Competition law must ensure free competition and the proper functioning of the market.
The fight against obstacles to fair trading seeks to eliminate anti-competitive practices. The goal is to eliminate certain behaviours as well as agreements between businesses which restrict competition (between 2 companies or with third-parties). Competition law also covers business mergers and concentrations that could paralyse competition and lead to the abuse of a dominant position.
Freedom to set prices
In principle, prices are set by free market competition. However, the executive branch of government can regulate prices under certain circumstances or in certain sectors (e.g. in the pharma industry) if the price competition is insufficient.
Ban on cartels
Any agreement between businesses, any decision by associations of undertakings as well as any concerted practice, the object of which is to prevent, restrict or distort competition in a market is prohibited and automatically null and void.
For example, it is prohibited to:
- fix the buying or selling price or other conditions for transactions either directly or indirectly;
- restrict or control production, markets, technical development or investments;
- share out markets or sources of supply;
- apply unequal conditions to trading partners for equivalent services;
- make the conclusion of contracts subordinate to the acceptance by partners of the provision of additional services which by their nature or according to commercial practices have no link with the object of the contract.
Example 1: business A and business B both manufacture toothbrushes. Instead of competing, they agree not to sell any toothbrush for less than EUR 2.
Example 2: the same businesses A and B split up the Luxembourg market among them. A takes the South and the East, whilst B takes the Centre and the rest of the country.
Under certain conditions, agreements, decisions and concerted practices may be permitted if a fair share of the profits is paid out to its users or if they contribute to the improvement of technical or economic progress.
Prohibition on abuse of a dominant position
It is prohibited for one or more businesses to abusively exploit a dominant position in a market.
Such abusive practices include:
- imposing unfair buy or sell prices or any other unfair transaction terms either directly or indirectly;
- limiting production, markets or technical developments to the detriment of consumers;
Supervisory authorities and penalties
The competition council (Conseil de la concurrence) is an independent administrative body whose mission is to ensure that competition rules are respected.
It bans and sanctions any anti-competitive practice which may distort the mechanisms of the free market. Anti-competitive practices may take the form of agreements between economic entities, or the abuse of a leading position which an economic entity may hold on a particular market.
The competition council has significant resources at its disposal to carry out its duties. It may namely:
- take coercive measures against businesses and associations of undertakings in order to put an end to infringements detected;
- take protective measures where the anti-competitive behaviour has caused serious and irreparable harm to the public economic order or to another business;
- impose penalty payments which may be as high as 5% of the business' average daily turnover;
- request businesses to provide any information deemed necessary;
- conduct the necessary on-site inspections of businesses and associations of undertakings.
The competition council may impose fines to the businesses concerned if:
- they have not complied with the competition rules;
- they have provided inaccurate or late information in response to a request.