expand their businesses because of lack of capital, the government of MSAR introduced the Scheme of Subsidy for Interest of Corporate Financing Loan in 2009, granting subsidy for interest to enterprises which applied for loans from banks for specific economic activities. Secondly, considering that youth has infinite creativity but lack of capital, the government of MSAR presented the Plan of Support to Young Entrepreneurs in 2013, encouraging youth to expand their businesses by granting interest-free amounts of refundable aid. Thirdly, in order to avoid the decline of fishery, the government of MSAR established the Plan of the Development and Support to Fishery in 2007, granting the support of interest-free repayable amounts to local fishery, enabling local fisheries to improve their fishing boats, equipment etc. For aids to SMEs, the government of MSAR launched several plans, by legislations, inter alia of the Plan of Aids to SMEs, the Scheme of Credit Assurance to SMEs, the Scheme of Credit Assurance to SMEs for Specific Project and the Program of Aids to the Distinctive Old Shops in Medium, Small and Micro Size. Once the beneficiary enterprises, which are the SMEs defined in the relevant legislations, apply for aids and obtain authorisation, the relevant aid would be granted by the government. For the first plan, after the approval of aids applied for by SME to the government, a repayable amount would be granted. For the second and third plans, if and only if beneficiary enterprises meet certain requisites, the government shall assume the credit assurance of the bank loan of the beneficiary enterprise. For the fourth plan, the government grants an amount to SMEs to improve the hardware or software of its operation. It is noteworthy that, the so-called SMEs are defined respectively in the relevant legislations related to the aids policy, and fortunately the requisites set out in them are the same, otherwise, it would appear inconsistent if one enterprise deemed as an SME under some plans but not others. However, for other economic activities, the definition of a SME is the same of these plans, but not applicable to others, it is not conducive to economic development as a whole and the strategic deployment of local enterprises in MSAR. Practically, MSAR has arranged, by policy addresses, a set of plans enabling the effective implementation of measures of aid, fostering competitiveness of
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 278 enterprises, strengthening and improving business support services and raising the skills of human resources.
279 Chapter 9 Core Provisions III of Fair Competition of Macao: Mergers of Companies The merger of a company with another company is often pivotal for the economic development of the company. On the one hand, a merger enables it to expand its production scale, to optimise the organisational structure of company, to improve the structure and quality of products and services, and to adjust the business scope in harmony with the socio-economic development of the economy; on the other hand, a merger increases the company’s financial strength to provide a diversity of products and services, and elevates the competitiveness of the company itself in the market. Taking into account the internal and external business and market influences, mergers are subject to legal constraints. In the legal system of the MSAR, there is no individual company law, and the relevant merger specification is included in the Commercial Code. In relation to mergers, the provisions are between Articles 272 and 292. However, for certain specific sectors there are a number of specific provisions in the relevant branches of law. 1. Core Provisions of the Merger of Companies Regulated in MSAR 1.1. Meaning and Forms of Mergers The merger of a company refers to where two or more companies, whether they are similar or different types, can combine into one company. Amalgamation has two forms, which are respectively: an absorbing merger and a consolidating merger. An absorbing merger refers to where one company merges with another company or several companies into an absorbing company, and all merged companies are extinguished. In general commercial circumstances, it is usual that a stronger company absorbs relatively weaker companies, but as long as a merger agreement is achieved between the parties, it cannot be excluded that a weaker company absorbs stronger companies. In any case, the absorbing company after the merger is stronger than before the merger, and better able to compete with other companies in the market. Subparagraph a) of paragraph 2 of Article 272 of the Commercial Code provides that “by way of the global transfer of the patrimony of one or more companies to another one, and the attribution to the shareholders of the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 280 former of parts or shares in the latter”. Consolidating mergers refer to where two or more companies create a new company due to the merger, and all companies participating in the merger are extinguished. Certainly, the newly established company is relatively stronger than every company that participated in the merger, and possesses prevalence over each participating company, enabling it to be more competitive in the market. Subparagraph b) of paragraph 2 of Article 272 of the Commercial Code provides that “by way of the creation of a new company, to which the patrimonies of the merged companies are globally transferred, the shareholders of the latter being given parts or shares in the newly established company”. 1.2. Process of Mergers A merger is not only an issue between the merged companies, but involves a series of issues such as the creation, modification and extinction of companies, the benefits of the merged companies themselves and their shareholders, and even to the rights of creditors, so that, in order to ensure the respective rights are not being damaged, the merger must be engaged in legally, otherwise it does not produce a legal effect. The Commercial Code of MSAR has more specific provisions for the entire process in relation to mergers, including six aspects by sequence: elaboration of merger project, supervision of the project, registration of the project, resolution of the project, publication of mergers and the registration of a merger. 1.2.1. Elaboration of merger project The merger project is elaborated jointly by the administrations of companies participating in the merger, based on the principle of equal negotiation. It must state the objective, contents, behaviours, as well as other necessary information of negotiation which all parties understand completely, and must contain the followings: (1) The type, motivation, conditions and objectives of the merger, in relation to all participating companies; (2) The designation of the firm, its registered address, the capital amount and business registration number of each participating company; (3) The participation that any of the companies may have in the capital of the other; (4) Balance sheets of the participating companies, particularly organised, which contains the value of assets and liabilities to be transferred to the absorbing company or the newly established company; (5) Parts or shares to be allocated, by the absorbing company or the newly established company, to shareholders of the company to be absorbed, and if any, the amounts of cash to be allocated to the same shareholders,
Core Provisions III of Fair Competition of Macao:Mergers of Companies 281 specifying the ratio of exchange of the company participations; (6) The draft amendment to the statutes of the absorbing company or the draft statutes of the newly established company; (7) The protection measures of the rights of creditors; (8) The rights assured by the absorbing company or the newly established company to shareholders who are the holders of special rights; (9) If the absorbing company or the newly established company is a limited company, the categories of shares of these companies and the date from which the shares are delivered and entitled to profits, as well as the modalities of this right. In the project or its attachment, the adopted evaluation criteria will be indicated, as well as the bases of the exchange ratio referred to point (5) cited supra. 1.2.2. Supervision of the merger project The administrations of all participating companies shall deliver the merger project and its attachments to the supervisory board or single supervisor of themselves, or, if there is no supervisory board or single supervisor, to the accounts auditor or firm of accounts auditors, to have their opinion. When the supervisory board or the single supervisor, the accounts auditor or the firm of accounts auditors, believe it is necessity, they can request all participating companies to provide the information and the documents needed, and proceed to the required verifications. If they have not observed the diligence of a judicious manager and order the verification of the financial position of companies and the completion of merger, they are jointly and severally liable for damages caused by the merger to the company and its shareholders and creditors. 1.2.3. Registration of the merger project Once the merger project is registered, the notice of the registration of the merger project, the notice of this project and its attached documentation which can be viewed by the respective shareholders and creditors at the registered office of each company, and the dates for the general meetings of shareholders, must be published. After the registration of the merger project is made, the general meetings of shareholders shall be convened, not earlier than 30 days from the date of sending or publication of the convocation, depending upon which takes place later, with a view to make a merger resolution in the companies’ general meetings. The proposals presented to all general assemblies which participate in the merger must be identical, any modification introduced by a general assembly is considered as a rejection of the proposal, without prejudice to its renewal.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 282 1.2.4. Resolution of the merger project Independent to the type of participating company to the merger, the merger project must be returned to the resolution to be made by shareholders of each participating company in a general meeting. Once the general meeting has taken place, its administration should start to expressly declare whether the factual elements of the merger project on which it is based has been changed. If so, the administration must declare the necessary modifications of the project, as well as the general assembly shall resolve whether the process of the merger must be restarted, or whether it will carry on the consideration of the proposal. The shareholders can request, in the general meeting, any information relating to the participating companies in order to understand the proposal of the merger. If there are no special provisions, the administration of each participating company approves the merger by resolution of the general meeting according to the provisions of the alteration of the company statute, and signs the respective document of merger. In any case, the contents of resolution can only be executed with the consent of all shareholders. 1.2.5. Publication of the merger The resolution of the merger project approved by each administration must engage in the registration and be promoted for publication, which must state clearly that creditors of the participating companies have the right of opposition. If debts are generated before the last publication of the resolution, the creditors of the participating companies may raise a judicial opposition to the merger, within 30 days from this publication, on the grounds of the realisation of damage of credits arising from the merger. 1.2.6. Registration of the merger The judicial opposition raised by any creditors hinders the registration of the merger, until any of the following facts is verified: (i) have been judged groundless by decision with res judicata, or in the case of acquittal, the opponent does not initiate new proceedings within 30 days; (ii) proceedings have been withdrawn by the opponent; (iii) have the participating company paid back to the opponent or provided the guarantee fixed by agreement or judicial decision; (iv) there are consent of opponents to the registration; (v) the amounts due to the opponents have been consigned in deposit. If there is not opposition raised by any participating company after the publication of the resolution, or if any, the facts mentioned in previous paragraph has been verified, the administration of any of the participating companies in the merger, or of the newly established company, must complete the business registration of the merger.
Core Provisions III of Fair Competition of Macao:Mergers of Companies 283 1.3. The Legal Effect of Mergers Once the business registration is completed, the legal efficacy is immediately produced and two different legal effects appear. Firstly, in the case of an absorbing merger, the absorbed company shall be extinguished, its rights and obligations shall be transferred to the absorbing company; in the case of a newly established company, all merged companies shall be extinguished, and their rights and obligations shall be transferred to the newly established company. Secondly, the shareholders of the extinguished companies, based on their rights and obligations transferred to the company after merger, become shareholders of the absorbing company or the newly established company. From this view, the merger shall result in the creation, modification and extinction of the company. If the efficacy of the merger is bound on the suspensive condition or the term, and occurs, before their verification, relevant alterations in the facts on which the resolutions are based, any general assembly of participating companies can resolve to petition the court for the rescission or modification of the merger. In this regard, this suspensive efficacy is delayed until the res judicata of the decision to pronounce in the court proceeding. The participating companies are extinguished due to merger, but their administrations, members of supervisory boards or individual supervisors and secretaries can exercise the rights of indemnity based on damages caused by the supervision of the merger project. As well, the participating companies possess rights and obligations produced by the merger, these participating companies are considered as existent for this purpose. If a participating company has the rights of indemnity due to its extinction, any shareholders or creditors of this company may request judicially to nominate a special representative to exercise these rights. This special representative must issue notification, through the notice to the company in written form, inviting the creditors and shareholders of the company to assert their rights of indemnity, in the period prescribed in the notice, not less than 30 days. In addition, if the absorbing company or the newly established company did not settle the payment or provide guarantees of debts, the indemnity attributed to the participating companies must be used in the payment of the respective creditors. If there is any excess, it shall be distributed between shareholders in accordance with the applicable rules to the distribution of the balance of a liquidation. However, if the creditors and shareholders of the companies did not assert their rights, it shall not accept the distribution of indemnity according to the aforementioned sequence. The special representative abovementioned, who has made spending with justifiable proofs by exercising the rights of indemnity, can request the respective creditors and shareholders to reimburse the relevant expenses and receive the remuneration, and their amounts are fixed prudentially by the court, as well as being shared by the respective creditors and shareholders.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 284 1.4. Nullity of the Merger The nullity of the merger can only be declared by the reason of the absence of the needed documents, or the previous declaration of nullity or annulment of any of the resolutions of the general assemblies of the participating companies. Proceedings to declare the nullity of the merger can only be initiated if the existing defects have not been corrected, but never after six months from the publication of the registered merger, or from the publication of the sentence res judicata which declares null or annuls any of the resolutions of the respective general assemblies. If the defects which cause the nullity of the merger are corrected within a period of time determined by the court, the court shall not declare the nullity of the merger. To the absorbing merger, in spite of the nullity of the merger being declared, the effects of the behaviours exercised by the absorbing company, in the period after the registration of merger in registry and before the sentence to declare the nullity of the merger, are not affected by the declaration. However, the absorbed companies are jointly and severally liable for the obligations undertaken by the absorbing company during this period. To the newly established company, the merged companies must be jointly and severally liable for the obligations undertaken by the newly established company, if the merger is declared null. 2. Branches of Law containing Merger Provisions Over the long term, the socio-economic policy of Macao is to pursue capitalism, so the government has been taking an attitude of non-intervention in the market, allowing the commercial enterprises to carry out freely their businesses. Only a few specific industries, based on which businesses are in peculiar natures, are regularised in terms of activities and behaviours by the government, enabling it to ensure the public interest and that this complies with the government policies for regional development. Table 9.1 lists certain sectors and businesses, which are regulated by relevant legal instruments containing provisions related to mergers. Table 9.1: Legislation of MSAR concerning provisions of merger for specific sectors # Field of activity Year Statute Issue 1. Industry of insurance 1997 Decree-Law no. 27/97/M Establishes the new legal regime for access and exercise of the insurance activity in Macao 2. Financial and credit institutions 1995 Law no. 3/95/M Regulates the acts of merger and division of financial and insurance institutions 3. Regime of concession of construction and operation of Ká 1988 Decree-Law no. 29/88/M Establishes the general bases of the regime of concession of the explora- tion of the Ká Hó Harbour
Core Provisions III of Fair Competition of Macao:Mergers of Companies 285 # Field of activity Year Statute Issue Hó Harbour 4. Service of tele- communications of television broadcasting via satellite 1999 Decree no. 206/99/M Confers to Telesat – Satellite Communications Limited, a licence to install and operate a system of television broadcasting by satellite 1999 Decree no. 207/99/M Confers to Telesat – Satellite Communications Limited, a licence to install and operate a system of satellite management 2000 Dispatch of the Chief Executive no. 232/2000 Authorises the “China Satellite TV (Group) Limited Company” to provide telecommunications services of television broadcasting by satellite 2004 Dispatch of the Chief Executive no. 46/2004 Determines that the “Satellite television MASTV, Limited Company” is licenced to provide the telecommunications services of television broadcasting by satellite 2008 Dispatch of the Chief Executive no. 318/2008 Licences “Macau Lotus Satellite TV Media Limited” to provide the telecommunications services of television broadcasting by satellite 2014 Dispatch of the Chief Executive no. 136/2014 Renews the Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, conferred to “Telesat – Satellite Communications, Limited”, to install and operate a communications system of television broadcasting by satellite 2014 Dispatch of the Chief Executive no. 163/2014 The endorsement to the firm “宇宙衛星通信服務有限公司” in Portuguese “Telesat – Comunicações por Satélite, Limitada” and in English “Telesat – Satellite Communications, Limited”, in the Licence no. 1/99, attached to Decree no. 206/99/M, dated on 31st May, is considered as being made to the “宇宙衛星通信服務股份有限公司 ”, in Portuguse “Telesat – Comunicações por Satélite, S.A.” and in English “Telesat – Satellite Communications, Limited” 5. Services of terrestrial mobile 2002 Dispatch of the Secretary for Authorises the Kong Seng Paging Limited, to provide services of
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 286 # Field of activity Year Statute Issue telecommunica-tions Transports and Public Works no. 96/2002 terrestrial mobile telecommunica- tions for public use, without own public network of telecommunica- tions and own frequencies (mobile virtual network operator) 2015 Dispatch of the Chief Executive no. 160/2015 Licences the Macau Telecommunica- tions Company Limited to install and operate a public network of terrestrial mobile telecommunications and provide the services of terrestrial mobile telecommunications for public use 2015 Dispatch of the Chief Executive no. 161/2015 Licences the China Telecom (Macau), Limited to install and operate a public network of terrestrial mobile telecom- munications and provide the services of terrestrial mobile telecommunica- tions for public use 2015 Dispatch of the Chief Executive no. 162/2015 Licences the Smartone – Mobile Communications (Macau), Limited to install and operate a public network of terrestrial mobile telecommunications and provide the services of terrestrial mobile telecommunications for public use 2015 Dispatch of the Chief Executive no. 163/2015 Licences the Hutchison Telephone (Macau), Limited to install and operate a public network of land terrestrial mobile telecommunications and provide the service of terrestrial telecommunications for public use 6. Special stamp duty 2011 Law no. 6/2011 Special stamp duty on the transfer of immovable property for housing 7. Public networks of fixed telecom- munications 2013 Dispatch of the Chief Executive no. 172/2013 Gives the Macau Telecommunications Company Limited, the right to install and operate a public network of fixed telecommunications and provide the licenced services, in the terms and conditions contained in Licence no. 1/2013 2013 Dispatch of the Chief Executive no. 173/2013 Gives the MTEL Telecommunica- tions Company Limited, the right to install and operate a public network of
Core Provisions III of Fair Competition of Macao:Mergers of Companies 287 # Field of activity Year Statute Issue fixed telecommunications and provide the licenced services, in the terms and conditions contained in Licence no. 2/2013 8. Provision of specified services by companies established by the financing of the government 8.1. Provision of terrestrial television broadcasting services 2014 Notice of the Chief Executive no. 11/2014 Order to publish the Statutes of the Basic Television Channels of Macao, Ltd. 8.2. Provision of support services to customer 2011 Notice of the Chief Executive no. 17/2011 Order to publish the Statutes of the Macau Investment and Development Limited The following sections will expound one-by-one, according to each industry or sector, the provisions related to mergers, in order to understand their forms and contents. 2.1. Insurance Industry The present regime of the access and exercise of the activities of insurance is established by Decree-Law no. 27/97/M, Chapter 7 of this text has mentioned that this regime comprises the provision of the prohibition of restrictive competition, aiming to ensure that insurers exercise the activities of insurance in a legitimate manner. Taking into account the activities of insurance have a significant influence on the social development and financing system, the financial arrangement and the development of insurers per se are likewise linked to this regime, in order to avoid unhealthy competition between insurers and to safeguard the interests of insured persons. Hence, in the aspect of the transformation of insurers, it is not only in line with the provisions of the Commercial Code, but also subject to the specific provisions stipulated in this regime. Whether the insurer is a natural person or legal person, as long as the insurer was established in the MSAR, its transformation by merger can only be authorised in advance by the Chief Executive after hearing the opinion of the Monetary Authority of Macao; if the transformation by merger is of an insurer with headquarters outside MSAR, the Monetary Authority of Macao must pronounce its opinion, to be sanctioned by the Chief Executive, about the feasibility of continuing to operate in the region of Macao.353 Regardless of whether it is an absorbing merger or a consolidating merger, its 353 Purusant to Article 92 of Decree-Law no. 27/97/M.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 288 established technical reserves shall transfer to the absorbing insurer or newly established insurer in the necessary part to make up the required reserves.354 2.2. Rules of Mergers in Financial Service Industries 2.2.1. Merger of credit institutions The present legal regime of the financing system of MSAR is subject to the Decree-Law no. 32/93/M, Chapter 7 of this text has expounded on the provision that financing and credit institutions protecting fair competition between them in the exercise of activities of financing and credit. However, in the regime of exception of the credit institutions set out specifically in this legal regime, if the credit institutions meet any difficulties in the establishment or functioning, and any other unbalance situations, of themselves or others institutions, are able to affect the normal functioning of themselves or other institutions, particularly in terms of liquidity or solvency, or normal conditions of functioning of monetary, financing or foreign exchange markets, or in the case of continuous violations of disciplinary rules of the respective activity, of the conditions of authorisation or instructions or of determinations of supervisory authority, the Chief Executive may, after hearing the opinions from the Monetary Authority of Macao, set out exceptional measures in the form of a dispatch. In a situation where a credit institution faces serious risks of non-compliance with its obligations to depositors and other creditors, or jeopardises the confidence of the economic participants in the financial system, the Chief Executive may, after hearing the opinions of the Monetary Authority of Macao, issue an order to nominate a representative or several representatives or an administrative committee, to intervene in the management of the institution in question. Therefore, the representative or administrative committee should propose and adopt appropriate measures, to ensure the end of the financial crisis and to re-establish the normal functioning of the institution. If this is not possible, it should consider specifically the benefits of depositors, in order to minimise the consequences of that situation. The competent company may, with the consent of the representative or representatives, or the administrative committee may adopt several methods, to overcome the financial situation or minimise its consequences, one of which is to proceed with the merger of institutions in the conditions which are considered convenient, but it can only be done by obtaining the Chief Executive’s approval. The merger procedure of credit institutions must comply with the relevant provisions of the Commercial Code. 354 Ibid, paragraph 1 of Article 94.
Core Provisions III of Fair Competition of Macao:Mergers of Companies 289 2.2.2. Merger of financial and insurance institutions For the merger of financial institutions, the Decree-Law indicated in the previous sub-section does not have relevant provisions, so it is applicable to the provisions, in general, of mergers in the Commercial Code; moreover, it is also applicable to the specific regulation in Law no. 3/95/M. Article 1 of this Law sets out the objective, aiming to “apply to the merger … of financial and insurance institutions which have their headquarter in Macao”. In other words, whether it implies, if a financial or insurance institution established in MSAR is a branch company, its merger is not applicable to this Law; or if its headquarters are located outside and engages in a merger, it is also not subject to this Law. However, Article 12 of this Law provides for an “extension”, if and only if with necessary adaptations, the following company behaviours can be carried out: (i) the merger regulated by this Law also applies to the merger of financial and insurance institution, with outside headquarters, which maintains in MSAR any form of legal representation; (ii) one institution incorporates another one, or an absorbing merger, of which capital is directly or indirectly the sole holder; or if it is not, the capital participation of the absorbing institution cannot be distributed to the shareholders of absorbed institution; (iii) to the transmission, by one institution to another existing one, or to be established, of one portion of its property affects a particular branch, which is considered, in the viewpoint of operation, as an independent business. After the merger of the participating financial institutions, there can be different types of financial institutions; and the insurance institutions can only be merged between them, an institution resulted from an absorbing merger is, of course, an insurance institution; and an institution resulted from a consolidating merger also should be an insurance institution. No matter whether it is a financial or insurance institution, its merger can only be engaged in by obtaining an authorisation in advance by the Chief Executive, through the publication of an executive order of the Chief Executive, after hearing the opinion of the Monetary Authority of Macao. The respective institution must prepare by law the merger project, attached to the application to the Monetary Authority of Macao. That institution has yet to present complementary information to support the application process when the Monetary Authority of Macao deems necessary. In the respective application, as long as there is a reasonable explanation, the respective institution may propose, for its merger, to shorten the period provided by the applicable legislation, simplify or exempt the formalities associated with the merger, or exempt the compliance with the merger process. The registry of an institution to be carried out just after the completion of the act that formalises the merger, the authorisation referred to the previous paragraph is only of a conditional nature, until it can be made a final registration of the act in question. The rights of transmissions, related to the property subject to the registry operated by the merger, must be registered by endorsement to the respective
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 290 registrations. If there are debts claimed by the creditors prior to the publication or to the ultimate publication of the company resolution which has approved the merger, the creditors can only be notified through the publication of a notice of the right of judicial opposition to the merger. In the case of the merger company applies, to MSAR, to exempt any taxes, fees, and notarial and registry fees produced from the executory acts of its merger, based on the explanation of the reasons of relevant interests, the Chief Executive may issue an executive order for the approval (then Governor may issue a dispatch for the approval). 2.2.3. Merger of banking institutions – the banking institutions established in Macao as examples (A) Change of a branch of overseas bank to be a headquarter incorporated in Macao a) Establishment of the Banco Comercial de Macau (Ásia), S.A.R.L. In 1995, through the promulgation of Decree no. 122/95/M, the application presented by the Banco Comercial de Macau, S.A., with headquarter incorporated in Oporto, Portugal, to establish a new credit institution, its branch, in Macao was approved. In this regard, based on provisions of subparagraph a) of paragraph 1 of Article 19 and Article 113 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, the establishment of “Banco Comercial de Macau (Ásia), S.A.R.L.” in Macao was authorised, and its banking activity conformed with the statutes approved by the Monetary Authority of Macao and the provisions of this Decree-Law. Regarding the executory acts under the authorisation conferred by the Decree indicated in the previous paragraph, all taxes, fees and notary and registration fees resulted from the transfer of property, rights and obligations of the branch of Banco Comercial de Macau to Banco Comercial de Macau (Ásia), S.A.R.L., conformed with the provisions of Article 10 and subparagraph c) of Article 12 of Law no. 3/95/M and through the publication of Dispatch no. 30/GM/95, were exempted. b) Establishment of Banco Nacional Ultramarino, S.A. In 1999, through the promulgation of Decree no. 284/99/M, the application presented by the Banco Nacional Ultramarino, S.A. with headquarter incorporated in Lisbon, Portugal, to establish a new credit institution, its branch in Macao was approved, in order to participate more directly in the commercial activities in this region through a bank established in Macao. In this regard, based on subparagraph a) of paragraph 1 and paragraph 3 of Article 19 and Article 113 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, the establishment of
Core Provisions III of Fair Competition of Macao:Mergers of Companies 291 “Banco BNU Oriente, S.A.R.L.” in Macao was authorised, and its banking activity conformed with the statutes approved by the Monetary Authority of Macao and the provisions of this Decree-Law. Through the promulgation of Executive Order no. 27/2001, the transfer of all properties belonging to the Macao branch of Banco Nacional Ultramarino, S.A. to Banco BNU Oriente, S.A.R.L. was authorised, and was exempted from all taxes, fees, notary and registration fees resulting from the executory acts related to this authorisation. Meanwhile, Banco BNU Oriente, S.A.R.L. was authorised to be renamed to Banco Nacional Ultramarino, S.A. c) Establishment of Banco Totta Ásia, S.A.R.L. In 1999, through the promulgation of Decree no. 312/99/M, the application presented by Banco Totta & Açores, S.A., with headquarter incorporated in Lisbon, Portugal, to establish a new credit institution, its branch, in Macao was authorised. In this regard, based on the provisions of subparagraph a) of paragraph 1 of Article 19 and Article 113 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, the establishment of “Banco Totta Ásia, S.A.R.L.” in Macao was authorised and its banking activity conformed with the statutes approved by the Monetary Authority of Macao and the provisions of this Decree-Law. Regarding the executory acts under the authorisation granted by this Decree indicated in the previous paragraph, all taxes, fees, notary and registration fees resulting from the transfer of property, rights and obligations of the branch of Totta & Açores, S.A., to conform with the provisions of article 10 and subparagraph c) of Article 12 of Law no. 3/95/M, and through the publication of Dispatch no. 121/GM/99, were exempted. (B) Banks of consolidating merger a) Establishment of DBS Bank In 2003, the Overseas Trust Bank Limited, DBS Kwong On Bank Limited and Dao Heng Bank Limited engaged in a merger in the Hong Kong Special Administrative Region. The authorisation to the exercise of banking activity in that place granted to the former was also withdrawn, and its branch in Macao was incorporated into the newly established institution after the merger and maintained its existing activities. The institution after the merger is denominated in Hong Kong, as “DBS Bank (Hong Kong) Limited”. Hence, based on the provisions of subparagraph b) of paragraph 1 of Article 19, and paragraphs 2 and 4 of Article 35 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, promulgated Executive Order no. 21/2003 and authorised the establishment of a branch of DBS Bank (Hong Kong) Limited in Macao and to conduct its banking activity; meanwhile, the authorisation, conferred by Legislative Instrument no.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 292 34/72 (Diploma Legislativo n.º 34/72), of that the Macao branch of Overseas Trust Bank Limited exercised banking activity in Macao was withdrawn. (C) Banks of absorbing merger a) Banco Comercial de Macau In 2005, to conform with the provision of paragraph 1 of Article 40 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, Tah Sing Bank of Hong Kong acquired shares of Banco Comercial de Macau from the group of Banco Comercial of Portugal and notified the Monetary Authority of Macao by which the authorisation was conferred. b) China Construction Bank Corporation In 2007, to conform with the provision of paragraph 1 of Article 40 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, the China Construction Bank Corporation acquired the Bank of America (Asia) Limited and was renamed to the “China Construction Bank (Macao) Limited”, and notified the Monetary Authority of Macao by which the authorisation was conferred. In 2014, to conform with the provisions of Executive Order no. 17/2014, the China Construction Bank Corporation, with headquarters incorporated in Beijing, China, to establish a branch in MSAR was authorised and its banking activity conformed with the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M; the merger between the China Construction Bank (Macao) Limited and the China Construction Bank Corporation was authorised. An exemption of all taxes, fees and notary and registration fees resulting from the executory acts under this merger was authorised. c) Industrial and Commercial Bank of China In 2009, to conform with the provision of paragraph 1 of Article 40 of the “Legal Regime of Financial System” defined by Decree-Law no. 32/93/M, the Industrial and Commercial Bank of China acquired the Seng Heng Bank and merged its Macao branch with the Seng Heng Bank, and changed the name of Seng Heng Bank to “Industrial and Commercial Bank of China (Macao) Limited”, notifying the Monetary Authority of Macao which authorised the merger. To conform with the provisions of Executive Order no. 30/2009, the merger between Seng Heng Bank Limited and the Macao branch of the Industrial and Commercial Bank of China Limited was authorised; the transfer of all rights and obligations under the developed activities of the Macao branch of Industrial and Commercial Bank of China to the Seng Heng Bank Limited was authorised; moreover, the renaming of the Seng Heng Bank Limited to the “Industrial and Commercial Bank of China (Macao) Limited” was authorised. In addition, all taxes, fees, notarial and registration fees derived from the executory acts related to the
Core Provisions III of Fair Competition of Macao:Mergers of Companies 293 merger were exempted. Finally, Executive Order no. 12/2003 was repealed; the authorisation related to the exercise of banking activity by the branch established in MSAR by the Industrial and Commercial Bank of China, with headquarters incorporated in China was withdrawn. 2.3. Regime of Concession of Construction and Operation of Ká Hó Harbour In 1988, the former Government of Macao considered the exploration of the Ká Hó Harbour had a far-reaching significance for the long-term development of Macao and should no longer be delayed. But the construction of terminals in the Ká Hó Harbour and the operation of the harbour was within the scope of Decree-Law no. 122/84/M, which defines the legal regime of the expenses related to government procurement. In the balance between the development of Macao and the interests of investors, the former government decided to exempt from public tender and to adopt the approach of concession for the exploration of Ká Hó Harbour, so promulgated Decree-Law no. 29/88/M on 11th April 1988, which established the general bases of the regime of concession of the exploration of the Ká Hó Harbour. In these situations, there is one article related to mergers, its subparagraph c) of paragraph 2 of Article 2 provides for that: “2. The concessionaire commercial company may not, without prior authorisation of the Governor [now Chief Executive], perform any of the following acts: … c) … merger … of the company.” It is pointed out clearly that, in the period of concession, if the company granted the concession right related to construction and operation of the Ká Hó Harbour intends to engage in a merger, either the absorbing merger or the consolidating merger, it must be requested to the competent body of the MSAR before initiating the merger process and only can be carried out after obtaining authorisation from the Chief Executive. Otherwise, it is treated in accordance with the applicable legislation, regulation and the relevant provisions of the Commercial Code. On the same day, the former Government of Macao and Macauport – Sociedade de Administração de Portos, S.A.R.L. signed the contract of concession for the exploration of harbour, and afterward on 9th May 1988, the former government issued Dispatch no. 52/SAOPH/88, the respective contract of concession was entitled by a public deed to Macauport – Sociedade de Administração de Portos, S.A.R.L. which terms do not involve merger of a company. It implies that, if Macauport – Sociedade de Administração de Portos, S.A.R.L. engages in a merger, the provision of Decree-Law no. 29/88/M abovementioned still must be complied with.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 294 2.4. Service of Telecommunications of Television Broadcasting via Satellite The provision of the service of telecommunications of television broadcasting via satellite is bound legally in MSAR, only if the companies which have been issued licences can install the respective system and provide relevant service. Section 13 of Chapter 7 of this text has expounded the relevant legislations. Among the licences which companies have been issued are listed in Table 7.5, merger-related provisions are included, or once these companies which were issued licences intend to engage in a merger, other than according to the relevant provisions of the Commercial Code, they are restricted in certain degrees. To the four licenced companies, the significance and approach related to mergers involved in these licences are similar, but only the wordings are slightly different. As an example of the terms stipulated in Licence no. 1/2004 issued by Dispatch of the Chief Executive no. 46/2004, paragraph 11 is of the “Suspension and revocation by non-compliance”, its point 11.1.12 sets out that: “11.1. The Licence may be suspended or revoked by the Chief Executive, under the proposal of GDTTI [Telecommunications and Information Technology Development Office], when the Holder does not respect the terms and conditions under which it is assigned, namely when: … 11.1.11. … the merger … of the Holder, not authorised;” This provision points out that, when the Telecommunications and Information Technology Development Office [presently, the competent body is the Macao Post and Telecommunications Bureau] knows, under any circumstance, that the Holder providing the service of telecommunications of television broadcasting via satellite by non-compliance with the terms and conditions stipulated in the licence, including the merger of a company in which the Holder intends to engage does not obtain in advance the authorisation by the Chief Executive, this Office may propose to the Chief Executive the suspension or revocation of the licence of that the Holder from providing the service of telecommunications of television broadcasting via satellite, which, for this example, is the Licence no. 1/2004. However, it is not a provision in an absolute nature. According to the significance of this provision, the Chief Executive has the right to negate the proposal to suspend or revoke the licence. Moreover, paragraph 14 is the “Headquarter and statutes of the Holder”, its point 14.3.3 sets out that: “14.3. The Holder may not, without prior authorisation of the Chief Executive, perform any of the following acts: … 14.3.3. … merger … of the company.”
Core Provisions III of Fair Competition of Macao:Mergers of Companies 295 This provision points out that, the Holder can only initiate the merger process after obtaining authorisation from the Chief Executive, otherwise the merger process in course or the completed merger is nullified as the merger does not comply with the stipulations. 2.5. Service of Terrestrial Mobile Telecommunications 2.5.1. Operator self-owned terrestrial mobile telecommunications network In 2015, the government of MSAR issues 4 licences for the establishment and operation of a public network of telecommunications and the provision of terrestrial mobile telecommunications services for public use which adopts the technology of long term evolution (LTE), to conform with the provision of paragraph 5 of Article 5 of Administrative Regulation no. 7/2002, the companies granted licences are respectively: Table 9.2: Companies granted licences to install and operate the networks of the fourth generation of terrestrial mobile telecommunications and provide the relevant services Company Legal instrument Granted licence Macau Telecommunications Company Limited Dispatch of the Chief Executive no. 160/2015 Licence no. 1/2015 China Telecom (Macau) Company Limited Dispatch of the Chief Executive no. 161/2015 Licence no. 2/2015 Smartone – Mobile Communications (Macau), Limited Dispatch of the Chief Executive no. 162/2015 Licence no. 3/2015 Hutchison Telephone (Macau) Company Limited Dispatch of the Chief Executive no. 163/2015 Licence no. 4/2015 Among these are set out and their contents are quite similar. In these licences there are 23 paragraphs, in two of which the contents involve the provision related to mergers. If the licenced companies engaged in a merger, they are subject to these two provisions. Firstly, paragraph 8 is of the “Suspension and revocation for non-compliance”, which subparagraph 13 of paragraph 1 provides for that: “1. The Licence may be suspended or revoked by the Chief Executive when the Holder does not comply with the terms and conditions under which it is assigned, namely when: … 13) … the merger … unauthorised of the Holder; …” Thus, if a licenced company carried out the merger by law, it shall not lead to the situation of the licence being suspended or revoked.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 296 Secondly, paragraph 11 is of the “Headquarter and statutes of Holder”, subparagraph 3 of paragraph 3 of which provides that: “3. The Holder may not, without prior authorisation of the Chief Executive, perform any of the following acts: … 3) Merger … of the company.” It can be seen clearly that, a merger of a company engaging in by a licenced company cannot be carried out if it does not obtain an authorisation in advance from the Chief Executive, even though the respective procedure is covered by law. It is noteworthy that, the merger herein referred to is not limited to a merger between the licenced telecommunications companies, if a licenced company merges with another company of any kind, it is also bound by this article. 2.5.2. Operator of mobile virtual network Administrative Regulation no. 7/2002 stipulates the “Operation of public networks of terrestrial telecommunications and provision of terrestrial mobile telecommunications services for public use”, whereby only the operator which holds the licence issued according to the provisions of this Administrative Regulation can operate the public networks of terrestrial telecommunications and provide the terrestrial mobile telecommunications services for public use. In the meanwhile, this Administrative Regulation stipulates exceptional provisions, Article 16 points out that, in the case of an entity which does not dispose by itself of the network and frequencies, if and only if this entity is granted an authorisation, in terms of applicable rules, by a competent body, to establish the conditions for the exercise of relevant activity, in the basis of each case, as well as issuing an appropriate licence, then this entity can still provide the terrestrial mobile telecommunications services for public use. Until the present date, “Kong Seng Paging Limited” is the only one which was licenced, which is the “Authorisation of Mobile Virtual Network Operator no. 1/2002”, issued by Dispatch of the Secretary for Transport and Public Works no. 96/2002. In this Authorisation, two articles related to mergers are regulated. Firstly, Article 7 is of the “Suspension and revocation by non-compliance”, its subparagraph 9 of paragraph 1 sets out that: “1. The authorisation may be suspended or revoked by the Government when the Holder does not comply with the terms and conditions under which it is granted, particularly when: … 9) The unauthorised … merger of Holder;” In this provision, the entity competent to grant authorisation is the Government. In general, the Government is represented by the Chief Executive. However, considering that the public networks of terrestrial mobile
Core Provisions III of Fair Competition of Macao:Mergers of Companies 297 telecommunications and the relevant services are approved and authorised by the Secretary for Transport and Public Works in accordance with the provision of Article 3 of the Administrative Regulation abovementioned, he has likewise the competence to suspend and revoke the respective authorisation. In other words, the “Government” indicated in this provision is represented by the Secretary for Transport and Public Works. Moreover, once the merger is authorised, as time is not, therein, specified, either it is an ex ante authorisation or an ex post authorisation, the aforementioned mobile virtual network operator shall not be suspended or revoked. Secondly, paragraph 10 is the “Headquarter and statutes of the Holder”, its subparagraph 3 sets out that: “3. The Holder may not, without prior authorisation of the Government, ... carry out its merger ...” This provision expresses clearly that, the respective operator cannot initiate the procedure of a merger before obtaining an authorisation in advance by the Secretary for Transport and Public Works. The merger herein indicated is a merger carried out between the authorised operator and any kind of companies, including another one or more authorised operators in the same industry. 2.6. Special Stamp Duty Article 1 of Law no. 6/2011, revised by Law no. 15/2012 – Special stamp duty on the transfer of immovable property for housing – provides that “[t]he law creates the special stamp duty which is payable on transfer of immovable property or rights about immovable property for housing located in the Special Administrative Region of Macao, hereinafter referred to MSAR, constructed, under construction or planned for construction, with a view to the fight against property speculation for housing”. Thus, collecting special stamp duty depends on the “transfer” of immovable property; otherwise it does not have to be levied. However, when this special stamp duty aims at cracking down on the speculation of immovable property, not all transfers of immovable property have to levy the special stamp duty. Only if the provisional or definitive transfer of the immovable property, or its rights for housing, in the period of two years starting from the settlement date, which takes place the incident stamp duty on the documents, instruments or behaviours that entitled the respective acquisition, is subject to the special stamp duty. In this regard, paragraph 1 of Article 4 of this Law sets out the sources of transfer, “[a]re considered sources of transfer of immovable property or rights about immovable property all documents, instruments or behaviours which give transfer or promise of transfer of the right of property or other real right of usufruct for housing, or the transference or promise of transference of the powers of facts of utilisation and fruition of such immovable property”. For the sake of the clear and correct application of this provision, this Law explicitly enumerates which
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 298 behaviours of transfer of rights relating to immovable property must be levied with the special stamp duty. If the capital of the company comprises immovable properties and their rights, and this company merges with other companies, then the transfer of immovable property is subject to this Law. 2.7. Public Networks of Fixed Telecommunications The present regime of installation and operation of public networks of fixed telecommunications was established by Administrative Regulation on. 41/2011, the contents provided are mainly in three aspects: licencing, exercise of activities and punishment. The public networks of fixed telecommunications indicated in this Administrative Regulation is defined in paragraph 2 of Article 1, “based on cables, optical fibres, radio-electricity or other electro-magnetic systems, which link local fixed points, between themselves, or the outside of the Special Administrative Region of Macao, …, and that support telecommunications services for public use”. Licencing must be carried out in accordance with the tendering procedure and provisions which must be complied with, established by the “Specific regulation of the public tender for the licencing of installation and operation of Public networks of fixed telecommunications in the Special Administrative Region of Macao”, approved by Dispatch of the Chief Executive no. 4/2012. If the proposal presented by the bidder meets the requirements, the Chief Executive can issue a dispatch to grant a licence to the relevant bidder, and the dispatch must be published in the Official Gazette of MSAR. Only entities which meet the specified requirements, especially companies established by law in MSAR, or local companies, may be licenced. Their business operations must include the licenced activities. In the case where licenced entities do not comply with the terms and conditions defined in licencing and specific lawful situations, which includes “the unauthorised …, merger, … of licensee, where the licence requires prior authorisation”,355 the relevant licence may be suspended or revoked by dispatch of the Chief Executive to be published in the Official Gazette of MSAR, and there could be a fine between 10,000 and 200,000 patacas. The exact amount relies on the gravity of breach and the type of merger carried out by the licenced entity.356 The merger referred to herein can be carried out between licenced entities or between a licenced entity and any other company. Based on the public tender initiated by Dispatch of the Chief Executive aforementioned, two telecommunications companies are licenced respectively to install and operate a public network of fixed telecommunications: 355 Pursuant to subparagraph 9) of paragraph 2 of Article 14 of Administrative Regulation no. 41/2011. 356 Ibid, subparagraph 4) of paragraph 1 and paragraph 2 of Article 26.
Core Provisions III of Fair Competition of Macao:Mergers of Companies 299 Table 9.3: Companies granted licence to install and operate public network of fixed telecommunications Licenced entity Legal instrument Granted licence Macau Telecommunications Company Limited Dispatch of the Chief Executive no. 172/2013 Licence no. 1/2013 MTEL Telecommunications Company Limited Dispatch of the Chief Executive no. 173/2013 Licence no. 2/2013 The terms and conditions defined in these two licences must be compatible with the provision of paragraph 1 of Article 3 of Administrative Regulation no. 41/2011,357 so their contents are similar and also about the same in form, as contained in the relevant licences, in spite of the companies background and structure, network architectures and their plans of investment and development of the installations and operations of public network of fixed telecommunications are different. Whatsoever, in these two licences, are set out two paragraphs related to mergers. Firstly, paragraph 9 sets out the “Suspension and revocation of licence by non-compliance”, its point 8 of subparagraph 2 provides for that: “2. The licence may be suspended when: … 8) the unauthorised … a merger … of Holder.” Albeit it is not indicated explicitly in this provision who the competent entity is to suspend the licence, it implies that the entity who issues the licence likely has the competence to suspend the licence, or the competent entity is the Chief Executive. The licence referred to in this provision may be suspended but with no absoluteness. Only if the Chief Executive considers that the merger carried out by a licenced company does not affect negatively the provision of services, the situation of fair competition of provision of services can still be maintained, and the interests 357 Paragraph 1 of Article 3 of Administrative Regulation no. 41/2011 provides for that, “[t]he licence shall set out the terms and conditions with regard to: 1) Statutes and capital of the licenced entity; 2) Rights and obligations; 3) Communication means; 4) Operation safety of the public networks of fixed telecommunications and maintenance of its integrity; 5) Protection of personal data and private life; 6) Confidentiality of communications; 7) Effective and efficient use of the allocated frequencies; 8) In conformity with the conditions relating to the protection of environment and the cultural heritage and access to public and private domains; 9) Compliance with the obligations applicable to universal service and sharing in its costs; 10) Interconnection with other networks; 11) Installations sharing; 12) Interoperability of services; 13) Operations of public networks of fixed telecommunications with appropriate quality level, as well as availability and permanence; 14) Conditions of providing services, including system of non-discriminatory prices; 15) Mechanisms for the protection of users; 16) Term and termination of licence; 17) Time limit for installation of public network of fixed telecommunications and the beginning of its operation; 18) Resignation, suspension and revocation of the licence; 19) Mode of supply and conditions of use of the guarantee”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 300 of consumers can still be guaranteed, etc., the licence shall not be suspended. Secondly, paragraph 12 regulates the “headquarter and statutes of Holder”, its point 3 of subparagraph 3 provides that: “3. The Holder may not, without prior authorisation of the Chief Executive, perform any of the following acts: … 3) Merger … of the company.” Thus, this is a provision in an absolute nature. In the case where the Holder does not obtain an authorisation in advance from the Chief Executive, the merger cannot be carried out, whether it is a merger between the holders or a merger between a holder and any non-licenced company. Only by obtaining an authorisation in advance can a merger process be initiated according to the relevant provisions of the Commercial Code. 2.8. Provision of Specific Services by Companies Established by the Financing of the Government of MSAR The circumstances of private and commercial activities provided by companies, created in the private sector by the financing of the Government of MSAR are relatively rare, but there are some examples. The objective of this practice is obviously that the Government discovered the existence of a rupture among some activities in the private sector, the private enterprises, in the assumption of profits, are not willing to provide the relevant activities or services are lacking. However, the Government cannot operate or provide that activities or services as its functions must be public in nature, so this method was derived in order to provide effectively the needed services to the residents, with the objective of safeguarding the interests of residents and the sustainable development of the economy. 2.8.1. Provision of service of frequencies of television channel (A) Contract of concession of cable terrestrial television broadcasting The concession right of television broadcasting in Macao is compatible with the “grant of public services” indicated by Decree-Law no. 3/90/M, which regulates the “Regime of bases of the concessions of public works and public services”,358 so the former Government of Macao and the Macau Cable TV, Ltd. signed a “Concession contract of the terrestrial television service by subscription” which entered into force on 22nd April 1999,359 in the period of 15 years, or till to 21st 358 Pursuant to subparagraph b) of Article 2 of Decree-Law no. 3/90/M, “by concession of public services, the transfer of power to another, exclusively, explore, at its own risk, the appropriate means to the satisfaction of a public necessary individually felt”. 359 “Concession contract of the terrestrial television service by subscription” was
Core Provisions III of Fair Competition of Macao:Mergers of Companies 301 April 2014. Within this period, this company had the right of concession related to the installation and operation of a public telecommunications system, the exclusive provision of terrestrial television service by subscription and the video services, but not including video-telephone services. The concession regime regulates the provisions related to mergers in its Article 8 is of the “obligations of the grantees”, its subparagraph c) of paragraph 3 sets out that: “3. Without prior authorisation of grantor, the grantees which are commercial companies may not carry out any of the following acts: … c) … merger … of the company.” The merger of this company can only be carried out after the authorisation in advance made by the Chief Executive, otherwise, the Chief Executive can, by law, impose a fine, sequestrate the concession of the respective services or revoke the concession. In addition, in this contract, two articles related to mergers are regulated. Firstly, paragraph 12 is of the “Termination by non-compliance”, its subparagraph f) of paragraph 1 provides that: “One. The Grantor may terminate the Contract if it appears any of the following acts attributable to the Grantee: … f) … merger … of the company, without prior authorisation of the Grantor.” The grantee referred to herein is the Macau Cable TV, Ltd. If this grantee does not obtain an authorisation in advance from the Chief Executive before carrying out a merger, the Chief Executive has the discretion to make a decision to revoke the concession contract. Secondly, paragraph 20 is of the “Statutes of company”, its subparagraph c) of paragraph 4 provides that: “Four. The Grantee may not, without prior authorisation of the Grantor, perform any of the following acts: … c) … merger … of the company.” This provision has the nature of absoluteness, prohibiting the company of concession, or the Macau Cable TV, Ltd. can only initiate the merger process by obtaining the authorisation in advance from the Chief Executive, otherwise, it is subject to the punishment established in the contract. During the period of implementation of this concession contract, in January 2007, Kong Seng Paging Limited financed the acquisition of the Macau Cable TV, Ltd. as a major shareholder, and became its parent company, while the latter continued its operation under its company name. published in the Series II, no. 18 of the Official Gazette of the Government of Macao, dated 5 May 1999.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 302 (B) Provision of service of terrestrial television broadcasting by a company established by the government of MSAR The service of terrestrial television broadcasting indicated in the previous sub-section was rendered by the Macau Cable TV, Ltd. which was granted the right of concession. But during the period of execution of the respective contract of concession, there were certain companies of common antenna service which provided the service of television signals to Macao residents without authorisation of the Macau Cable TV, Ltd., which suffered losses, and therefore, filed a lawsuit of infringement to the court.360 Finally, the Macau Cable TV, Ltd. won the case. The Court of Second Instance decided that the provision of service of signals related to terrestrial television broadcasting by the companies of common antenna service was apparently illegal and infringed the concession right holding by the Macau Cable TV, Ltd. Hence, the court forced the then director of the Bureau of Telecommunications Regulation to fulfil ex officio and precisely the obligations of the “Concession contract of the terrestrial television service by subscription” abovementioned within 90 days, in order to protect the concessional right of the Macau Cable TV, Ltd., as well as ordered the termination of unlawful provision of television signals. As the companies of the common antenna service could not provide television signals to the residents after this decision, the Government of MSAR then proposed solutions to enable the residents to watch continuously television programmes before the termination of that concession contract, not resulting in a loss of rights and interests. After negotiations with all parties, an agreement on cooperation was finally reached, whereby the Macau Cable TV, Ltd. provides the television signals of specified channels to the companies of common antenna service, then the latter provide the television signals, through their set up networks, to the residents who have connected to those networks. Prior to the termination of “Concession contract of the terrestrial television service by subscription”, or before 22nd April 2014, the Government of MSAR created the “Basic Television Channels of Macao, Ltd.”, through the promulgation of Administrative Regulation no. 8/2014, and consequently issued Executive Order no. 11/2014 which published the Statutes of the Basic Television Channels of Macao, Ltd. This pointed out that the company has a duration of two years and its objective was the provision of support service at the reception of the basic television channels by the residents in the terms of the concessional contract. Starting from 22nd April 2014, the Basic Television Channels of Macao, Ltd. implemented its duties in accordance with the “Contract of concession of support service at the reception of the basic television channels”, signed on 15th April 360 Case no. 22/2013, sentenced by the Court of Second Instance of MSAR, on 06 June 2013.
Core Provisions III of Fair Competition of Macao:Mergers of Companies 303 2014. 361 In these Statutes, there are two articles related to mergers. Firstly, paragraph 13 is of the “Resolution” of the General Assembly, its subparagraph 2 provides that: “2. The resolutions on … merger … of the company are approved by a qualified majority of two third of the present or properly represented votes, either on the first or second call, since, on first call, whether is present or represented one third of the share capital.” This provision proposed that the resolution of a merger to be made by the general assembly is conditional. There are two restrictive conditions to make a resolution in the first call, and there is only one condition in the second call. There is no other restriction in the occurrence of the third or further call for the merger of the company. Secondly, paragraph 17 is of the “Competence” of the board of administration, its point 3 of subparagraph 1 provides that: “1. The Board of Administration has the broadest powers in the management of the business, in particular of: … 3) resolve on projects of … merger … of the company; …” This provision is clearly to harmonise with one of the procedures of the merger process set out in the Commercial Code and which regulates explicitly that the administration referred to in the Commercial Code is the Board of Administration of the Basic Television Channels of Macao, Ltd. Only this Board can make a resolution on the merger project of the company and can continue to execute the relevant merger process with other merging companies. 2.8.2. Provision of support services to customers by a company established by the Government of MSAR In 2011, in order to implement the “Outline of the Plan for the Reform and Development of the Pearl River Delta” and the “Framework Agreement on Cooperation between Guangdong and Macao”, and to promote the cooperative developments between Macao and Hengquin Island and between Macao and Nansha, particularly being responsible to manage the participation of local entrepreneurs to projects in the Guangdong-Macao industrial zone, and to initiate the construction of Guangdong-Macao Chinese Medicine Industrial Park, etc., with the objective to foster the diversified development of industries of Macao, the Government of MSAR, the Industrial and Commercial Development Fund and the Macao Trade and Investment Promotion Institute financed jointly, through the 361 “Contract of concession of support service at the reception of the basic television channels” was published in the Series II, no. 16 of the Official Gazette of Macao Special Administrative Region, dated 16 April 2014.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 304 promulgation of Administrative Regulation no. 14/2011, and created the “Macau Investment and Development Limited”, and then issued Dispatch of the Chief Executive no. 17/2011 which published the “Statutes of the Macau Investment and Development Limited”. Its Article 4 provides for the company objective which is mainly “the conception, management and exploration of spaces for physical deployment of enterprises and non-entrepreneurial entities, particularly the acquisition, infra-structuring, promotion, transfer or lease of spaces, as well as the direct or indirect provision of customer support services”. In these Statutes, there are two articles related to mergers. Firstly, Article 13 is of the “Resolution” of the General Assembly, its paragraph 2 provides that: “2. The resolutions on … merger … of the company are approved by a qualified majority of two third of the present or properly represented votes, either on the first or second call, since, on first call, whether is present or represented one third of the share capital.” Secondly, Article 17 is of the “Competences” of the Board of Administration, its subparagraph 3) of paragraph 1 provides that: “1. The Board of Administration has the broadest powers in the management of the business, in particular of: … 3) resolve on projects of … merger … of the company; …” The provisions of these two articles are identical with the provisions aforementioned in the previous sub-section, so they are not discussed again. 3. Conclusion In the EU, mergers are one of the areas concerned for the protection of fair competition in business and trade. Considering that two or more companies after a merger will increase their market share and their economic power is correspondingly increased, the EU restricts the companies that can be merged if market power is highly concentrated after merger. However, in the current legal system of fair competition of MSAR, there does not exist a restrictive policy or legislation in this regard. In MSAR, mergers generally must comply with the merger procedure set out in the Commercial Code. Nevertheless, for certain specific industries and sectors, especially insurance, financial and credit institutions, the regime of concession of construction and operation of Ká Hó Harbour, the service of telecommunications of television broadcasting via satellite, services of terrestrial mobile telecommunications, special stamp duty, public networks of fixed telecommunications, provisions of terrestrial television broadcasting services and the provision of support services to customers etc., companies which engage in mergers are subject to the relevant legal regimes and regulations. Consequently, mergers of companies involved can only be carried
Core Provisions III of Fair Competition of Macao:Mergers of Companies 305 out after receiving authorisation in advance from the Chief Executive or competent body. But, the relevant legal regimes and regulations do not define the reasons or objectives of such authorisations. Frankly, if the intention of companies participating in a merger is to hinder, restrict or distort competition, the merger in question should not be authorised; or if a company to be merged will be in a dominant position of its business market, but it is hard to determine that the company to be merged will abuse its dominant position due to the not yet completed merger, so it will generally be authorised.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 306
307 Chapter 10 Regional and International Cooperation ensuring Fair Competition Since the reunification of Macao, the governance of Macao has been returned to the People’s Republic of China and Macao became a non-separated part of China. But in the principle of “one country, two systems”, and under the condition of a “high degree of autonomy”, Macao maintains the independence of its administrative, legislative and judicial systems. Pursuant to the provision of paragraph 2 of Article 112 of the Basic Law of Macao Special Administrative Region, “[t]he Macao Special Administrative Region may, using the name ‘Macao, China’, participate in relevant international organisations and international trade agreements (including preferential trade arrangements), such as the General Agreement on Tariffs and Trade and arrangements regarding international trade in textiles” and its Article 135 provides that “[n]on-governmental organisations in fields such as educations science, technology, culture, news media, publication, sports, recreation, the professions, medicine and health, labour, women, youth, returned overseas nationals, social welfare and social work as well as religious organisations in the Macao Special Administrative Region may maintain and develop relations with their counterparts in foreign countries and regions and with relevant international organisations. They may, as required, use the name ‘Macao, China’ in the relevant activities”. In this regard, Macao still has an independent identity in the international community. For the same reason, the MSAR must be actively and constantly in the international community, to build relationships, maintain connections and participate in the relevant affairs for the sustainable development of Macao per se in different areas and in different international organisations. As well as to achieve inter-regional and international levels, cooperative relationships in various aspects through bilateral and multilateral agreements. 1. International and Regional Instruments applicable to MSAR 1.1. International Treaties applicable to MSAR The trend of economic globalisation has led many countries and regions into
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 308 different degrees of cooperation in various aspects, there is no exception for MSAR. Over the years, both the former government of Macao and the government of MSAR, have introduced international instruments, such as conventions and agreements, so that the international norms of different affairs are applicable to MSAR. The relevant categories include civil aviation; customs; drugs; economic and financial relationships; education, science, technology and sports; environment and conservation, foreign affairs and defence; health; human rights; intellectual property; international crime; labour; maritime law, private international law; road traffic; telecommunications and postal; and treaties establishing international organisations. There are in total 237 international instruments effectively applicable to MSAR. 1.2. Bilateral Agreements signed by MSAR 1.2.1. Bilateral agreements signed at the international level Hitherto, MSAR has also signed 167 bilateral agreements with different countries, the relevant covered areas comprise: 5 agreements in the legal and judicial cooperation, 12 agreements in trade and technical cooperation, 2 agreements in investment protection and promotion, 77 agreements in diplomatic and consular relations, 30 agreements in air services, 20 agreements in taxes, and 21 agreements in the abolition of Visas. The MSAR will in future establish more agreements with other countries and regions in line with the needs in different sectors of the society. 1.2.2. Bilateral agreements signed at the regional level (A) Cooperation between the MSAR and the Mainland China in the Area of Economy and Trade Since its reunification, Macao has become an integral part of China, but in the principle of “one country, two systems”, maintaining a “high degree of autonomy”, in addition to the Constitution of the People’s Republic of China and national laws, other laws and regulations are not enforced in MSAR. Therefore, Macao and Mainland China engage in cooperation in the field of mutual interests, which must be set up formally by creating platforms, mechanisms and methods in line with the legislation per se; contrarily, if each party adopted and executed measures without mutual consensus, inter alia of exchange and execution of affairs in the ambit of judiciary, it would lack a legal base in one hand, and the execution of affairs would be misled by the absence of foundation and direction, making it difficult to achieve reciprocal and beneficial goals, on the other hand.
Regional and International Cooperation ensuring Fair Competition 309 Table 10.1: Regional agreements signed between Macao and the Mainland China, since the reunification of Macao Year Signed agreements 2001 Agreement on Mutual Requests of Citation or Notification of Judicial Acts and Evidences Production in Civil and Commercial Issues between the Courts of Mainland China and the Courts of Macao Special Administrative Region, signed in Macao, on 15th August 2001 2003 Agreement of Cooperation between National Directorate of Intellectual Property and the Economic Services of Macao Special Administrative Region in the area of Intellectual Property Rights, signed in Beijing, on 24th January 2003 2004 Mainland and Macao Closer Economic Partnership Arrangement (CEPA), signed in Macao, on 17th October 2003 - Supplementary Protocol to the Agreement on Closer Economic and Trade Relations between the Mainland China and Macao, signed in Macao, on 29th October 2004 - Supplement II to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 21st October 2005 - Supplement III to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 26th June 2006 - Supplement IV to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 2nd July 2007 - Supplement V to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 30th July 2008 - Supplement VI to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 11th May 2009 - Supplement VII to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 28th May 2010 - Supplement VIII to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 14th December 2011 - Supplement IX to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 2nd July 2012 - Supplement X to the Mainland and Macao Closer Economic Partnership Arrangement and its annex, signed in Macao, on 30th August 2013 - Complementary text of annex of the Supplement X to the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 30th August 2013 - Agreement between the Mainland and Macao on the Basic Implementation of Liberalisation on Trade Services in Guangdong under the Mainland and Macao Closer Economic Partnership Arrangement, signed in Macao, on 18th December 2014 2003 Arrangement to Avoid Double Taxation and Prevent Evasion of Income Tax between Mainland China and Macao, signed in Macao, on 27th December 2003 - Protocol to the Arrangement to Avoid Double Taxation and Prevent Evasion of Income Tax between Mainland China and Macao, signed in
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 310 Year Signed agreements Macao, on 15th July 2009 - Second Protocol to the Agreement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income Between Mainland China and Macao Special Administrative Region, signed in Beijing, on 26th April 2011 2006 Arrangement Between Mainland China and the Macao Special Administrative Region on the Mutual Recognition and Enforcement of Civil and Commercial Judgments, signed in Macao SAR, on 28th February 2006 2007 Agreement on Confirmation and Execution of Arbitral Awards between Mainland China and Macao Special Administrative Region of Macao, signed in Beijing, on 30th October 2007 2011 Guangdong-Macao Cooperation Framework Agreement, signed in Beijing, on 6th March 2011 Among the agreements indicated in the above table, the agreements related to commerce and trade, or in particular the “Mainland and Macao Closer Economy Partnership Arrangement” and “Guangdong-Macao Cooperation Framework Agreement” are closely related to maintaining fair competition in cross-border activities of trade and business engaged in by enterprises. (a) Mainland and Macao Closer Economic Partnership Arrangement (a.1) Principle objectives of the Mainland and Macao Closer Economic Partnership Arrangement The principle objective is to foster the common prosperity and the development of the economy of Mainland China and Macao and to strengthen the economic connection between both parties and other countries and regions, through the setup of the “Mainland and Macao Closer Economic Partnership Arrangement”, aiming to enhance the cooperation of trade and investment between both parties, promoting the common development in three major aspects: firstly, to reduce and even eliminate progressively tariff and non-tariff barriers existing in all merchandise trade between both parties; secondly, to achieve progressively the liberalisation of trade in services, through the reduction or elimination of all discriminative measures substantially existing between both parties; thirdly, to foster the facilitation of trade and investment. In respect to the development of the first aspect, Macao SAR shall continue to exempt fully from customs duties all imports of goods whose origin is Mainland China, and shall continue to expand the goods categories which customs duties will be abolished. Neither party applies any non-tariff measures contrary to the rules of
Regional and International Cooperation ensuring Fair Competition 311 WTO to imported goods originating from the other party, and the Mainland will not impose tariff quotas on goods originated in Macao, as well as neither party will apply anti-dumping measures to goods imported and originating from the other party. This Arrangement highlights specially that, both parties agree to establish and strengthen mutual collaboration in administrative matters, including the establishment and strict implementation of procedures of issuance of certificates of origin, the establishment of systems of regulatory and auditing, the creation of a data links and electronic data exchanges between the issuing authorities and regulatory authorities of both parties, so as to ensure the effective implementation of preferential measures in the field of trade in goods. In respect to the development of the second aspect, each party of the Arrangement shall progressively reduce and even eliminate the existing restrictive measures with regard to the services and the service providers of the other party, in accordance with the established contents and schedules. One party may nevertheless develop, through consultations initiated by the request of other party, the further liberalisation in the trade in services and set out complementary measures of liberalisation in the trade in services. This Arrangement establishes specially and specifically three services: (i) in the cooperation of financial services, in order to reinforce the cooperation of both parties in the areas of banking, securities and insurances, both parties must adopt the necessary measures, so as to support the financial enterprises of the Mainland to initiate their businesses in Macao; to support the Mainland banks to develop their businesses and extend their networks to Macao by acquisitions; to encourage and support the business exchange between the institutions of banking, securities and insurance of Macao and the Mainland; to reinforce the cooperation and the exchange of information between the respective bodies with competence for the supervision of financial activities; (ii) in the cooperation of tourism services, in order to promote the development of tourism in Macao, the Mainland authorises the residents of specified cities and regions to travel individually to Macao, so-called “free-walker” and “individual tourist”. In addition, both parties shall reinforce the cooperation in the promotion and publicity of tourism, including the promotion of tourism between them and the development of programmes of tourist promotion centred on the Pearl River Delta. Moreover, both parties undertake to have friendly cooperation with the objectives of raising the level of services in the tourism industry and protecting the rights of tourists; (iii) in the service of mutual recognition of professional qualifications, both parties undertake to encourage the mutual recognition of professional qualifications and promote the exchange of specialised and technical people, and the competent authorities and professional associations of both parties, in consultation with each other, research and establish the methods to be adopted for mutual recognition of professional qualifications.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 312 In respect to the development of the third aspect, through the elevated transparency and the enhanced exchange of information and the adoption of common standards, both parties implement the facilitation of trade and investment. In this regard, both parties establish the areas of cooperation by the Arrangement, including: promotion of trade and investment; facilitation of customs formalities; inspection of goods, inspection and quarantine of animals and plants, food safety, sanitary control, certification and accreditation and standardised management; electronic commerce; transparency of legislation; cooperation between SMEs; industrial cooperation, etc., and one party may extend, in the Arrangement, through consultation initiated by proposal of the another party, the scope and content of the cooperation in the facilitation of the trade and investment. This Arrangement contains 5 annexes, which set out trade in goods in detailed and specific ways: implementation of exemption of customs duties and list of goods, rules of origin and list of criteria of origin of goods of Macao benefiting from preferential tariffs for trade in goods, procedures for the issuing and verification of certificates of origin, specific commitments on liberalisation of trade in services, and the definition of “service provider” and respective rules. (a.2) Mainland and Macao Closer Economic Partnership Arrangement and its supplements Since the signing of the Mainland and Macao Closer Economic Partnership Arrangement in 2003 to 2015, both parties have been complementing the coverage of trade in goods and enlarging the scope of the Arrangement. In total 10 supplements have been signed, allowing both parties to have a much closer and stronger partnership in cooperative relationships, and enabling them to achieve mutually beneficial goals. Overviewing this Arrangement and its supplements, 544 imported goods with origin in Macao are exempted from customs duties by the Mainland, and 463 goods with origin in Macao are benefiting from preferential tariffs. The procedures for the issuing and verification of certificates of origin have not been changed since the signing of the Arrangement. Regarding the specific commitments on liberalisation of trade in services, from 70 items primarily published, since 2003 until 2015, through 10 supplement protocols to the Arrangement, the accumulative specific commitments reach 389 items, involving 12 sectors and 66 subsectors of services. The respective sectors of services are respectively: (i) commercial services; (ii) communication services; (iii) construction and engineering-related services; (iv) distribution services; (v) education services; (vi) environmental management services (excluding environmental quality control and pollution sources investigation); (vii) financial activities; (viii) health-related services and social services; (ix) tourism and travel related services; (x) recreational, cultural and sport services; (xi) transport services; (xii) others services sector not specified.
Regional and International Cooperation ensuring Fair Competition 313 Table 10.2: Evolution of issues covered by the Mainland and Macao Closer Partnership Arrangement (CEPA) and its supplements CEPA Supplement Total I II III IV V VI VII VIII IX X Customs Duties Exemption in Trade in Goods - Goods with origin in Macao exempted the customs duties by the Mainland 273 190 91 -- -- -- -- -- -- -- -- 544 Rules of Origin for Trade in Goods - Goods of Macao benefiting from preferential tariffs for trade in goods 273 190 -- -- -- -- -- -- -- -- -- 463 Procedures for the Issuing and Verification of Certificates of Origin Yes No No No No No No No No No No -- Specific Commitments on Liberalisation of Trade in Services - Specific commitments on liberalisation in relation to Macao of the trade in services from Mainland 70 44 21 13 40 27 28 25 20 36 65 389 (b) Guangdong-Macao Cooperation Framework Agreement On 6th March 2011, the governor of Guangdong Province and the Chief Executive of MSAR signed the “Guangdong-Macao Cooperation Framework Agreement” in Beijing, in order for both parties to engage in broad strategies, particularly in furthering development and positioning of cooperation, entrenching fundamental principles, establishing principle objectives, to enabling the effective implementation of national policies, such as the “Outline of the Plan for the Reform and Development of the Pearl River Delta (2008 – 2020)”, the “Overall Development Plan of Hengqin Island”, and the “Mainland and Macao Closer Economic Partnership Arrangement” and its supplement protocols. These aim to achieve the promotion of a closer cooperation relationship between Guangdong and Macao, the acceleration of integration and development in the areas of society, economy, culture and life, the impulse of scientific development of Guangdong and the development of adequate diversification of the economy of Macao, the construction of a more dynamic and competitive metropolitan zone, in the expectation of creating a new economic zone of world class and intensifying
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 314 regional economic integration. In this regard, this Framework Agreement entrenches the positioning of cooperation by both parties in four aspects: (i) the construction of a world destination for tourism and leisure; (ii) the creation of a new development platform to raise the level of the industries of Guangdong-Macao; (iii) the elaboration of a feasibility study on the establishment of an innovative experimental pilot area of cooperation between Guangdong, Hong Kong and Macao; (iv) the extension of the objective of adequate diversification of the economy of Macao. In order to implement the abovementioned positioning, this Framework Agreement sets out objectives in two phases. The first phase is a short-term objective, which is until 2015, a network of cross-border infrastructure and the international metropolitan area on the western margin of Pearl River estuary have been basically concluded, the joint development between Zhuhai and Macao is implemented in full, the exploration of Hengqin Island has made significant progress, the adequate diversification of the economy of Macao has achieved initial success. The second phase is a long-term objective, which is until 2020, the structure of regional integration development shall be basically established, the world destination of tourism and leisure shall be basically formed, the development and enhancement of the region will have significant results, the interconnection between the systems of social public services of Guangdong and Macao shall be established, the great metropolitan area, of world class, of the Great Pearl River Delta region will be formed and serving as the foundation for the development of adequate diversification of the economy of Macao. To achieve the aforementioned principle objectives, both parties entered into five directions of works of the development, which are respectively: cooperation in the development of Hengqin Island, coordinated development of industries, infrastructures and customs facilities, social public services, and plans of regional cooperation. Regarding the cooperation in the development of the Hengqin Island, both parties have to commit to the Overall Development Plan of Hengqin Island and its relevant measures, to explore new model of cooperation between Guangdong and Macao, to attract investment and concentration of high-end resources of domestic and foreign investors, Hong Kong and Macao, to support mutually the development of new industries, to promote the industrial upgrade and development of the western margin of the Pearl River, to explore the development of adequate diversification of the economy of Macao, which will be made in a series of strategic arrangements, namely the joint participation, the separated management, the major industrial parks, the complementary policies etc. With regard to coordinated development of industries, both parties have to set up a competitive industrial complex at an international level, both parties have to use the regional synergy power, to coordinate the strategies of joint industrial
Regional and International Cooperation ensuring Fair Competition 315 development, to support the implementation of Closer Economic Partnership Arrangement, to foster the industrial diversified development of Macao and improve the employment system. This will be made in a series of strategic arrangements, namely tourism, conventions and exhibitions, the Traditional Chinese Medicine industry, cultural and creative industries, finance, the development of SMEs, and business environment etc. Regarding the infrastructures and customs facilities, both parties have to coordinate the planning, construction and operation of the cross-border infrastructures, to define innovative policies of customs facilities, to boost quick and easy movement of people, cargo, capital and information, to promote regional integration in order to streamline the adequate diversification of the economy of Macao, which will be made in a series of strategic arrangements, namely the transport, the water, electricity and gas supply, the information network, and the border posts etc. Regarding social public services, both parties have to boost the link between public services, to promote the sharing of social resources, to build the cooperation in the construction of a quality area of living and working life, and even to promote the flow of regional skilled personnel and provide living facilities for cross-border workers in Guangdong and Macao. This will be made in a series of strategic arrangements, namely education and training, medical services, public health, culture and sport, environmental protection, quality of life and social benefits, and cooperation in legal affairs and public security management etc. Finally, regarding the plans of regional cooperation, both parties have to accelerate the preparation and implementation of the plans of regional cooperation, particularly the “Area of Quality Life”, “Infrastructure”, “Touristic Cooperation”, as well as the “Action Plan for the Bay Area of the Pearl River Estuary”, and to promote the development of regional integration and take advantage of regional synergies. This will be made in a series of strategic arrangements, namely the Regional Development Plan for the Western Margin of the Pearl River Estuary, the Coordinated Development Plan for Zhuhai-Macao, and the Plan of Cooperation Between Macao and Nansha of Guangdong etc. It can be seen from the abovementioned strategic arrangements implementing the directions of key developments, both parties of Guangdong and Macao engage in the necessary and fundamental works in the level of government, offer and conclude the radical and required conditions for the development of regional integration, and then let private enterprises seek development opportunities on the basis of the infrastructure and installations concluded by the governments and the legal and administrative planning. If private enterprises engage in any behaviour of unfair competition in their businesses, they are subject to the legislation applicable to the location where this behaviour is carried out.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 316 (B) The long-term special relationship in business and trade of Macao and Hong Kong For many years, Macao and Hong Kong have been closely related in social, economic and cultural aspects and likewise have adopted the system of liberal economic capitalism. The area and the population of Macao are much less than Hong Kong, and Macao lacks some urban infrastructures in large scale or certain infrastructures are relatively in small scale, particularly air and marine international freight. So the market for consumable goods and services in Macao relies on Hong Kong in several aspects. For example, as international goods must be transferred through Hong Kong, purchase of goods made in Hong Kong, acquisition of needed services from Hong Kong, etc. Therefore, some enterprises with distributors or headquarters established in Hong Kong, in order to facilitate their businesses in Macao, set up branches or distributors in Macao. In other words, for certain industries or international merchandises, the market of Macao is not considered as an individual market, but a part of the market of Hong Kong, or an auxiliary market of Hong Kong. Even so, there were some changes since the reunification of Macao, to the sustainable development of society and economy of Macao, from the past almost entirely dependent relationship into the present equal relationship of some industries, and even the development of a few areas of Macao beyond Hong Kong and makes these industries flock to learn from Macao or to follow the direction of Macao. Meanwhile, following from the development of the gaming industry and the popularity of e-commerce, Macao has become more recognised internationally and is turning into an individual market of consumption and services. (a) Regional agreement reached between MSAR and HKSAR The relationship between Macao and Hong Kong in the areas of policy and law has been closer after the reunification, particularly certain formal linkages have been established based on the major principle “one country, two systems” and the principle of equity, ensuring both parties comply with the achieved consensus to tackle regional issues concerning them. To the present date, Macao and Hong Kong have signed four agreements, which are respectively: (1) On 6th September 2004, the “Memorandum on ‘Travel facilitation for Macao residents entering/exiting Hong Kong’” was signed in HKSAR, aiming to relax the conditional restrictions on Chinese nationals who are holders of identify cards of non-permanent residents of Macao and Portuguese nationals entering Hong Kong, to simplify the formalities of persons who are the holders of electronic “Macao Special Administrative Region Permanent Resident Identify Card” entering Hong Kong. (2) On 20th May 2005, the “Arrangement between the Government of Macao Special Administrative Region and the Government of Hong Kong Special
Regional and International Cooperation ensuring Fair Competition 317 Administrative Region on the Transfer of Sentenced Persons” was signed in HKSAR, so that under the mutual consensus and based on the established conditions and procedures of transfer, a sentenced person in the jurisdiction of one party can be transferred to the jurisdiction of the another party. Afterwards, in general circumstances, the receiving party executes the penalty to the sentenced person in accordance with the linkage to the duration and the date of expiration of the penalty imposed on the person by the transferring party. (3) On 24th November 2009, the “Agreement on Entry and Exit with Permanent Resident Identity Card and Mutual Exemption from Filling in Arrival/Departure Cards between the Macao Special Administrative Region of the People’s Republic of China and the Hong Kong Special Administrative Region of the People’s Republic of China” was signed in HKSAR. This aims to allow Macao residents who are the holders of electronic identity cards of permanent resident of MSAR, to not have to use other travelling documents and fill in the arrival/departure card when entering and exiting the ports of Hong Kong, as visitors to enter and exit Hong Kong. As well as allowing Hong Kong residents who are the holders of the electronic identity cards of permanent resident of HKSAR to not have to use other travelling documents and fill in the arrival/departure card when entering and exiting the ports of Macao, as a visitor to enter and exit Macao. Macao residents to Hong Kong, or Hong Kong residents to Macao, are issued with a printed entry record upon arrival, the respective person must keep the printed record during his/her stay and show the record upon the request of executive officers of the arriving place. (4) On 7th January 2013, the “Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong Special Administrative Region and the Macao Special Administrative Region”, was signed in MSAR. Both parties reached consensus that the courts of Macao SAR recognise and execute arbitral awards made in HKSAR in accordance with the Arbitration Ordinance of the Hong Kong Special Administrative Region, and the courts of HKSAR recognise and execute arbitral awards made in MSAR in accordance with the arbitration-related legislations of MSAR. The contents of this Arrangement, include: (i) if one of the parties fails to comply with the arbitral awards, the other party may request its recognition and execution pursuant to ways and methods stipulated in the Arrangement, to the competent court of the place of residence or of the situation of assets of respondent, and pay the relevant fees; (ii) when the execution carried out in one of the parties is not sufficient to fully satisfy debts, the applicant may request to the court of other party the execution relatively to the debts which have not been fulfilled; (iii) the competent court must confirm with regard to the received application according to the legislation of the place where it was applied for the recognition and execution, as well as engaging in examination
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 318 and verification of evidences submitted by applicant. The four agreements supra citato are not, in appearance and in content, instruments related to the protection of fair competition jointly safeguarded by Macao and Hong Kong. However, if both parties cope with the contents of arbitral cases and the disputes between both parties of arbitration, in relation to the protection of fair competition, based on the “Arrangement Concerning Reciprocal Recognition and Enforcement of Arbitral Awards between the Hong Kong Special Administrative Region and the Macao Special Administrative Region”, and the arbitral cases are in the scope of this Arrangement, and the conditions of arbitration fulfil the provisions of this Arrangement, they can be carried out through this Arrangement. (b) Both parties have the legal basis and conditions to establish jointly the regional protection of fair competition Presently, in the legal systems of MSAR and HKSAR, there are provisions regarding the protection of fair competition. Although MSAR has no an over-arching competition law, there are some fair competition related provisions established between Articles 153 and 173, which compose the part of “Regulation of Competition Between Entrepreneurs”, in the Commercial Code, which was revised in 1998, totaling 21 articles. These articles set out essentially the general provisions regarding the prohibition of behaviours of restrictive competition, and provide concretely 11 behaviours which are deemed as unfair competition. Moreover, in the legislations of different activities of the economy, relevant articles are set out to protect fair competition, comprising the prohibition of the practice of unfair competition, the abuse of a dominant position by enterprises and the mergers of the companies of specific industries, making the existence of provisions relatively clear and targeted, and have applicability to specific activities, in various trades and businesses. The competition law of HKSAR which is established in an individual form of legislation and was approved in June 2012, and completely entered into effect on 14 December 2015, is the legislation Chapter 619 – Competition Ordinance, comprising 176 articles. This Ordinance includes mainly 3 rules: (i) the first conduct rule prohibits agreements, concerted practices and decisions of association which have the object or effect of hindering competition in Hong Kong; (ii) the second conduct rule prohibits business bodies from abusing market power which has the object or effect of hindering competition in Hong Kong; (iii) the rule of mergers prohibits mergers which substantially lessen the effect of competition in Hong Kong. The former two are applicable to all business sectors in HKSAR; the latter is only applicable to the mergers of holders of carriers’ licence under the Chapter 106 – Telecommunications Ordinance of Hong Kong Special Administrative Region. It can be seen generally that, regarding the protection of fair competition
Regional and International Cooperation ensuring Fair Competition 319 between MSAR and HKSAR, the legislation and the level of regulation are different. Albeit the normative contents are different, their directions are consistent, as both contain the essential elements and relevant legal provisions related to the protection of fair competition required by the international community, which will facilitate both parties to initiate negotiations and establish a regional bilateral agreement on the protection of fair competition. 2. International Cooperation in the Ambit of the Economy 2.1. Relationship between Macao, China and the WTO Until 30th November 2015, the World Trade Organisation (WTO) had 162 member states and regions. From 11th January 1991, Macao has been the member region of General Agreement on Tariffs and Trade (GATT) consonant to the relationship with the Republic of Portugal, and became a founding region of the WTO when it was established on 1st January 1995. Since the reunification of Macao to the People’s Republic of China on 20th December 1999, Macao, entitled as “Macao, China” continues being a member region to attend conferences of WTO and participate in activities.362 Since Macao, China has been a member region of the WTO, and has signed the Agreement on Establishing the World Trade Organisation, and is subject to the constraints of this agreement and must implement its obligations. Hence, based on the Trade Policy Review Mechanism of WTO, it can enhance the understanding of political measures of members, including Macao, China, and increase the transparency and predictability of international trade. The review frequency of WTO to members depends on the volume of trade under the system of multilateral trade. To Macao, China, from the establishment of WTO to the present time, a review of trade policy is carried out about every six years. These reviews have been made in 1994, 2001, 2007 and 2013. 2.1.1. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2001 After the reunification of Macao, the Trade Policy Review Body of WTO issued the Trade Policy Review no. WT/TPR/G/82 and WT/TPR/S/82, dated on 19th February 2001, reported respectively by Macao, China and the Secretariat of WTO. The former did not mention any contents related to competition law; the latter stated 362 Pursuant to the provision of Article 112 of the Basic Law of Macao Special Administrative Region, “[t]he Macao Special Administrative Region may, using the name ‘Macao, China’, participate in relevant international organisations and international trade agreements (including preferential trade arrangements), such as the General Agreement on Tariffs and Trade and arrangements regarding international trade in textiles”.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 320 the legislative situation of competition law in the part of “Summary observations”: “15. Confident of the disciplinary effects of an open market environment, Macau, China has no competition law as such; nonetheless, the 1999 Commercial Code establishes some general principles regarding competition policy in order to safeguard economic freedom and combat business practices that impair competition. While the openness of the Macau, China economy to trade has undoubtedly fostered competition as far as goods are concerned, competition appears to be somewhat lacking in several service activities.” Moreover, this report also contained an individual section on competition policy, which involved the legislation in the aspect of competition in Macao: “141. Confident of the disciplinary effects of an open market environment, Macau, China has no specific competition law; however, the 1999 Commercial Code establishes some general disciplines regarding competition policy in order to safeguard economic freedom and avoid abuse. The Code states that any agreement or business practice used to nullify or impair competition is prohibited. Despite this provision, a contract that limits competition must be in written form, and is restricted in terms of duration, activity, and location. The duration should be no more than five years unless otherwise provided. In addition, recipients of concession must offer equal treatment to all suppliers.” 2.1.2. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2007 In 2007, the Trade Policy Review – Macao, China no. WT/TPR/G/181 reported by Macao, China was issued, its contents did not mention competition law, but in many points stressed the promotion of competition development. Part of the “institutional developments” pointed out that the Bureau of Telecommunications Regulation was newly established in May 2006, and one of its major duties was to ensure the fair competition in the sector of telecommunications.363 In “recent economic developments”, it was noted that the gaming sector had been opened up in 2001, where an exclusive right had been implemented for 40 years, in order to promote competition and new investments in the sector, marking the fascinated step of success by the implementation of a liberalisation policy. 364 In “sectoral development” it was pointed out that, since 1981, the telecommunications sector, the basic telecommunications services by concession agreement was granted to the 363 WTO/TPRB. Trade Policy Review, reported by Macao, China, WT/TPR/G/181, dated on 27 March 2007, p 7. 364 Ibid, pp 7-8.
Regional and International Cooperation ensuring Fair Competition 321 Companhia de Telecomunicações de Macau, and the exclusive rights was extended in 1999 to 2011, but the scope of this agreement was restricted in fixed line network, data transfer and leased line; the internet services and mobile telephone services were opened to competition respectively in 2000 and 2002. The Trade Policy Review – Macao, China no. WT/TPR/S/181, issued by the Secretariat of WTO, the “Trade Policies by Sector” pointed out that the Review of 2001 had mentioned that, in the markets of several services, provided by private companies which possessed exclusive rights by government concessions, inter alia of gaming, telecommunications etc. competition have been improved. Meanwhile, it motivated other keys services, such as basic telecommunications, electricity, water supply, transports etc. into more competitiveness, which brings a severe challenge from the constructions of new hotels and casinos.365 The Trade Policy Review – Macao, China, Revision no. WT/TPR/S/181/Rev.1 issued by the Secretariat of WTO, explicitly stated and described comprehensively an overview of competition policy implemented by the Macao SAR:366 “88. While Macao, China does not have a comprehensive law on competition policy, it recognises the importance of a functioning fair and competitive market. The Government also follows closely competition policies formulated by other WTO Members and maintains a flexible and open position with regard to competition policy. The Commercial Code of Macao 1999 establishes some general disciplines in the context of competition amongst traders in order, inter alia, to safeguard fair competition as well as the freedom of economic initiatives. 89. At the time of the previous Review it was considered that there was a lack of competition in services markets in general. Gaming services had been under private monopoly since 1961 and most public services, including telecommunications, utilities and transport, were provided by private companies with exclusive rights under government concessions. There have been various developments since then.” Furthermore, this report also outlined the competition situation of certain individual sectors, particularly gaming, telecommunications, land transport, maritime transport, air transport, distributions, public utilities, construction, and broadcasting etc., and the legal provisions which regulated the activities which must protect fair competition which have be discussed in chapters 7, 8 and 9 of this text. 365 WTO/TPRB. Trade Policy Review – Macao, China, Report by the Secretariat. WT/TPR/S/181, dated 26 March 2007, p 56. 366 WTO/TPRB. Trade Policy Review – Macao, China, Revision, Report by the Secretariat. WT/TPR/S/181/Rev.1, dated 8 June 2007, p 52.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 322 2.1.3. Contents related to competition policy and law stated in the “Trade Policy Review – Macao, China” reported in 2013 In 2013, the Trade Policy Review – Macao, China no. WT/TPR/G/281, reported to WTO by Macao, China, “competition policy” explicitly indicated:367 “4.30. The MSAR’s traditional status as a free port, and consequent openness to imports, has, by and large, guaranteed competition in domestic goods markets. Its openness to inward FDI, and thus commercial presence (the main mode for cross-border delivery of services), also ensures vigorous competition in services markets, many of which are now characterized by strong commercial presence of foreign-owned companies. The MSAR’s overall openness to trade in services is exemplified by its revised offer of commitments on services in negotiations in the context of the DDA; this revised offer involves commitments in eight of the eleven sectors (73 subsectors) covered by the GATS. 4.31. At present, the MSAR does not have a comprehensive competition law. Relevant provisions are instead found in the Commercial Code and other sector-specific regulations and rules, which the Government believes are sufficient and appropriate, given the high degree of openness, very small scale and scope of the local economy. Competition was recently introduced into fixed telecommunications, bus services and the electricity market.” In the same year, in the Trade Policy Review – Macao, China no. WT/TPR/S/281 issued by the Secretariat of WTO, the legislation situation of competition law it was stated in its summary:368 “16. There has not been overarching competition legislation in Macao SAR. The authorities consider that current provisions, which are scattered around various laws and sector-specific regulations and rules, have provided adequate protection given that the territory is small and most businesses are SMEs. In the last ten years, a series of measures were adopted to introduce competition to the gaming sector, the public utility sector, and the telecommunication sector.” In this report, “competition policy and price controls” was specifically set aside. Price controls were not mentioned in the previous reports on Trade Policy 367 WTO/TPRB. Trade Policy Review – Macao, China, Report by Macao, China. WT/TPR/G/281, dated 25 March 2013, pp 11-2. 368 WTO/TPRB. Trade Policy Review – Macao, China, Report by the Secretariat. WT/TPR/S/281, dated 25 March 2013, p 8.
Regional and International Cooperation ensuring Fair Competition 323 Review in 2001 and 2007. This section is transcribed as follow:369 “3.107. The regulatory framework for competition policies remains unchanged since the last Review of Macao SAR in 2007. There is no comprehensive law on competition policies. Relevant provisions are scattered throughout the Commercial Code, and other sector-specific regulations and rules (Chapter 4). The authorities state that the existing provisions are deemed adequate and appropriate given the scale and scope of the local economy (i.e. the economy is dominated by SMEs). 3.108. The Government periodically reviews its competition policy. During the period under review, the Government introduced competition in some public utilities, including bus services and the electricity market, as well as fixed-line telephony services (Chapter 4). 3.109. The authorities indicate that no products are subject to price controls or administered prices. In order to protect public interest, prices of public utilities, inter alia, water, electricity, telephone, postal charges, and taxi fares, are regulated or monitored by the Secretary for Transportation and Public Works. Price adjustments must be approved by the respective industrial regulators. There is no differentiation between user groups or industries. In 2008, when aggressive market competition in the gaming sector led to ‘unreasonable’ price level for junkets, the Government set a cap on junket commissions (section 4.3.6).” 2.1.4. Concerns of WTO to the implementation of competition policy and its legislation of Macao, China Macao, China, as a member region of the WTO, has a duty to report the situations of its activities and developments of trade and business in response to a request by WTO. The above text has mentioned that Macao has submitted 4 reports to the Trade Policy Review since the establishment of WTO. Among the 3 reports after the reunification of Macao, the situations of the enforcement and the legislation of competition policy of Macao have been reported. In the 3 reports submitted by Macao, China, there were no individual sections or parts which reported the competition policy implemented by Macao SAR. However, the legislative forms of competition law were reported in “institutional developments” and the contents of “sectoral developments” mentioned measures to protect fair competition involved in the development of relevant sectors, including the provisions of fair competition set out in the laws that regulate sectoral activities. Regarding the 3 reports and their revisions submitted by the Secretariat of Trade Policy Review Body of WTO, it can be seen that WTO constructed the 369 Ibid, p 51.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 324 framework and issues a report relying on the themes promoting trade, thereby reporting the development of relevant issues of Macao, China. In the reports of 2001 and 2007, an individual section was set up in order to report the situations of enforcement and development of competition policy of Macao, China in various economic sectors; the report of 2013 did not only report the sustainable implementation of competition policy, but also mentioned the situation of anti-competitive conduct of “price controls” in Macao, China. This issue is one of the major concerns in the framework of competition law entrenched by the WTO. But, the situations of anti-competition possibly derived from mergers was not mentioned in the report. 2.2. Relationship between Macao, China and the EU The relationship between Macao and the EU is based on common values and European heritage, the mutual interests in the areas of economy, environment, education and culture, so both parties signed an Agreement on Trade and Cooperation on 15th June 1992, which entered into force on 1st January 1993.370 The European Commission pointed out its support of a high degree of autonomy of Macao in the Communication “Building a comprehensive partnership with China” in 1998, and afterward, issued the Communication “The EU and Macao: Beyond 2000”, which highlighted the importance of smooth implementation of the principle of “one country, two systems” and the definition of ways in which the EU could promote the political and economic development of Macao. The European Commission and its External Action Service issued an annual report on the development of politics and economy of the MSAR, such as in the Annual Report 2014 issued on 22nd April 2015.371 It expressed succinctly the statu quo ante of various areas of MSAR, which concerned the EU, mainly the political development; policies; equal opportunity, rights and freedom; anti-corruption; economic development; and the bilateral relation between the EU and Macao. In “EU-Macao bilateral relations”, the following major priorities projects were highlighted for 2015: “Key priorities for 2015 include cooperation on the diversification of Macao’s economy, maximising the potential benefits of the CEPA for 370 Agreement for Trade and Cooperation between the European Economic Community and Macao, signed on 15th June 1992 in Luxembourg. Its summary is available on the following address: http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/ treatiesGeneralData.do?step=0&redirect=true&treatyId=363. 371 European Commission. Joint Report to the European Parliament and the Council – Macao Special Administrative Region: 2014 Annual Report. Brussels, 24.4.2015, JOIN(2015) 13 final.
Regional and International Cooperation ensuring Fair Competition 325 both local and European companies established in Macao, and exploring regulatory convergence in areas such as competition policy, government procurement and intellectual property rights” In fact, since the reunification of Macao, or starting from 2000, the European Commission has prepared annual reports on the situations of MSAR. In the 2007 report, the European Commission noted that the improvement of transparency and the strength of regulatory framework can enhance the procedure of government procurement, so as to ensure fair and open competition and encourage the administrative reform and the prevention of corruption in the development of this aspect in Macao. But, this report did not mention any measure adopted on these issues by MSAR. The 2014 report for the first time mentioned the research into regularisation of competition policy, exploring the regulatory convergence of the relevant legislation, in order to reach healthy economic development in the bilateral relations. The EU and Macao have an annual “Joint Committee” meeting to study the issues of mutual cooperation and explore cooperation in new areas.372 Prior to 2015, this committee has called for 20 joint meetings. In the 20th Committee meeting, the discussion issues were in three aspects: (i) based on the results obtained from the protocols of periods 2010-2014 and 2013-2016, a new five-year term translation training programme was signed, continuing to train qualified interpreters for Chinese and Portuguese, in order to meet the practical needs of both parties; (ii) the first and second cooperation programmes in the legal field between the EU and Macao were successfully completed respectively in 2007 and 2013. The third cooperation programme of legal training was adopted in the joint meeting, aiming at strengthening the legal system of MSAR and improving the training for legal practitioners in MSAR; (iii) by promoting the participation of research institutions and researchers in the Horizon 2020 programme of the EU for research and innovation, both parties launched a new EU-Macao cooperation programme. The MSAR announced it was setting up a fund to finance the participation in the Horizon 2020 programme by researchers. In summary, the cooperation between the EU and Macao is diversified, cooperation projects are not restricted, and only if both parties recognise the necessity to reach mutual interests based on the clause 21 of the abovementioned Agreement on Trade and Cooperation, under the assumed observance of democratic principles and human rights, cooperation projects can be launched. Thus, competition policy between both parties tend to be convergent and oriented in a similar direction, giving both parties a high degree of freedom and space in competition policy and legislation. 372 See http://eeas.europa.eu/macao/index_en.htm
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 326 3. Conclusion Pursuant to the Basic Law, the MSAR can use “Macao, China” as an individual qualification to participate in international organisations, particularly the WTO, and sign international agreements, as well as to maintain and develop relationships with foreign non-governmental organisations in various ambits. In this regard, the MSAR has signed agreements at regional and international levels. At regional level, the MSAR has mainly signed cooperative agreements with China and HKSAR. Cooperation with China involves the mutual requests of citation or notification of judicial acts and evidences produced in civil and commercial issues between courts of both parties, intellectual property rights, trade and economy relations, avoidance of double taxation and prevention of evasion of income tax, mutual confirmation and execution of arbitral Awards, and the Guangdong-Macao cooperation, etc. Cooperation with HKSAR involves several issues, such as Macao residents entering/exiting Hong Kong, transfer of sentenced persons between both regions, entry and exit with permanent residents and mutual exemption from filling in arrival/departure cards between both parties, reciprocal recognition and enforcement of arbitral awards between both parties, etc. Amongst these cooperative relations, although they do not explicitly stipulate the joint protection of fair competition of commercial activities, each party has per se legislation of fair competition, so it brings the basis of cooperation on both parties or three parties develop jointly or commonly cross-border measures to safeguard fair competition. At the international level, the MSAR has signed 167 bilateral agreements with many countries, involving several areas, such as legal and judicial cooperation, trade and technical cooperation, investment protection and promotion, diplomatic and consular relations, air services, taxes, and abolition of Visas etc. and these are increasing. In the aspects of international organisations, firstly, Macao, China is a member-region of the WTO, the former must report to the latter in every six years regarding the Trade Policy Review. The latest 3 Reviews pointed out that there is no specific fair competition law in Macao, China, and there only exists some general disciplines in the context of competition amongst trades, established in the Commercial Code of Macao 1999, in order to safeguard fair competition and some other sector-specific regulations and rules, which are not over-arching and comprehensive. The second is the bilateral relation of Macao and the EU, which calls for the “Joint Committee” meeting every two years. Both parties look continuously for new areas for cooperation. It implies that the EU can render aids to Macao in order to establish a comprehensive law of fair competition, as well as aids to elevate the technical capacity in enforcement of this law. In short, with the trend of globalisation of the world economy, the protection of fair competition is not only an issue concerning one country or region, it is a
Regional and International Cooperation ensuring Fair Competition 327 long-term objective which all countries of the world promote to help the development of a healthy economy. So, on one hand, MSAR has to elevate the legislation of fair competition per se to the level required internationally; on the other hand, MSAR has to reinforce regional and international cooperation, in order to effectively safeguard the interests of its economy and consumers so that they are not damaged by anti-competitive behaviours in the continued rise of cross-border trade and commercial activities.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 328
329 PART III THE CONCEPTUALISATION OF THE STATE‐OF-THE-ART COMPETITION LAW FOR MSAR
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 330
331 Chapter 11 In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development Irrespective of the comparison of competition policy of the EU with other international policies, or within the EU itself, EU competition law has been an undeniable success. Particularly passing through more than six decades of development of the EU, this competition policy has broken through uninterruptedly every obstacle in terms of politics, legislation, jurisdiction, economics and even administration, achieving in all aspects tremendous merit. Rethinking the reason for establishing the EEC, it was solely for the six Western European countries, after the World War II, to protect their natural resources, inter alia of coal and steel, so that they could be used appropriately to enable their economic re-development and develop their economies in unison. The success obtained, therefore, relies on all policies which mainly promote economic development. Thus, competition policy is one of the core policies, and also one of the crucial strategies defined contextually in the TFEU. This policy is not merely represented by competition-related legislation in different forms, but also by the increasing interests in competition policy by the EU’s institutions, and is represented by the successful concretisation of the synergy established between the EU and all Member States, helping to achieve solutions on cross-borders issues of competition affairs. It also represents an achievement obtained in the protection of fair competition by the EU. Thereupon, the EU promotes competition-related laws and policies to countries already included and to be included in its enlarging EU area. Also the EU has started to cooperate in different forms, especially in bilateral cooperation, at an international level, with countries which have economic strength and potential, and competitiveness, promoting the opportunity of fair competition and trade liberalisation and globalisation. In this connection, notwithstanding that MSAR is not an independent state, but is one of the special administration regions of China which possesses individual international status, therefore the EU and MSAR have established a bilateral relation since 2000 and the EU issues joint reports each year, concerning the political and economic issues of MSAR, including the development of competition legislation and policy.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 332 1. Components of the Competition Law and Policy of the EU 1.1. Historical Background After the World War II, the European economy was in near economic collapse. All Western Europe countries led by France and German sought to recover their economies and reconstruct their economic order. Robert Schuman, Foreign Minister of France, made a famous proposal for the establishment of a coal and steel community, including not only France, German, but also Italy, the Netherlands, Belgium and Luxembourg, called the Original Six. The ECSC Treaty, also named the Paris Treaty, was signed in 1951 and introduced the governance of coal and steel resources by a supranational authority, the High Authority. Albeit the ECSC Treaty was initiated by Western European countries, the influence of America expanded into European affairs at that time. The provisions of the ECSC Treaty contained similar parts of the Sherman Act of the US, in 1890 (Cini, 1998, p 17). It can be seen that the American economic model was projected to the new Western European economic system, at that moment, which had a far-reaching influence. Articles 65 and 66 of the ECSC Treaty only provided for the policy on restrictive coal and steel agreements and concentrations, which focussed on a determined area. This was in contrast with the rules on competition spelt out in the 1957 EEC Treaty, also called the Rome Treaty. When competition policy was first set up, only Germany had comprehensive and specific competition laws within the Original Six. Moreover, due to the reluctance of other Member States to use the rules on competition, they did not achieve the expected effects. Undoubtedly these Member States were lacking experience in national competition enforcement. Owing to the explicit provisions in the Treaty, other Member States were obliged, under pressure, to agree to the procedural regulation in enforcement of the provisions concerned. Eventually the Council of Ministers reached agreement in 1962 and promulgated the well-known Regulation No. 17, which became the cornerstone in the EEC regarding restrictive practices and monopoly policy. Having these procedures enabled all Member States to strengthen the effective enforcement of the system. The Treaty has been revised several times, but the changes have not involved the Rules on Competition, which proved that the Rules have adequate coverage, standardisation and applicability. 1.2. Legal Framework 1.2.1. Core provisions There are differences in definitions of competition policy and some other policies in the EU. The major principle of competition law is defined in the name of “Rules on Competition” as an individual chapter in the TFEU which are similar to
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 333 constitutional law in the EU. The earliest competition-related provision, namely “Agreements and Concentrations”, was stipulated in the Paris Treaty in 1951. The Original Six coordinated and cooperated with each other over the next 6 years. The EEC obtained experiences in economic cooperation and formed a preliminary model of the Common Market, so that in the Rome Treaty in 1957, the competition-related provisions had a substantial alteration into “Rules on Competition” in the Treaty. Until the Nice Treaty, the Rules on Competition had no regulatory modification, apart from “Dumping” being removed from the Rules in the Rome Treaty. In another words, Dumping was not deemed, since then, as part of competition policy but as an independent policy dealt with by the EU. Afterward, the context of the Rules on Competition contained in the then draft Treaty establishing a Constitution for Europe373 has been altered slightly over time, inter alia, in wording, for instance, “common market” replaced by “internal market”. However, the contents of principles are completely unaffected. Recently, the Treaty of Lisbon which was signed on 13 December 2007 and entered into force five years later amends slightly the Rules on Competition, 374 in which, principally, the competence of the Commission is empowered in terms of competition-related legislation. The reason is that the provisions of principle are applicable and flexible and can regulate the trade between and/or within Member States of the EU, even in the enlarging EU. In sum, there were no significant changes in the past 60 years, forming thus the functions in the legal instrument of the EU with the constitutional nature. No matter what, the EU’s competition policy is based on the provision of Article 3(1)(b) of the 373 The European Convention, Draft Treaty establishing a Constitution for Europe, CONV 850/03, Brussels, 18 July 2003. 374 The amendment of the Rules on Competition in the Treaty of Lisbon is shown as follow: In Article 105 (ex Article 85 TEC), new paragraph 3 is added as: “The Commission may adopt regulations relating to the categories of agreement in respect of which the Council has adopted a regulation or a directive pursuant to Article 103(2)(b).”; Article 107 (ex Article 87 TEC) is amended as follows: (a) at the end of point (c) in paragraph 2, the following sentence is added: “Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point.”; (b) at the end of point (a) in paragraph 3, the following sentence is added: “…, and of the regions referred to in Article 349, in view of their structural, economic and social situation;”. In Article 108 (ex Article 88), new paragraph 4 is added: “4. The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 109, determined may be exempted from the procedure provided for by paragraph 3 of this Article.”
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 334 TFEU, which attempts to establish the “competition rules necessary for the functioning of the internal market”. In short, this Article and the Rules on Competition form and consolidate the core of EU competition law. Among the legal instruments concerned, Regulation No. 1/2003, which replaced Regulation No. 17, is considered as a milestone in the evolution of EU competition law and policy. Its publication ensures a more effective and efficient enforcement of the Rules on Competition through the close cooperation of the Commission with and between the competition authorities and the courts of all Member States. It also gives an effective connection between Articles 101 and 102 of the Rules on Competition of the TFEU and national competition laws, forming a complete competition policy system of an enlarging and integrated EU. 1.2.2. Peripheral provisions On the other hand, pursuant to the provisions of the TFEU, the Commission, the Council and the European Parliament have the right to make regulations, issue directives, take decisions, and make recommendations or deliver opinions.375 The legislative acts on the area of competition of the EU are represented mostly in the form of “decisions” due to it is targeted to particular cases and not applicable to others. In this regard, the specific form of the legal instrument concerned is enforced and adjusted subject to the changes of socio-economic activities of the entire EU and Member States per se and the accession of new Member States to the EU. In addition, secondary legislations are promulgated due to better interpretation and application of the Rules on Competition of the TFEU. Secondary legislation is conformed and formulated by specific policy areas, including antitrust, cartels, mergers, liberalisation, State aid and international cooperation etc., especially the major legislations which focus on anti-competitive practices which are regulated in application to Articles 101 and 102 of the TFEU. This secondary legislation in relation to restrictive practices is a non-precautionary measure, in other words, they are merely applicable to the circumstances of infringement ex post and not applied to the foreseen facts which have not yet occurred. 1.3. Structure and Staff The competence of the Commission includes total responsibility in competition affairs. The current Commission’s term of office runs until 31 October 2019 and constitutes 1 president, who is presently Jean-Claude Juncker, 7 vice-presidents and 20 commissioners, one of these commissioners, Margrethe Vestager, is responsible for competition policy. Johannes Laitenberger has been 375 Article 288 of the TFEU.
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 335 designated as the Directorate-General for Competition since 1 September 2015. He is assisted by 3 Deputy Director-Generals for Competition who are responsible for 3 specified functions: antitrust; merger; and state aid. They superintend jointly 9 directorates, which are respectively: Directorate A is for Policy and Strategic; Directorate B is for Markets and cases I: Energy and Environment; Directorate C is for Market and cases II: Information, Communications and Media; Directorate D is for Markets and cases III: Financial services; Directorate E is for Markets and cases IV: Basic Industries, Manufacturing and Agriculture; Directorate F is for Markets and cases V: Transport, Post and other services; Directorate G is for Cartels; Directorate H is for State aid: General Scrutiny and Enforcement; and Directorate R is for Registry and Resources. In order to deal with the competition affairs supra citato, the DG Competition employed 608 staff in 2002,376 of which more than the 400 staff were employed before 1998 (Cini, 1998, p 47). Among the staff in 2002, one third were professionals in the area of law and economics. At the end of 2014, the number of staff members had increased to 792.377 Besides the internal entities, supra citato, responsible exclusively for competition issues of the Commission, the Commission strengthened the strategy of exchange of information with competition authorities of all Member States through the establishment of an integrated communication network, so as to detect restrictive practices between Member States, forming thus the European Competition Network (ECN). Furthermore, the Commission strengthened its connection and communication with courts of all Member States as well, providing or exchanging necessary information, and enabling the latter to combat the occurrence of anti-competitive practices under the condition of sufficient evidences. 2. International Characteristics of the Competition Policy of the EU In the view of the EU, free trade between Member States is secured by the provision of free movement of goods and services pursuant to the provision of the TFEU. Practically, trade in the EU is divided into intra-state trades and trade between Member States, the latter is also referred to as cross-border trades or inter-state trade. Barriers to trade should not exist which hinder the fair competition promoted actively and jointly, in compliance with the Rules on Competition, and the provision of the secondary legislation related to competition issues, by the EU and the Member States. In the view of the global economy, the competition policy of the EU seems 376 Visited on 15 June 2005 the website: http://europa.eu.int/comm/dgs/competition/directory/staff.pdf 377 European Commission. 2014 Annual Activity Report, DG Competition, p 5. Available on: http://ec.europa.eu/atwork/synthesis/aar/doc/comp_aar_2014.pdf
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 336 like the internal policy of a single super nation, which has an identical influence as the Sherman Act and Clayton Act of the US. It also is a reference to be employed by other countries which are making per se competition policy. Moreover, this function of reference enables a comparison to be made with competition policies defined by international organisations, such as WTO, OECD etc., for their member states. Due to the increasing progress of globalisation, more mergers and cartels are occurring at the international level, enabling the influences of activities on competition matters within the EU, even though the undertakings of these activities are located outside the EU region; moreover, international cooperation between enforcement authorities of competition law in the world has intensified increasingly, facilitating the extensive recognition of global free and fair trade. So, the importance of engaging in cooperation is significant. Therefore, the Commission of the EU has been developing competition-related international cooperation policy in two aspects: on one hand, it established cooperative agreements with its proactive and major trading partners and developed bilateral relations; and on the other, it made efforts to extend its multilateral relations in areas of international competition. 2.1. International Multilateral Cooperation Relations of the Competition Policy of the EU The EU participates in several international organisations, such as the European Economic Area (EEC), the International Competition Network (ICN), the United Nations Conference on Trade and Development (UNCTD), the Organisation of Economic Cooperation and Development (OECD), the World Trade Organisation (WTO), etc., which all pursue fair competition and trade. The EU is as a member region of some of these organisations, complies with their competition policies defined respectively, and with the principle of free and fair trade. For instance, in the enthusiastic and active participation of the EU, the subject of competition was adopted in the negotiation ambit of the WTO; the EU plays a crucial role in the ICN and the OECD, in the harmony with the EU’s influence on the global economy, making the EU per se one of the precursors to drive the implementation of fair competition and trade among all countries in the world. It is noted that the EU has believed profoundly that competition policy is an important attribute and determinant to establish a well-functioning market economy, so competition issues were adopted in the negotiation of the Ministerial Conference of the WTO in 1996 and in the Doha Round of trade negotiation, known as Doha Development Agenda (DDA), in 2001. Nevertheless, the adoption of WTO competition policy was not carried out until the Ministerial Conference held in Cancún, Mexico in September 2003. The DDA recognised the multilateral framework as a basis to enhance the contribution of competition policy to
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 337 international trade and development, insofar as it provides the needs of the developing and least-developed countries to enhance technical support and capacity building assistance.378 In this regard, the ministerial conference held in Hong Kong in December 2005 became a crucial one in order to reach a common consensus. The subject matter of the Conference was focussed on multilateral trade of products and services in some certain areas, inter alia of agriculture, cotton, services, TRIPS and trade facilitation etc. to reach agreements and consensus.379 In the course of negotiations, the EU addressed guiding proposals in different areas to promote fair trade, to develop relevant functions on balancing the trading interests protected by each Member State and to acquire a balance on the protected economy, from LDCs to developed countries, so that the economic interests of each party can be protected under the circumstance of fair competition in imports and exports. Albeit the Ministerial Declaration of the Hong Kong Session did not indicate expressly the policy analysis and development of “trade and competition policy” as in Doha Declaration, the time line in 2006 of the Doha Work Programme380 set out in the Hong Kong Ministerial Conference and the negotiations of relevant events, such as agriculture, cotton, etc, were expected to be concluded successfully in 2006. Afterwards, in the ministerial conferences held in 2009 in Geneva, 2011 in Geneva, 2013 in Bali and 2015 in Nairobi, the competition policy was not the major issue but it was infused variously into relevant concerns of trade facilitation, agriculture, cotton and LDCs issues. 2.2. International Bilateral Cooperation Relations of the Competition Policy of the EU The cooperation in competition policy of the EU with outside states and regions is established by creating an official cooperative agreement or other cooperative forms of bilateral cooperation relations. To the end of 2015, 83 378 Pursuant to the Doha Declaration, WT/MIN(01)/DEC/1, World Trade Organization, Ministerial Conference, Fourth Session, Doha, 9-14 November 2001, in paragraph 25, the Working Groups on the Interaction between Trade and Competition Policy will focus on, in the period until the Fifth Session, the clarification of: core principles, including transparency, non-discrimination and procedural fairness, and provisions on hardcore cartel; modalities for voluntary cooperation; and support for progressive reinforcement of competition institutions in developing countries through capacity building. This expressed provision provides the more concrete tasks of competition policy to be dealt with by the WTO. It is helpful to understand the negotiations in the Hong Kong Round and the contents and works related to trade and competition, as well as the conclusion achieved. 379 DOHA WORK PROGRAMME – Draft Ministerial Declaration (Revision), WT/MIN(05)/W/3/Rev.2, World Trade Organization, Ministerial Conference, Sixth Session, Hong Kong, 13-18 December 2005. 380 Visited on 18 November 2007 the official website of WTO: http://www.wto.org/english/tratop_e/dda_e/dohatimelines2006_e.htm
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 338 countries had established bilateral relations concerning anti-competitive activities with the EU. The competition provisions are included as part of wider general agreements, such as free trade agreements, partnership and cooperation agreement and association agreements etc. Moreover, the EU and some countries, namely Bosnia and Herzegovina, Brazil, Canada, China, India, Japan, Republic of Korea, Russian Federation, Switzerland and the United States etc., have dedicated cooperation agreements entirely on competition policy. Some of them are based on the “principle of comity”, which mutually inform their activities exercised, or to exercise so as to harmonise their laws, as well as to provide other parties with certain non-confidential information. The bilateral relation between the EU and the PRC was established officially in November 2003 by a regular mechanism of consultation and transparency in the area of competition affairs, and the former reinforced the provision of technical and capacity building assistance to the latter. In May 2004, the Terms of References (ToR) of the EU-China Competition Policy Dialogue was signed and implemented following the visit of Commissioner Monti to Beijing. Thereafter, both parties initiated annual conferences based on the cooperation established, comprising the subject of competition, so as to provide specialised and technical assistance in terms of antitrust policy legislation and administration. Besides that, the EU also strengthened the assistance on competition issues with other developing countries, to solve the trade affairs which are placed in the situation of long term unfair competition. Meanwhile, China can also apply this experience to engage in cooperation with other countries with which China has frequent trade and investment. This enables the establishment of channels of information and communication, and being well-prepared for severe infringement of unfair competition which have not emerged yet. For instance, China and the Republic of Kazakhstan signed a cooperative agreement in areas of anti-unfair competition and anti-monopoly in 1999. Nevertheless, the bilateral relationship between the EU and Macao was set aside from the EU-China relations and is based on the Trade and Cooperation Agreement in 1992. Following the Communication “The EU and Macao: beyond 2000” in 1999 after the Communication “Building a comprehensive partnership with China” in 1998, the EU could contribute to the political and economic development of MSAR in line with the importance of the smooth implementation of the “one country, two systems” principle. Since 2000, the European Commission has issued an annual report on the MSAR. Among these reports, the first issue discussed related to fair competition was government procurement, which was mentioned in the 2007 Annual Report:381 381 The European Commission. Report from the Commission to the Council and the European Parliament – Macao Special Administrative Region: Annual Report 2007. Brussels,
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 339 “The European Commission notes the enhancement of procedures for public procurement to improve transparency and to strengthen the regulatory framework in order to ensure fair and open competition, and encourages Macao to pursue and develop this policy of administrative reform and prevention of corruption”. In the 2014 Annual Report, the EU pointed out for the first time that the importance of regularisation in competition policy is one of the key issues leading Macao to the diversification of its economy:382 “Key priorities for 2015 include cooperation on the diversification of Macao’s economy, … exploring regulatory convergence in areas of such as competition policy, government procurement and intellectual property rights”. In the EU-Macao bilateral relationship, if only the policies contributed by the EU relate to political and economic development, they can be the major issues in this relationship, therefore it implies a number of possibilities within economic policy, namely the EU may promote fair competition policy and its relevant legislation in Macao. Within 15 years after the reunification of Macao, it can be inferred that due to the huge corruption case of the then Secretary for Transport and Public Works in 2007, in the eighth annual report, the EU suggested that Macao must strengthen the provisions for fair and open competition in the works of government procurement. Furthermore, in the fifteenth annual report, the EU more explicitly showed the key priorities in Macao for the regulatory convergence of dispersed provisions related to fair competition, and making these provisions more normative. 3. Turning Point of the Competition Law and Policy of the EU Entering the 21st Century The EU underwent its sixth enlargement on 1 January 2007, from originally 25 Member States to 27 Member States. This enlargement was merely 3 years after the fifth one which was the largest in terms of the number of states in accession. At the same time as the fifth enlargement, the newly approved Regulation No. 1/2003, which replaced the celebrated Regulation No. 17, implemented the modernisation of antitrust, revised the mergers control in the system of EU and internally reformed the DG Competition, and so on, forming a radical change of the EU in 2.4.2008, COM(2008) 167 final, p 3. 382 The European Commission. Joint Report to the European Parliament and the Council – Macao Special Administrative Region: 2014 Annual Report. Brussels, 24.4.2015, JOIN(2015) 13 final, p 10.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 340 implementation of the competition law and policy. In the macro view, these changes were envisaged to improve the EU’s effectiveness on competition policy and its influence on intensifying the openness and guarantee of a competitive market. The EU must be assured that it can cope with instant and major challenges: firstly, the EU proceeded historically to the largest enlargement on 1 May 2004 and latest two on 1 January 2007 and 1 July 2013. Those new Member States are from Eastern Europe, making in total 28 member states. Albeit the obvious divergence among Member States in economic growth and competition background have been emerging within the EU, the EU must guarantee that the commercial activities and administrative authorities can operate in an orderly manner under the same competition policy in the entire EU; secondly, in order to overcome the structural problems of competitiveness which is restricted, and the development opportunity of the European economy which is hindered, heads of Governments of all Member States met in Lisbon in 2000 and defined, for the EU per se in the national and EU level, a set of aggressive economic reform plans, the so-called “Lisbon Strategy”. Some reforms related to the reinforcement of the abilities of economic growth and jobs, establishing an effective internal market, boosting research and innovation, improving education, etc., all aiming to forge by 2010 the EU as “the most dynamic and competitive knowledge-based economy in the world”.383 Apparently, this process of economic reform, that avoids the possible negative increment of 1% per annum384 of economic growth of the EU, makes for further openness of the EU market and possesses higher competitiveness, in order to promote the sustainability of economic growth. Therefore, this adjustability of competition policy is the fundamental strategy for the EU to sustain its competitiveness in the international community. Passing through this reform, a sound and excellent tool – the so-called “modernisation package” – was proposed to guarantee an effective competition policy of the EU, aiming to promote a single market among Member States. One of the crucial results was that this package can reinforce the capacity of the Commission to focus on the implementation of competition-related activities. The following are the major aspects of this package: (1) In the aspect of the modernisation of antitrust, the Commission adopted a proactive and aggressive stance which was changed implementation of these laws from a passive to an active approach. The notification system was abolished in the antitrust implementation. In fact, the Commission would rely more on the investigation mechanism of complaints and of actions taken per se, and intensify the analytical capacity of the DG 383 Visited on 27 December 2005 the website of Growth and Jobs of the EU: http://europa.eu.int/growthandjobs/intro_en.htm 384 Ibid.
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 341 Competition. These shifts of approach were created jointly and responsibly together by the Commission and national competition authorities of Member States, with the objective of focussing on the implementation tasks being distributed better and more effectively by them, thereby forming a relationship with the European Competition Network (ECN). On the other hand, increasing the participation of national competition authorities and strengthening their competences, the Commission would concentrate on the infringements of the most dangerous distortions of competition which were emerging at the EU level, and the infringements of negative impacts on consumer welfare. Practically, the EU has improved its capacities by aiming at the most harmful anti-competition agreements and practices. (2) Cartel is the most pernicious agreement formed among rivals, so it is an area that demands attention. Only in 2002, the Commission adopted 9 decisions in cartel-hunting activities and imposed fines of about EUR 1 billion. Definitely, the Commission reinforces laws continuously in this area. On the other hand, the EU strengthened cooperation with competition authorities of other well-developed states economically, inter alias, of the US, Canada and Japan etc., contributing to combating international cartels. Albeit the EU is restricted on the confidentiality of information exchanges, it will be implemented on the solid base of effective cooperation through approved cooperative agreements. (3) The abuse of a dominant market position is also a major area of concern. As a result, the Commission started to address a set of cases and practices under Article 82 of the TEC (now Article 102 of the TFEU) many years ago, the Commission put the abuse of a dominant position in the priority list of treatment. The DG Competition has begun to examine the policy on the abuse of a dominant position, assessing the policies in force and how they could be more effective in their executions, as well as to define an operation with higher transparency. (4) The enforcement of Article 106 of the TFEU is obviously important to promote the liberalisation of markets. In recent years, the Commission launched the liberalisation process which can effectively prevent monopolists, who retain strong market positions, engaging in exclusive practices that delay or hinder effective competition in the market, for instance, in the sectors of energy and telecommunication, etc. (5) Mergers Control is also a priority activity enforced by the Commission. The Commission expects to effectively safeguard the competitive market structures by preventing a dominant market position being created and
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 342 being strengthened through mergers. The Commission focusses on large-scale mergers in the Union above the threshold defined legally at the EU level. National agencies apply their own national laws to engage in mergers below that threshold at their national levels. It forms a two-tier mergers control. The Commission makes decisions on mergers in both clearance and prohibition within legal prescriptions. In 2003, the Commission dealt with 222 clearance decisions of merger.385 Owing to the operation in coordination with the then CFI, the judicial procedures and processes have been accelerating, resulting in more efficient decisions on mergers cases. 4. Examination of the legislative statu quo of the legal system of fair competition of MSAR before EU competition law Competition law of the EU is one of the most mature and complete legal systems of fair competition in the world, and it gives a certain degree of enlightenment to enhance the legal system of fair competition of the MSAR. While the former is much more advanced than the latter and both are incomparable, the major elements of the former therefore can be listed one-by-one with the objective of examining the legislative statu quo of the latter. This will help understand where the legal system of fair competition of MSAR can be improved, to cooperate with the international economic situation, to catch up with the international level to safeguard the interests of consumers, and to ensure the regional and international trade of MSAR engages with a level playing field. Table 11.1: Major elements of the EU Competition law compared with the relevant legislations of the MSAR in force Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR 1. Objectives of competition policy The base of general purposes is set out in Article 3 of the TEU, making all policies of the EU, particularly the development of competition policy, Protocol (No 27) annex, and the Rules on Competition of the TFEU entrenched with the essential value and the general objectives of the competition policy of EU. The provision of paragraph 1 of article 153 of the Commercial Code entrenches the objective of the legal system of fair competition. The competition policy changes vary with The Government of MSAR publicises 385 European Commission, Competition Policy Newsletter, Special Edition 2004, p 2.
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 343 Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR annual enforcement, reaching relevant concrete objectives. general strategies and planning through annual policy addresses. Looking at the policy addresses of each year, there is not a clear competition policy outlined, or the objectives set by the policy. As policy addresses do not define competition policy, the annual policy reports do not comment on the enforcement of competition policy. 2. Legal framework 2.1. Core provisions The core provisions regulating the EU Competition Law are established by the “Rules on Competition” between Articles 101 and 109 of the TFEU. Articles 101 and 102 form “two central rules” set out in the TFEU. Rules on Competition can be divided into 2 sections: section 1 contains Articles 101 to 106, which cover the rules applying to undertakings; section 2 is Articles 107 to 109 which applies to state aid. The core provisions regulating the Legal System of Fair Competition of MSAR are established by the “Regulation of Competition Between Entrepreneurs” between Articles 153 and 173 of the Commercial Code. These provisions can be divided into 2 parts: part 1 is the “Competition between Entrepreneurs in General”, which contains Articles 153 to 155, covering the limits and obligations to contract applying to entrepreneurs; part 2 is “Unfair Competition”, which contains Articles 156 to 173, defining generally and specifically the conducts that violate fair competition. 2.2. Secondary Legislation Apart from the core provisions aforementioned, the European institutions shall establish, through secondary legislation, legal acts in relation to the affairs of fair competition. Secondary legislations are at two levels: acts with binding force and acts whose forms have no binding force. There is no legislative concept correspondent to secondary legislation, but there are various types of legislation, with legal positions hierarchically different, to regulate fair competition-related activities. 3. European institutions which deal with competition-related affairs Competition policy is enforced by the European Commission and European Courts at a supranational level. There is no a specific and exclusive authority responsible for dealing with affairs related to fair competition.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 344 Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR Directorate-General for Competition, which is one of 33 Directorate-Generals of the Commission, is responsible for dealing with competition-related affairs. However, as the provisions which protect fair competition of various industries and activities are stipulated in various relevant legislations, the public agencies which are responsible for the enforcement of the relevant legislations assume respectively the duties to cope with fair competition of the relevant industries and activities. 4. Areas of competition policy 4.1. Antitrust Among several areas of EU competition policy, antitrust is the major and crucial policy, which comprises restrictive practices and cartels. The concept of antitrust does not exist. The subject of antitrust is an undertaking. Albeit paragraph 2 of Article 54 of the TFEU defines an undertaking, it still does not offer a complete meaning. In the past, judges have determined the meaning of an undertaking in decisions, which mainly are in the Polypropylene and FENIN cases. The subject of Regulation of Competition is the entrepreneur, the meaning of which is set out in Article 1 of the Commercial Code. 4.1.1. Restrictive practices Restrictive practices are subject to Article 101 of the TFEU, providing that all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, shall be prohibited. Restrictive practices are subject to Article 153 of the Commercial Code, providing that all agreements or practices that have the object or effect of preventing, falsifying or restricting competition are forbidden, without prejudice to special provisions. Decisions in this aspect are not deemed as restrictive practices, agreement is limited to written form, and practices represent any form of conduct, which comprises concerted practice. De Minimis rule is established. Albeit agreement which falls within the provision of paragraph 1 of Article 101 of the TFEU shall be prohibited, based on the insignificant effect of this agreement and the weak position of perpetrator, this agreement shall escape the prohibition and Similar measures do not exist.
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 345 Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR not be deemed as violation of fair competition. Exemption from prohibition: individual exemption and block exemption. Similar provisions do not exist. 4.1.2. Abuse of dominant position An undertaking in a dominant position represents that it possesses strong economic power, which does not constitute any violation, but if it abuses its dominant position, it is banned by Article 102 of the TFEU. The concept of abuse is primarily defined by a judgement in the Hoffmann-La Roche Case in 1979. The “Regulation of Competition Between Entrepreneurs” of the Commercial Code does not stipulate the abuse of a dominant position. Amongst the various laws regulating industries and economic activities, there exist only provisions which prohibit expressly the abuse of a dominant position. But, the legal system of fair competition does not set out what a dominant position is, and it does not define any objective conditions which determine a dominant position of the entrepreneur being abused. An undertaking which abuses its dominant position must be judged in relation to a relevant market. In the judgement of United Brands Case in 1976, the relevant temporal market was mentioned, but the Commission issued a notice in 1997, its paragraphs 7 and 8 define only and respectively the relevant product market and the relevant regional market. The legal concept of a relevant market does not exist. 4.2. Cartels Cartels which belong originally to the ambit of restrictive practices and became independently, in 2005, a policy area to protect fair competition of the EU. Its concept was preliminarily defined, in 1995, in the 24th Report on Competition Policy of the Commission. An explicit provision of cartels does not exist, but a similar concept is contained in the legal system of government procurement. A leniency programme is set out to encourage participants of cartels to be whistle-blowers. Once the Commission confirms the existence of secret cartels, fines imposed to this participant can be Relevant measures do not exist.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 346 Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR reduced varying on the disclosed information. 4.3. Mergers The control of concentration between undertakings is stipulated by the adoption of Council Regulation (EC) No. 139/2004. Principally, the Commission only examines larger mergers which have an EU dimension, viz., the merging firms reach certain turnover thresholds, which are defined in the abovementioned Council Regulation. Mergers of companies are subject to the provisions of Articles 272 to 292 of the Commercial Code, in which the merger process is stipulated. In general, only if companies engaging in mergers comply with the legal provisions, the merger is not subject to any restriction. Nonetheless, to certain specific industries or sectors, the relevant legislations set out that mergers of companies can only be carried out with prior authorisation of the Chief Executive or the competent authority. 4.4. Liberalisation The policy of liberalisation is set out in the provision of paragraph 3 of Article 106 of the TFEU, which is that the member-states of the EU allow concessions to undertakings providing specific services with general economic interest. The respective undertakings can be private undertakings or public undertakings, their operations are likely to be subject to Articles 101 and 102 of the TFEU. Based on the legal system of fair competition of MSAR, in particular of the “Regulation of Competition Between Entrepreneurs” sets out in the Commercial Code provides solely for restrictive practices, and so the policy of liberalisation does not explicitly belong to this legal system. Despite this, public works and public services of the Region possess characteristics of public interest, if the government intends to implement public works or render public services by a third person, the respective concession is subject to Law no. 3/90/M. 4.5. State Aid The policy of state aid is subject to Articles 107 to 109 of the TFEU. These provisions set out the general principle of exclusivity of state aid and the criteria of incompatibility with the internal market, expressly enumerating the kinds of aid compatible with the internal market. The Government of MSAR implements the policy of state aid at two levels: the first is to strengthen the operational ability of enterprises through legislation to support their developments, by means of loans, financing, credit assurance, and technical assistance etc.; the second is that, in the policy addresses of government, assistance for the survival and substantial
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 347 Major elements of the EU Competition Law Relevant legislations and measures in the fair competition system of MSAR development of SMEs, inter alia, of certain specific industries, has been outlined several times, enabling them to operate efficiently in the market and not to be driven out or even closed down. 4.6. International cooperation International cooperation is a one of the policies within the EU competition policy which is based on the globalisation of the world economy and the awareness of mergers and cartels which are not restricted to a region and are international. In fact, this policy per se did not exist as a designated policy and it was incarnated in the so-called Relations with Third Countries, especially the cooperation with international organisation and bilateral cooperation. In spite of the MSAR having a lack of expressed competition policy, there are many bilateral agreements signed at international and regional levels under the modality of governance with “one country, two systems”. Although some bilateral agreements are in the area of economy and trade, there are not provisions among them ensuring expressly that both parties protect fair competition. However, in the international cooperation in the area of the economy, especially in the cooperative relationships between Macao, China and WTO, and MSAR and EU, the relevant reports point out respectively the situations of competition policy of certain industries and the concerns regarding the regularisation and consistent direction of competition policy. 5. EU Competition Law Model implied for MSAR 5.1. Definition of All-encompassing Local Competition Law Enterprises that participate excessively or illegitimately in marketplaces cause problems of unfair competition that damage the economic interests of other rivals, as well as driving out other rivals from the same marketplace. The practices related to unfair competition are connected to enterprises and national administrative authorities in local government which do not have a correct concept of fair competition. From this meaning, fair competition must be based on the appropriate propaganda and education. No matter how, an effective competition law is the fundamental means of ensuring fair competition under a rule of law and is the core of competition policy. Currently in the legislations in force in the MSAR, provisions relating to the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 348 protection of fair competition are stipulated, starting from the 1980s, in the relevant legislations consonant to the situations of operation of various sectors and industries, but they are quite scattered, which include: government procurement, protection of consumers, transportation industry, advertising activity, insurance, food labelling, imports and exports, freight forwarding, the statistical information system of MSAR, activity of the television broadcasting via satellite, private notary, intellectual property rights, motor vehicles, road and intercity passengers transport, labour relations, integrity, public health, public administration, Internet services, gaming and telecommunications etc. They also involve several forms of legislation, which are specifically law, administrative regulation, decree-law, decree, executive order, dispatch, dispatch of the Chief Executive, notice of the Chief Executive and dispatch of the Secretary for Transport and Public Works etc. The connection between these targeted and scattered provisions was only established until the promulgation of the revised Commercial Code in 1999, which has the individual Title “Regulation of Competition between Entrepreneurs”. The provisions of this Title can only be regarded as the legislation of fair competition of MSAR, but cannot be considered as fair competition law, and these provisions only dwell on one of the two central rules of modern competition law – rules on restrictive competition, and there is a lack of clear terms subject to the abuse of a dominant position. 5.2. Essential Elements in Competition Policy 5.2.1. The legislation is the subject of competition policy Since the establishment of the competition policy of the EU, the institutions of the EU have approved numerous competition-related legislations, some of which have been revised or repealed in accordance with the development of competition affairs. The relevant legislations are divided mainly into four classifications: rules applicable to undertakings, rules applicable to state aid, rules applicable to specific sectors and competition provisions in the international level and in the aspect of enlargement, these are listed in the Annex II. It can be seen from the information available on the website of the EU, the legislations include, pursuant to their forms, the legislations with binding force, legislations without binding force and other types of instruments. The competition-related legislations of the EU are represented in different types of legal acts, which comprise, in total, 19 regulations, 1 directive, 13 notices, 9 guidelines, 10 communications, 1 resolution and 8 other types of instrument. The latter can also be specified as white papers, frameworks, approaches and reports. The first three types have binding force pursuant to the provision of the TFEU; the fourth and fifth types have no binding force pursuant to the provision of the TFEU;
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 349 the rest are other types of instruments of an administrative nature utilised by European institutions. This legal foundation has resulted in a three-tier legal framework, and has established the implementation of the EU’s competition policy; in addition, specific legal provisions have been defined for guaranteeing diversified activities of fair competition. Both create essential conditions for enforcement of the EU’s competition law and policy. Leaving aside the Rules on Competition, the number of legal instruments with binding force are 20, the numbers of regulation and directive are respectively 19 and 1, as indicated in Table 11.2. It should be noted that the decisions made by the Commission are specifically related to practical cases of anti-competitive practices or their applications are not for a generalised purpose, as regulations and directives, its number should be quite huge. However, as the decisions are not presently listed, in a summarised way, in the website of EU, they are almost impossible to be counted by a general and ordinary method. Whatsoever, 1,521 decisions were counted to 20 November 2007.386 These legislations are being updated and new legislations are increasing in line with the development of the entire EU. Table 11.2: Number of legislations in force in respect of competition-related nature of the EU Nature of competition legislationType of legislation1 Binding forceNon-binding force Other instruments Tot Reg Dir Dec Rec Opi Not Gui Com Res Oth 1. Rules applicable to undertakings 24 7 11 3 1 2 1.1. Antitrust: Restrictive Practices and Abuse of Dominant Position 21 6 11 2 1 1 - General rules 12 10 1 1 - Exemptions per category: vertical agreements 3 2 1 - Exemptions per category: horizontal agreements 3 2 1 - Other types of exemptions 2 2 - Damages actions 1 1 386 The number of decision was counted based on the legislations listed till to 20 November 2007, sourced from the official website of EU: http://www.eur-lex.europa.eu/en/repert/0810.htm.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 350 Nature of competition legislationType of legislation1 Binding forceNon-binding force Other instruments Tot Reg Dir Dec Rec Opi Not Gui Com Res Oth 1.2. Mergers 3 1 1 1 2. Rules applicable to state aid 22 4 1 2 4 8 1 2 - General rules 1 1 - Block exemptions 1 1 - Rules with horizontal objectives 1 1 - Regional aid 1 1 - Services of general economic interest 3 1 1 1 - Specific aid 8 1 2 2 2 1 - Unspecified2 7 1 1 4 1 3. Rule applicable to specific sectors 13 8 2 1 2 3.1. Competition in agriculture and fisheries 3 1 2 3.2. Competition in transport 10 7 1 2 4. Competition: International dimension and enlargement 2 2 4.1. Enlargement 2 2 TOTAL 61 19 1 0 0 0 13 9 10 1 8 Remarks: The legislations in force are listed till to 25 February 2016, sourced from the official website of EU http://eur-lex.europa.eu/summary/chapter/competition.html?root_default=SUM_1_CODED%3D08&locale=en. 1. Tot : total number; Reg: Regulation; Dir: Directive; Dec: Decision; Rec: Recommendation; Opi: Opinion; Not: Notice; Gui: Guideline; Com: Communication; Res: Resolution , Oth: Others. 2. Certain legislations are listed in the “Rules applicable to state aid” but not classified in the sub-level, so they are classified as unspecified. Although the legislations related to the protection of fair competition of MSAR can be traced back to the 1980s, they involve various industries and sectors of activity, but their specifications are only limited to the surface and not in depth. In particular there is a lack of an all-encompassing fair competition law, while the broader applicability is set out in the “Regulation of Competition between Entrepreneurs” of the Commercial Code. After the visual examination to the existing legislations, related to the protection of fair competition collected by the author, Table 11.3 was constructed according to their specifications, in which the approximated numbers are listed.
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 351 Table 11.3: Number of legislations in respect of the types of unfair competition in MSAR Type of unfair competition Total Law AR DL EO Dec DCE NCE DSTPW Restrictive competition 65 10 14 13 1 3 19 4 1 Abuse of dominant position 27 2 6 1 -- -- 16 2 -- Unreasonable price 12 -- 2 2 -- 1 7 -- -- Mergers 13 2 -- 1 -- -- 10 -- -- Monopoly 2 -- -- 2 -- -- -- -- -- Total 119 14 22 19 1 4 52 6 1 Remarks: AR: Administrative Regulation; DL: Decree-Law; NCE: Notice of the Chief Executive; EO: Executive Order; DCE: Dispatch of the Chief Executive; Dec: Decree; DSTPW: Dispatch of the Secretary for Transport and Public Works. 5.2.2. The competition-related legal system acts as the key role in competition policy The huge success obtained from the enforcement of the EU’s competition policy is undivided from the legal and political regime of the EU, per se, which contains the advantages of statute law and case law, which the author recognises. Ergo, it is a mixed legal system from a judicial point of view. The provisions of principles and the legal acts stipulated by the TFEU ensure competition legislation is well established. In terms of enforcement, the series of legislative acts, such as regulations, directives, decisions, recommendations and opinions, orient the Commission and the executive authorities of Member States to deal with competition-related issues in a consistent manner with similar cases. Consequently, this creates beneficial conditions to enforce the competition law at the EU level and at the national level. Furthermore, judgments of courts give correct and just interpretations on the laws to the Commission and governmental agencies of Member States in their administration and operation, avoiding the same problems occurring repeatedly. Afterwards, the Council and/or the Commission can legislate in accordance with the judgment, such as the definition of relevant markets mentioned in Chapter 4. Active concerns to the EU’s competition policy by EU’s Member States and their governmental leaders are settled with political authoritativeness. Although legislations related to fair competition have existed for over 30 years in MSAR, there is no over-arching fair competition law and the provisions set out in various industries and sectors of activity are also only superficial and merely conceptual. There are no specific provisions in line with the socio-economic situations presently, i.e., laws and regulations of certain industries set up the
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 352 prohibition of abuse of dominant position, but the existing legislations do not define how to measure the market share in the relevant market, to determine whether a company is considered to be in dominant position, so it is not conducive for rivals or respective competent bodies to begin litigation, or it is not conducive to making an appropriate decision by a court. Firstly, since MSAR does not have a complete and comprehensive fair competition law, nor the establishment of an authority which ensures exclusively the enforcement of legislations of fair competition, it makes it difficult for the Government of MSAR to overview the functioning of the entire system of competition. Secondly, as MSAR is the region with a statute law system, it is unlike countries and regions with a case law system where precedent cases are the basis for the sentences, so there is uncertainty in the results of judicial decisions. 5.2.3. The consciousness of fair competition is a power to motivate fair competition Global free and fair trade activities start from and rely on the increasing consciousness concerning fair competition in all countries. This consciousness is realised from the emerging assistances to developing and least-developed countries by the developed countries. The development of the EU’s competition law and policy is closely linked to the increasing consciousness of fair and legitimate trade, and competition of Member States of EU and undertakings within the EU region. Up to now, the EU still pays high attention on the undertakings’ consciousness to fair competition, and adopts a set of actions and measures to highlight that consciousness in the Union. As MSAR is still a developing region, economic development is a priority issue. The majority of domestic companies, especially the SMEs, have no idea or little knowledge of the fair competition in question. Therefore, MSAR must strengthen measures to significantly increase the consciousness of fair competition on companies, in order to provide a strong impetus to fair competition actions. In the meanwhile, MSAR also has to increase fair competition consciousness by governmental officials in different levels in order to clean up conceptual blockages and barriers on fair competition actions. For the present circumstances, before the creation of an enforcement authority of fair competition, the function of promotion and education, regarding consciousness of fair competition to companies which may be covered by the legislations of relevant sectors, can only be assumed by certain public agencies with relevant and exclusive competences. 5.2.4. The scope of competition policy Competition policy per se is not an independent issue, which is comprised inherently in socio-economic development, and in the ambit of industrial,
In reference to the Competition Law System of the EU, establishing the Competition Legal System of MSAR in line with its Socio-economic Development 353 commercial and social life, etc. So, competition policy is not only related to competition, but also concerned with the relationship between competition and other aspects of both the economy and society. It is part of economic policy in a broader view. Competition policy needs to cooperate and harmonise with other relevant policies; also, competition issues must be considered within the execution of other social policies, running or embedding the concept of fair competition through other relevant policies. 5.2.5. Implementing a sustainable development strategy Compared with 30 years ago, free and fair competition is more respected in Macao. Particularly in the last 15 years, the government of MSAR introduced the provisions related to the protection of fair competition into the legislations of specific industries, public affairs and services of concession. Although they are often superficial, it is better than nothing. However, the protection of fair competition is still ignored by the public in society. Although the Consumers Council issued a “Study report on the fair competition policy in Macao” in April 2001, it did not resonate in society, so hitherto a complete and comprehensive fair competition policy has not yet been introduced. For some people, fair competition is the behaviour of companies to protect its rivals’ interest and it does not enable it to maximise its own profit. Therefore, it can be said that some incumbents only put their profits in the first place and ignore the fairness in operational practices in order to increase their self-profit that will likely harm the development of other companies. Eventually, it makes the status of socio-economic activity unbalanced. Thus, the government agencies concerned with regulating economic activities must realise the important mission of fair competition; the agencies concerned with regional development must simultaneously implement efficiently a growth plan which aims at promoting more competition. The effective way to do this is to formalise sustainable development with specific goals of more competition; otherwise, companies with stronger economic strength may drive their rivals out of the marketplace and become a monopolist which damages social development in many aspects. Presently, the concept of fair competition is included gradually in the essential regional policies and affairs of the economic openness and development of MSAR. This sustainable development is to protect the present and future interests of the enterprises’ survival and development. Therefore, MSAR must persist with the principle of sustainable development in the definition of policies, as well as in the production and trade of regions with different levels of economic development and number of enterprises. Notwithstanding the Title “Regulation of Competition between Entrepreneurs” in the Commercial Code and other scattered fair competition-related legislations, these do not stipulate explicitly the principle
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 354 related to sustainable development, and the prohibitive provisions incorporate this intention. To achieve sustainable development, the rapid growth of the economy of MSAR and trade in goods and services must be realised through fair competition, making a sound allocation of resources and products, but not maintained by dependency on improper means, inter alia, of restrictive competition, price fixing, abuse of dominant positions and mergers and monopoly, etc. These are the most relevant tasks, otherwise, if it concerns only the present and ignores the future rapid and increasing growth, it could lead to the emerging and growing enterprises, particularly SMEs, closing down under the condition of unfair competition, and makes the unbalanced distribution of social welfare in short-term, as well as adversely affecting the social economy. In this regard, it is not hard to imagine that the government of MSAR expects the orderly development of a capitalist economic market in a rapid growth environment through the implementation of the present fair competition-related legislations. If the government of MSAR is able to build an independent and new fair competition law which meet objectives at the regional and international levels, it will be able to more effectively protect the SMEs to survive, to provide consumers more opportunities of choice and to safeguard their interests and rights, which helps the diversified and healthy economic development of MSAR.
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Bibliography 359 24. Commission (2015). Joint Report to the European Parliament and the Council – Macao Special Administrative Region: 2014 Annual Report. COM(2015) 13 final, Brussels, 24.04.2015. 25. Communication from the Commission. Building a Comprehensive Partnership with China. Brussels, 25.03.1998, COM(1998) 181. 26. Green Paper on Vertical Restraints in EC Competition Policy. COM(96) 721 final, Brussels, 22.01.1997. Official documents: WTO 1. WTO (2001a), Doha Declaration, WT/MIN(01)/DEC/1, Ministerial Conference, Fourth Session, Doha, 9-14 November 2001. 2. WTO (2001b). Report of the Working Party on the Accession of China (WT/MIN(01)/3). 10 November 2001. 3. WTO (2001c). Trade Policy Review, Macau, China, Report by the Government. WT/TPR/G/82, 19 February 2001. 4. WTO (2001d). Trade Policy Review, Macau, China, Report by the Secretariat. WT/TPR/S/82, 19 February 2001. 5. WTO (2005), DOHA WORK PROGRAMME – Draft Ministerial Declaration (Revision), WT/MIN(05)/W/3/Rev.2, Ministerial Conference, Sixth Session, Hong Kong, 13-18 December 2005. 6. WTO (2007a). Trade Policy Review, Report by Macao, China. WT/TPR/G/181, 26 March 2007. 7. WTO (2007b). Trade Policy Review, Report by the Secretariat, Macao, China. WT/TPR/S/181, 26 March 2007. 8. WTO (2007c). Trade Policy Review, Report by the Secretariat, Macao, China – Revision. WT/TPR/S/181/Rev.1, 8 June 2007. 9. WTO (2013a). Trade Policy Review, Report by Macao, China. WT/TPR/G/281, 25 March 2013. 10. WTO (2013b). Trade Policy Review, Report by the Secretariat, Macao, China. WT/TPR/S/281, 25 March 2013. 11. WTO (2013c). Trade Policy Review, Report by the Secretariat, Macao, China – Revision. WT/TPR/S/281/Rev.1, 27 June 2013.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 360 Official document: OECD 1. OECD (2002). Frightening Hard-Core Cartels: Harm, Effective Sanctions and Leniency Programmes. Other documents: 1. Declaration on the start of a dialogue on competition by the EU and China. 2. International Monetary Fund. World Economic Outlook – Building Institutions. September 2005. 3. MEMO/06/357 from the Commission, Competition: Commission proposes changes to the Leniency Notice – frequently asked question. 4. Press release: Commission adopts new leniency policy for companies which give information on cartels (IP/02/247, Brussels, 13 February 2002). 5. Press release: Competition Policy: new Notice on agreement of minor importance (de minimis Notice). (IP/02/13, Brussels, 7 January 2001). 6. SPEECH/03/489, EU competition policy after May 2004, Prof. Mario Monti, European Commissioner for competition policy, Fordham Annual Conference on International Antitrust Law and Policy, New York, 24 October 2003. 7. Terms of Reference of EU-China Competition Policy Dialogue, in official website of European Union: http://europa.eu.int/comm/competition/international/bilateral/extracts/cn2b_en.pdf, visited on 25 November 2004. Internet sources: 1. Website of the Competition Law of China: http://www.competitionlaw.cn 2. Website of the Council of the European Union: http://www.consilium.europa.eu 3. Website of the European Union: http://europa.eu/ 4. Website of the European Parliament: http://www.europarl.europa.eu 5. Website of the World Trade Organization: http://www.wto.org
361 Annex I: Rules on Competition of the TFEU (Note: These provisions are extracted from the Treaty on the Functioning of the European Union) CHAPTER 1 RULES ON COMPETITION SECTION 1 RULES APPLYING TO UNDERTAKINGS Article 101 (ex Article 81 TEC) 1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to 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. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: – any agreement or category of agreements between undertakings, – any decision or category of decisions by associations of undertakings, – any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 362 Article 102 (ex Article 82 TEC) Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to 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. Article 103 (ex Article 83 TEC) 1. The appropriate regulations or directives to give effect to the principles set out in Articles 101 and 102 shall be laid down by the Council, on a proposal from the Commission and after consulting the European Parliament. 2. The regulations or directives referred to in paragraph 1 shall be designed in particular: (a) to ensure compliance with the prohibitions laid down in Article 101(1) and in Article 102 by making provision for fines and periodic penalty payments; (b) to lay down detailed rules for the application of Article 101(3), taking into account the need to ensure effective supervision on the one hand, and to simplify administration to the greatest possible extent on the other; (c) to define, if need be, in the various branches of the economy, the scope of the provisions of Articles 101 and 102; (d) to define the respective functions of the Commission and of the Court of Justice of the European Union in applying the provisions laid down in this paragraph; (e) to determine the relationship between national laws and the provisions contained in this Section or adopted pursuant to this Article. Article 104 (ex Article 84 TEC) Until the entry into force of the provisions adopted in pursuance of Article 103, the authorities in Member States shall rule on the admissibility of agreements, decisions and concerted practices and on abuse of a dominant position in the internal market in accordance with the law of their country and with the provisions of Article 101, in particular paragraph 3, and of Article 102.
Annex I: Rules on Competition of the TFEU 363 Article 105 (ex Article 85 TEC) 1. Without prejudice to Article 104, the Commission shall ensure the application of the principles laid down in Articles 101 and 102. On application by a Member State or on its own initiative, and in cooperation with the competent authorities in the Member States, which shall give it their assistance, the Commission shall investigate cases of suspected infringement of these principles. If it finds that there has been an infringement, it shall propose appropriate measures to bring it to an end. 2. If the infringement is not brought to an end, the Commission shall record such infringement of the principles in a reasoned decision. The Commission may publish its decision and authorise Member States to take the measures, the conditions and details of which it shall determine, needed to remedy the situation. 3. The Commission may adopt regulations relating to the categories of agreement in respect of which the Council has adopted a regulation or a directive pursuant to Article 103(2)(b). Article 106 (ex Article 86 TEC) 1. In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in the Treaties, in particular to those rules provided for in Article 18 and Articles 101 to 109. 2. Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in the Treaties, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Union. 3. The Commission shall ensure the application of the provisions of this Article and shall, where necessary, address appropriate directives or decisions to Member States. SECTION 2 AIDS GRANTED BY STATES Article 107 (ex Article 87 TEC) 1. Save as otherwise provided in the Treaties, any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 364 with the internal market. 2. The following shall be compatible with the internal market: (a) aid having a social character, granted to individual consumers, provided that such aid is granted without discrimination related to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany, in so far as such aid is required in order to compensate for the economic disadvantages caused by that division. Five years after the entry into force of the Treaty of Lisbon, the Council, acting on a proposal from the Commission, may adopt a decision repealing this point. 3. The following may be considered to be compatible with the internal market: (a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment, and of the regions referred to in Article 349, in view of their structural, economic and social situation; (b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State; (c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest; (d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Union to an extent that is contrary to the common interest; (e) such other categories of aid as may be specified by decision of the Council on a proposal from the Commission. Article 108 (ex Article 88 TEC) 1. The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market. 2. If, after giving notice to the parties concerned to submit their comments, the Commission finds that aid granted by a State or through State resources is not compatible with the internal market having regard to Article 107, or that such aid is being misused, it shall decide that the State concerned shall abolish or alter such aid within a period of time to be determined by the Commission. If the State concerned does not comply with this decision within the prescribed time, the Commission or any other interested State may, in derogation from the
Annex I: Rules on Competition of the TFEU 365 provisions of Articles 258 and 259, refer the matter to the Court of Justice of the European Union direct. On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the internal market, in derogation from the provisions of Article 107 or from the regulations provided for in Article 109, if such a decision is justified by exceptional circumstances. If, as regards the aid in question, the Commission has already initiated the procedure provided for in the first subparagraph of this paragraph, the fact that the State concerned has made its application to the Council shall have the effect of suspending that procedure until the Council has made its attitude known. If, however, the Council has not made its attitude known within three months of the said application being made, the Commission shall give its decision on the case. 3. The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or alter aid. If it considers that any such plan is not compatible with the internal market having regard to Article 107, it shall without delay initiate the procedure provided for in paragraph 2. The Member State concerned shall not put its proposed measures into effect until this procedure has resulted in a final decision. 4. The Commission may adopt regulations relating to the categories of State aid that the Council has, pursuant to Article 109, determined may be exempted from the procedure provided for by paragraph 3 of this Article. Article 109 (ex Article 89 TEC) The Council, on a proposal from the Commission and after consulting the European Parliament, may make any appropriate regulations for the application of Articles 107 and 108 and may in particular determine the conditions in which Article 108(3) shall apply and the categories of aid exempted from this procedure.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 366
367 Annex II: Legislations in force in respect of competition-related nature of the EU Nature of competition legislation Legislation 1. Rules applicable to firms 1.1. Antitrust: Restrictive Practices and Abuse of Dominant Position - General rules - Commission Notice on cooperation within the Network of Competition Authorities [Official Journal C 101 of 27.4.2004] - Commission Notice on Immunity from fines and reduction of fines in cartel cases [Official Journal C 298, 8.12.2006] - Commission notice on the definition of relevant market for the purposes of Community competition law [Official Journal C 372 of 9.12.1997] - Commission Notice on Immunity from fines and reduction of fines in cartel cases [Official Journal C 298, 8.12.2006] - Commission Notice on the cooperation between the Commission and the courts of the EU Member States in the application of Articles 81 and 82 EC [Official Journal C 101 of 27.4.2004] - Communication from the Commission - Guidelines on the application of Article 81(3) of the Treaty [Official Journal No C 101 of 27.4.2004] - Commission Notice on informal guidance relating to novel questions concerning Articles 81 and 82 of the EC Treaty that arise in individual cases (guidance letters) [Official Journal No C 101, 27.4.2004] - Commission notice – Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty [Official Journal C 101 of 27.4.2004] - Commission Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 [Official Journal C 210 of 1.9.2006] - Commission Notice on agreements of minor
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 368 Nature of competition legislation Legislation importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis) [Official Journal C 368 of 22.12.2001] - Commission Notice on the rules for access to the Commission file in cases pursuant to Articles 81 and 82 of the EC Treaty, Articles 53, 54 and 57 of the EEA Agreement and Council Regulation (EC) No 139/2004 (Text with EEA relevance) [Official Journal C 325, 22.12.2005] - Commission Notice 2004/C 101/05 on the handling of complaints by the Commission under Articles 81 and 82 of the EC Treaty (Text with EEA relevance) [Official Journal C 101, 27.4.2004] - Exemptions per category: vertical agreements - Commission Regulation (EU) No 461/2010 of 27 May 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector - Commission notice of 10 May 2010: Guidelines on vertical restraints [SEC (2010) 411 final] - Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices - Exemptions per category: horizontal agreements - Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements - Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements - Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements [Official Journal C 11 of 14.1.2011]
Annex II: Legislations in force in respect of competition-related nature of the EU 369 Nature of competition legislation Legislation - Other types of exemptions - Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements - Commission Regulation (EU) No 267/2010 of 24 March 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of agreements, decisions and concerted practices in the insurance sector - Damages actions - White Paper of 2 April 2008 on damages actions for breach of the EC antitrust rules [COM(2008)165 final – Not published in the Official Journal] 1.2. Mergers - White Paper: Towards more effective EU merger control (COM(2014) 449 final of 9.7.2014) - Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation) - Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings [Official Journal C 31 of 05.02.2004] 2. Rules applicable to state aid - General rules - Council Regulation (EC) No 659/1999 - detailed rules for the application of Article 108 of the Treaty on the Functioning of the European Union (state aid) - Block exemptions - Commission Regulation (EC) No 800/2008 of 6 August 2008 declaring certain categories of aid compatible with the common market in application of Articles 87 and 88 of the Treaty (General block exemption Regulation) (Text with EEA relevance) - Rules with horizontal objectives - Communication from the Commission - Framework for state aid for research and development and innovation (OJ C 198, 27 June 2014, pp. 1-29) - Regional aid - Guidelines on national regional aid for 2007-2013 [Official Journal C 54 of 4.3.2006] - Services of general economic interest - Commission Regulation (EU) No 360/2012 of 25 April 2012 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 370 Nature of competition legislation Legislation Union to de minimis aid granted to undertakings providing services of general economic interest - Community framework for state aid in the form of public service compensation [Official Journal C 297 of 29.11.2005] - Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions of 23 March 2011 – “Reform of the EU State Aid Rules on Services of General Economic Interest” [COM(2011) 146 final – Not published in the Official Journal] - Specific aid - Commission Directive 2006/111/EC of 16 November 2006 on the transparency of financial relations between Member States and public undertakings as well as on financial transparency within certain undertakings - Community guidelines of 18 August 2006 on state aid to promote risk capital investments in small and medium-sized enterprises [Official Journal C 194 of 18.8.2006] - Communication from the Commission on the application of State aid rules to public service broadcasting [Official Journal C 257 of 27.10.2009] - Community guidelines on State aid for railway undertakings [Official Journal C 184 of 22.7.2008] - Council Resolution of 12 February 2001 on national aid to the film and audiovisual industries [Official Journal C 73 of 06.03.2001] - Commission Communication on state aid elements in sales of land and buildings by public authorities (Official Journal C 209 of 10.07.1997, p. 3-5) - Commission notice on the application of Articles 87 and 88 of the EC Treaty to state aid in the form of guarantees [Official Journal C 71 of 11.03.2000] - Commission notice on the application of the state aid rules to measures relating to direct business taxation [Official Journal C 384 of 10.12.1998] - Unspecified - Communication from the Commission - Guidelines on State aid for environmental protection and energy
Annex II: Legislations in force in respect of competition-related nature of the EU 371 Nature of competition legislation Legislation 2014-2020 (OJ C 200, 28.6.2014, pp. 1-55) - Communication from the Commission - Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty (OJ C 249 of 31.7.2014, pp. 1-28) - Communication from the Commission - Criteria for the analysis of the compatibility with the internal market of State aid to promote the execution of important projects of common European interest (OJ C 188, 20.6.2014, p. 4-12) - Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty - 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid - Guidelines on regional State aid for 2014-2020 (Official Journal C 209 of 23.7.2013) - Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (Banking Communication) (OJ C 216 of 30.7.2013) 3. Rule applicable to specific sectors 3.1. Competition in agriculture and fisheries 3.1.1. Antitrust laws - Council Regulation (EC) No 1184/2006 of 24 July 2006 applying certain rules of competition to the production of and trade in certain agricultural products [See amending acts] 3.1.2. State aid legislation - Community guidelines for state aid in the agriculture and forestry sector 2007-13 [Official Journal C 319 of 27.12.2006] - Guidelines for the examination of State aid to fisheries and aquaculture [Official Journal C 84, 3.4.2008]
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 372 Nature of competition legislation Legislation 3.2. Competition in transport 3.2.1. Antitrust legislation - Council Regulation (EC) No 487/2009 of 25 May 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements and concerted practices in the air transport sector - Council Regulation (EC) No 169/2009 of 26 February 2009 applying rules of competition to transport by rail, road and inland waterway - Commission Regulation (EC) No 906/2009 of 28 September 2009 on the application of Article 81(3) of the Treaty to certain categories of agreements, decisions and concerted practices between liner shipping companies (consortia) - Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries - Council Regulation (EEC) No 4055/86 of 22 December 1986 applying the principle of freedom to provide services to maritime transport between Member States and between Member States and third countries [See amending acts] 3.2.2. State aid legislation - Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road, and repealing Council Regulations (EEC) No 1191/69 and (EEC) No 1107/70 - Community approach to State aid for transport by sea [Official Journal C 205, 05.07.1997] - Council Regulation (EC) No 3094/95 of 22 December 1995 on aid to shipbuilding [See amending acts] - Commission Communication of 9 December 2005 "Community guidelines on financing of airports and start-up aid to airlines departing from regional airports" [PDF] [Official Journal C 312 of 09.12.2005] - Framework on state aid to shipbuilding [Official Journal C 317 of 30.12.2003]
Annex II: Legislations in force in respect of competition-related nature of the EU 373 Nature of competition legislation Legislation 4. Competition: International dimension and enlargement 4.1. Enlargement - Commission Report [COM(2011) 666 final – SEC(2011) 1201 – Not published in the Official Journal] - Commission Report – [COM(2011) 666 final – SEC(2011) 1203 – Not published in the Official Journal] Source: The legislations in force are listed till to 25 February 2016, sourced from the official website of EU: http://eur-lex.europa.eu/summary/chapter/competition.html?root_default=SUM_1_CODED%3D08&locale=en.
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375 Annex III: Fair competition-related provisions set out in the Commercial Code of MSAR (Note: These provisions are extracted from the Commercial Code of MSAR) TITLE I REGULATION OF COMPETITION BETWEEN ENTREPRENEURS CHAPTER I COMPETITION BETWEEN ENTREPRENEURS IN GENERAL Article 153 (Legal limits) 1. Competition between entrepreneurs shall take place in a manner that does not harm the interests of the economy of the Territory, and within the limits established by the law. 2. All agreements or practices that have the object or effect of preventing, falsifying or restricting competition are forbidden, without prejudice to special provisions. Article 154 (Contractual limits) 1. An agreement restricting competition between entrepreneurs shall, under penalty of nullity, respect the limits indicated in the previous article and be made in writing. 2. For the agreement to be valid, it must be limited to a certain zone or to a certain activity. 3. If the duration of the agreement was not set, or was set for a longer period, it shall be valid for five years only. Article 155 (Obligation to contract) Whoever exercises an enterprise in conditions of legal monopoly is obliged to contract with whoever requires the performances which constitute the object of the enterprise, observing the principle of equality of treatment. CHAPTER II UNFAIR COMPETITION Article 156 (Objective scope) 1. The conducts mentioned in this Chapter are considered unfair if they are
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 376 practiced in the market with the purpose of competition. 2. It is presumed that the act is practiced with the purpose of competition if, by the circumstances in which it takes place, it is objectively adequate to promote or to ensure the distribution in the market of the products or services of the party or of a third party. Article 157 (Subjective scope) 1. The norms on unfair competition apply to entrepreneurs and to whoever participates in the market. 2. The application of the rules on unfair competition is independent of the fact that the subjects act in the same branch of activity. Article 158 (General clause) Unfair competition is any act of competition that objectively reveals itself to be in breach of the norms and honest usage of economic activity. Article 159 (Acts of confusion) 1. An act is considered as unfair if it is adequate to create confusion with the enterprise, the products, the services or the credit of competitors. 2. The risk of association by consumers regarding the origin of a product or service is sufficient basis to consider a practice unfair. Article 160 (Misleading acts) The use or broadcast of incorrect or false indications, as well as the omission of real ones, as well as any act which, by the circumstances in which it takes place, has the potential to induce in error the persons it reaches, or to whom it is addressed, regarding the nature, aptitudes, qualities and quantities of the products or services and, in general, the advantages really offered, is considered unfair. Article 161 (Offers) 1. The delivery of offers with advertising purposes, and analogous commercial practices, are considered unfair if, by the circumstances in which they take place, the consumer is put in a situation of having to contract the main performance. 2. The offer of any type of advantage or premium for the case of acquiring the main performance is considered unfair if it induces or can induce the consumer in error concerning the level of prices of other products or services of the same entrepreneur, or if it renders excessively difficult the assessment of the effective value of the offer
Annex III: Fair competition-related provisions set out in the Commercial Code of MSAR 377 or its comparison with alternative offers. Article 162 (Negative statements) 1. The making or broadcast of statements on the enterprise, products, services or commercial relations of competitors, which are apt to diminish their credit in the market, is considered unfair except if they are exact, true and pertinent. 2. Statements on the nationality, the religious or ideological beliefs, the private life or any other exclusively personal circumstances of any person are not considered pertinent. Article 163 (Acts of comparison) 1. The public comparison of one or another person's enterprise, products or services with those of a competitor is considered unfair if it relates to realities that are not analogous, relevant or ascertainable. 2. The comparison shall also be considered unfair if it is made in the terms indicated in Articles 160 and 162. Article 164 (Acts of imitation) 1. Imitation of the products, services or entrepreneurial initiatives of other persons is free, unless they are protected by an exclusive right recognized by the law. 2. Imitation of the products or services of a third party is considered unfair if it is adequate to create an association on the part of consumers in relation to the product or service, or if it makes it possible to unduly take advantage of the reputation or efforts of other persons. 3. The inevitability of the risk of association or of exploitation of the reputation of other persons excludes the unfairness of the respective practice. 4. Without prejudice to the previous paragraph, the systematic imitation of the products, services and entrepreneurial initiatives of a competitor is considered unlawful if the said strategy is directly aimed at hindering or obstructing his affirmation in the market and exceeds what, according to the circumstances, may be considered a natural response from the market. Article 165 (Exploitation of other persons' reputation) Improper exploitation of the entrepreneurial reputation of another person, to one's own benefit, or to a third party's, is considered unfair.
The conceptualisation of the competition legal system of Macao under the perspective of EU Competition Law 378 Article 166 (Breach of secrets) 1. The spreading or exploitation, without permission from the holder, of industrial secrets or any other entrepreneurial secrets that were either accessed legitimately, but with a duty of confidentiality, or not legitimately, namely as a consequence of any of the conducts mentioned in the following article, is considered unfair. 2. For the purpose of this article, all and any technical or commercial information that has a practical use and provides economic benefits to the holder, which is not public knowledge, and in relation to which the holder took appropriate security measures to guarantee its respective confidentiality, is considered an entrepreneurial secret. Article 167 (Promotion and exploitation of contractual breaches) 1. The instigation of employees, suppliers, clients and other obliged parties to the breach of contractual obligations that they have undertaken towards competitors, is considered unfair. 2. The promotion of the regular termination of a contract or the exploitation of another person's contractual breach, if known, to own or to a third party's benefit, are considered unfair if they have as object the diffusion or exploitation of an enterprise secret, or take place with circumstances such as deceit, the intention to eliminate a competitor from the market, or analogous ones. Article 168 (Exploitation of dependence) The undue exploitation by an entrepreneur of a situation of dependence, with economic repercussions, in which entrepreneurs who are his clients or suppliers may find themselves, and who do not have an equivalent alternative for the exercise of their activity, is considered unfair. Article 169 (Sales at a loss) Sales effected below the cost or acquisition price are considered unfair, if they are part of a strategy directed at the elimination of a competitor or group of competitors from the market. Article 170 (Judicial action for unfair competition) Judicial action for unfair competition shall be initiated within one year from the date when the injured party had or could have had knowledge of the person who practiced the facts that provide its basis, but not more than three years after their occurrence.
Annex III: Fair competition-related provisions set out in the Commercial Code of MSAR 379 Article 171 (Sanctions) A judicial decision declaring the existence of acts of unfair competition shall determine the prohibition of the continuation of the said practice, and shall indicate the appropriate means to eliminate the respective effects. Article 172 (Compensation for damage) 1. If acts of unfair competition are practiced intentionally or with fault, the tortfeasor is obliged to compensate the damage caused. 2. In the case mentioned in the previous paragraph, publication of the judicial decision can be ordered. 3. If the existence of acts of unfair competition is proven, fault is presumed. Article 173 (Legitimacy of entities representing of interested parties) If acts of unfair competition harm the interests of a category of interested parties, the judicial action for unfair competition can also be initiated by entities representing the said category.
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