Play Fair and Square to Avoid Sanctions under Competition Law
Competition between companies encourages efficiency and innovation and reduces prices. Competition law in turn aims to protect competition and, maybe even more importantly, it allows companies to compete on fair terms. National and EU competition law concern all types of companies, including startups, in all of their activity.
Agreements that Restrict Competition Prohibited
All companies come across agreements of various kinds; license agreements, distribution agreements, co-operation agreements, etc. Competition law prohibits agreements between two or more companies that restrict competition. Additionally, it prohibits firms holding a dominant position on the market to abuse such a position, for example, by charging unfair prices. Both situations can arise, and do arise, in the everyday life of startups, and companies should pay close attention to every contract before signing them to make sure they are competition law compliant. Especially clauses that restrict competition can easily pass unnoted. Startups that come up with an innovative product without a substitute on the market should also be careful not to abuse its, perhaps, dominant position.
Keep an Eye on Your Financing
When applying for financing, startups need to pay attention to competition law, as it prohibits companies to receive state aid from national public authorities, unless it is justified by reasons of general economic development. In other words, startups should carefully evaluate the advantages they receive from the state.
Non-Compliance May Be an Expensive Ordeal
Breaking competition legislation may lead to significant sanctions, as the fine for non-compliance could be as high as 10 % of the overall annual turnover of the company (in addition to any litigation damages the company may be liable for). Such sums, as well as any damage to the company image, may be fatal for any company, startups to say the least.
De Minimis Saves the Day?
Competition law contains a number of exceptions – some of which might be of great importance for startups. For example, the so called “de minimis” rule states that competition law rules do not apply if the impact on competition is not considerable, which could often be the case with startups. De minimis also enables startups to receive state aid (up to a certain point) without having to deal with EU state aid rules.
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