Business Law II

Question 1

Objective and Tasks of ECB (which article)

Answer 1

Objective:
 Maintaining price stability (primary task under Art 127 TFEU)
 Internal goal: maximum inflation rate of two per cent
 Economic welfare of the eurozone is not an official objective!

Tasks:
 to define and implement the monetary policy for the Eurozone
 to conduct foreign exchange operations,
 to take care of the foreign reserves
 to refinance commercial banks
 to issue bills (exclusively) and coins (jointly with member state
central banks)

Question 2

How does the introduction of the Euro affect businesses?

Answer 2

 may influence decision on where to establish business in
Europe (BMW / Rover)
 may reduce currency risks (facilitates maintenance of price
stability)
 may reduce transaction costs
 may reduce capital costs (access to “cheap continental
money”, e.g. mortgage rates in continental Europe v UK)  may enhance ability to pin down costs accurately when
quoting
 may enhance ability to trade with partners in euro also
beyond the eurozone

Question 3

Classical and new approach under monetary policy

Answer 3

ECB lowered interest rates to zero to avoid credit crunch (classical)

New approach
 ECB buys debt instruments from commercial banks and states
 Purpose: raising the prices and lowering their yield, while
simultaneously increasing the monetary base
 First measures taken in late 2009; official quantitative easing
program (€ 60bn a month) started in March 2015

Question 4

Outright Monetary Transactions (OMT)

Answer 4

 QE aims for planned purchase of debt instruments from all states
 OMT aims for unlimited purchases of debt instruments from states
in danger of default (Mario Draghi, 2012: ‘whatever it takes’)

Question 5

Common Agricultural Policy-goals (which clause is about CAP)

Answer 5

 safeguarding agricultural productivity and assuring availability
of supplies
 ensuring farmers’ fair income and fair prices for consumers
 stabilizing markets

Question 6

Common Agricultural Policy- Criticism

Answer 6

 Oversupply („EG-Butterberg“)
 Inefficient state intervention
 Unfair focus on farming
 Artificially high food prices
 CAP (and US subsidies) is hampering the development
of Third World Countries
 CAP is more beneficial for larger farms

Question 7

What is Securities Regulation (Capital Market Law)

Answer 7

Regulation of…
 …offering of and trading in financial products (primary and
secondary market)
 …financial markets and financial intermediaries

Question 8

Aims and objectives of securities regulation

Answer 8

 the protection of investors
 ensuring that markets are fair, efficient and transparent;
 the reduction of systemic risk

Question 9

Why are information assymmetries bad?

Answer 9

unfair
decisions based on missing information
Principal-agent theory
the example with the cars

Question 10

What are the prospectus requirements?

Answer 10

All offers to the public…
• offers are public if they are made to an open (i.e. not restricted) group of
investors
…require a prospectus before the emission starts
• prospectus is a document containing information about the company that an
average investor needs to make an informed decisions

Question 11

Regulatory principle of Ad-hoc Disclosure?

Answer 11

 Listed companies…
• Includes listing at EU-regulated markets and at exchange regulated
markets („Freiverkehr“)
 …need to disclose all information relevant to the markets…
• includes all information that are potentially relevant for the share
price and directly related to the issuer (insider information, Art. 7)
 …immediately
• this would usually be: on the same day

Question 12

Regulatory principle of Insider Trading?

Answer 12

Regulatory principle, Art. 8 and Art. 14 MAR)
 A person in possession of insider information (again, Art. 7
MAR!) must not…
• …buy or sell financial instruments in relation to the insider
information, or…
• …suggest or recommend dealing in these financial instruments
to a third party, or…
• … disclose the information to outsiders

Question 13

Regulatory Principle of Market Manipulation?

Answer 13

 Regulatory principle, Art. 12 and Art. 14 MAR:  Simplified – prohibition of misleading the markets, e.g.
• Releasing incorrect statements, etc.
• Faciliate rumours, etc.
• Putting in and cancelling orders to provoke a market reaction, etc.

Question 14

The Three Pillars of EU Competition Law

Answer 14

 Anticompetitive Conduct, Art 101 TFEU (‘Cartels’)
 Abuse of Market Power, Art 102 TFEU
 Merger Control, Regulation139/2004/EC

Question 15

Block Exemption Regulations (BER, just read)

Answer 15

 Different rules for competing and non-competing businesses; special rules for selective distribution systems
 Core Restraints, usually relating to price fixing or no-competition clauses -> the whole agreement is void
 Grey Clauses, containing restraints which are deemend bad but not crucial -> the respective clause is void
 All other clauses within the ambit of the BER are exempt (=permitted)

Question 16

Examples of BER

Answer 16

 Vertical agreements (330/2010/EU)
 Technology transfer and license agreements (316/2014/EU)
 Research and Development (1217/2010/EU)

Question 17

Consequences of Contravention (Infringement of 101)

Answer 17

 Agreement is void, Art 101(2) TFEU
 Fines up to 10 percent of annual turnover, Reg 1/2003/EU, Art 23
 Private litigation under national laws (e.g. § 33 GWB)
 Serious threat to established distribution systems

Question 18

What does exactly Dominant Market Position means?

Answer 18

 Idea: A dominating undertaking is partly or fully detached from basic
market mechanisms; but no legal definition
 Dominance depends on market structure (market entry barriers; market
shares of competitors)
 Mere size does not necessary result in a dominant position
 Rebuttable assumptions (e.g., 30 per cent market share)

Question 19

Council of the European Union

Answer 19

Status

 One of the two primary legislative bodies
 Arguably most important organ of the EU

Structure
 Formed by ministers from member states
 Presidency rotates every six months („Trio“)
 Meets in Brussels or Luxemburg

Decisions usually by qualified majority
 55 per cent of member states AND 65 per cent of population
 In special cases: unanimous vote required, for example, for further approximation of laws, Art 115 TFEU

Question 20

European Council

Answer 20

Status
 No formal powers
 Defines major policies of the EU

Structure
 Comprises heads of member states/governments, the President of the Commission, and the EU (Council) President
 Meets twice a year

Question 21

European Commission

Answer 21

Status
 Executive branch of the EU (day-to-day business)
 Can initiate EU legislation
 ‘Guardian of the Treaties’  Issue: Commission as EU government?
Structure
 28 members, appointed for five years
 24 Departments, called Directorates-General
 25.000 employees, 65% based in Brussels

Question 22

European Parliament

Answer 22

Budget Power
 Shared with Council of the EU
 Budget suggested by Commission

Legislative Power
 Shared with Council of the EU (ordinary procedure)  Right of legislative initiative lies with the Commission!

Supervision Powers
 Can start inquiries on all EU matters
 Can require Commission to submit reports
 Approves Commission; can force Commission to resign

Question 23

General Court

Answer 23

First instance for most legal matters (eg, review of decisions made by the Commission)

Question 24

Civil Services Tribunal

Answer 24

Forum for legal disputes between the European Union and its civil servants

Question 25

Measures and Principles of the Internal market

Answer 25

Effet utile
 Interpretation of domestic laws in accordance with EU law

Duty of loyalty
 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.’ (Art 4 TEU)

Principle of non-discrimination, Art 18 (later)
Five freedoms (later)
Customs Union (later) and Schengen Treaty

Question 26

European Economic Interest Grouping (EEIG)

Answer 26

Purpose
 facilitating economic activities of members by pooling
resources, activities or skills. Grouping does not have to
generate profits for itself.

Requirements
 Must have at least two members from different Member
States.
 No more than 500 employees!

Question 27

Societas Europeae (SE) + Creation and Registration

Answer 27

 The ‘European Company’ -> Uniform business structure for the entire EU

SE can be created by:
 merging existing plcs from at least two Member States;
 forming a holding company promoted by plcs from at least two Member States;
 forming a subsidiary of companies from at least two Member States;
 transforming a plc which for at least two years has had a subsidiary in another Member State.

Minimum capital requirement: EURO 120.000,-
Choice between one-board structure and two-board
structure

Question 28

Difference between Customs Union and Free Trade Association

Answer 28

In CU you have unified tariffs and duties for all the goods travelling between Member States and coming from outside. (much much deeper integration)

In Free Trade Association it is only between Member States.

Question 29

Consequences of the Shengen Agreement

Answer 29

 No fixed border controls between signee states

 But reintroduction possible for six months if necessary

Question 30

Mechanism of the Dublin Agreement

Answer 30

 Asylum seekers‘ applications are processed only (!) in the Member State in which they entered the EU
 If asylum seekers travel to other Member States, they can be deported to their point of entry
 Member States can use „sovereignty clause“ if necessary

Question 31

Objectives of Competition Law

Answer 31

=> enhancing efficiency:
maximizing consumer welfare
achieving the optimal allocation of resources

=> protecting consumers and smaller firms from large aggregation of economic power

=> facilitating the creation of a single European market
prevent creation from being frustrated by private undertakings