EC Competition Law and Policy
EC Competition Law and Policy Albertina Albors-Llorens
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© Albertina Albors-Llorens 2002 All rights reserved; no part of this publication may be reproduced, stored in a retrieval; system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the Publishers or a licence permitting copying in the UK issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1P 9HE. First published 2002 ISBN 1-903240-74-3 Paperback ISBN 1-903240-75-1 Hardback
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Contents
v
Contents
Preface
vii
Table of EC Commission decisions
ix
Table of cases
xi
Table of EC Treaty provisions Table of EC legislation
Chapter 1:
Chapter 2:
The foundations of EC competition law Introduction The EC Treaty provisions in competition The scope of application of Articles 81 and 82 EC The two levels of enforcement of EC competition law: the roles of the Commission, the natural courts and national authorities The aims of EC competition policy Community competition law and national law The common elements in articles 81 and 82 EC Anti-competitive agreements, decisions and concerted practices: Article 81 EC Introduction Article 81(1) EC: The basic prohibition on anticompetitive agreements, decisions by associations of undertakings and concerned practices
xxiii xxv
1 1 2 4
5 6 8 10
16 16
18
vi
EC Competition Law and Policy Article 81(2) EC: the sanction Article 81(3) EC: exemptions The ‘rule of reason’ in EC competition law
Chapter 3:
Chapter 4:
Index
Abuses of dominant position by one or more undertakings: Article 82 EC Introduction The prohibition on abuses of dominant position by one or more undertakings The enforcement of EC competition law Introduction The present system – enforcement at community level: Regulation 17/62 Enforcement at national level: national courts and national authorities – the present system The new system of enforcement of competition law: the White Paper and the Draft Regulation Concluding remarks
46 46 68
74 74 75 113 113 114 145 151 157 159
Preface
vii
Preface
Despite the phenomenal growth of EC competition law in recent years, there are plenty of excellent books on the market that cover exhaustively the intricacies of this complex area. This book aims to provide a short and accessible analysis of Articles 81 and 82 EC, the two core competition provisions in the EC Treaty, and their system of enforcement. It also focuses on two fundamental changes during the past two years that have the potential to alter dramatically the complexion of EC competition law as it has stood for over thirty years. These are the new system of block exemption regulations for vertical and horizontal agreements and the proposal for a fully decentralised system of enforcement of Articles 81 and 82 EC. The book is divided into four chapters. Chapter 1 considers the foundations of EC competition law. It includes an overview of the aims and configuration of EC competition law and examines contentious issues, such as those arising from the relationship between EC and national competition law, and the extraterritorial jurisdiction of the Commission in the application of Articles 81 and 82 EC. Chapter 2 analyses the structure of Article 81 EC. It surveys the case law of the Community judicature and the decisions of the Commission in an attempt to establish a coherent thread in their policy on collusive practices. This chapter discusses in detail the process of reform of the Commission’s policy on vertical restraints, initiated in 1997, and which culminated, in December 1999, in the adoption of the umbrella block exemption on vertical restraints. The new block exemption regulations for horizontal agreements are also briefly discussed. Chapter 3 considers Article 82 EC and develops its essential elements – in particular, the notions of dominance, abuse and collective dominance, taking into account recent developments in the case law. Finally, Chapter 4 examines the enforcement of EC competition law. Important changes are taking place in this field,
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following the Commission’s publication in April 1999 of its White Paper on enforcement and in September 2000 of a Draft Regulation that, if approved, will replace Regulation 17/62. The chapter is therefore divided into two parts that consider, first, the current system of enforcement and then the one suggested by the Commission. This book would have never seen the light of day without the help of many people. I began to teach competition law with Elizabeth Freeman; she has always been a wonderful friend and guide to me. I am also very grateful to Rosa Greaves, who has always encouraged me, providing extremely helpful ideas and suggestions, and to Paul Taylor, who read the manuscript and made pertinent and useful comments. Thanks are due to Rosemary Graham for her editorial assistance, to Kirsty Allen, Catherine Barnard, Joanne Scott and Stephanie Palmer for their unfailing support, and to Christine Gray, for being such a kind and loyal friend. Finally, I am enormously grateful to Brian Willan for his help and understanding during the preparation of this book, which was so frequently interrupted by my teaching commitments. My greatest debt, however, is to my parents, to my husband Pantelis, and to our son Alexander, whose unconditional love and patience have helped me to see this book through. I dedicate it to Pantelis’s parents, Nicholas and Lily Fanouraki, in thanks for their continuous support. Albertina Albors-Llorens April 2002
Table of Commission Decisions
ix
Table of EC Commission decisions
68/376/EEC (Re Rieckermann and AEGElotherm) OJ [1968] L 276/25, [1968] CMLR D78 40 69/240/EEC (Quinine cartel) OJ [1969] L 192/5, [1969] CMLR D41 40 (Dyestuffs) OJ [1969] L 195/11, [1969] CMLR D23 25, 26 70/332/EEC (Re Kodak) OJ [1970] L 147/24, [1970] CMLR D19 45 71/23/EEC (Re German Ceramic Tiles) OJ [1971] L 10/15, [1971] CMLR D6 44 71/224/EEC (GEMA) OJ [1971] L 134/15, [1971] CMLR D35 92, 119, 129, 141, 143 72/403/EEC (Re Pittsburgh Corning Europe) OJ [1972] L 272/35, [1973] CMLR D2 45 73/332/EEC (Re Deutsche Philips) OJ [1973] L 293/40, [1973] CMLR D241 132 75/75/EEC (General Motors) OJ [1975] L 29/14, [1975] 1 CMLR D20 78, 87, 89, 111 75/77/EEC (Re French and Taiwanese Mushrooms) OJ [1975] L 29/26, [1975] 1 CMLR D83 41 76/172/EEC (Re Bayer and Gist-Brocades) OJ [1976] L 30/13, [1976] 1 CMLR D98 48 76/353/EEC (United Brands) OJ [1976] L 95/1, [1976] 1 CMLR D28 7, 75, 77, 79, 82, 84–86, 89, 90, 92, 99, 111, 132 77/327/EEC (BP) OJ [1977] L 117/1, [1977] 2 CMLR D1 100, 111 78/68/EEC (Hugin) OJ [1978] L 22/23, [1978] 1 CMLR D19 77, 78, 105, 107
79/934/EEC (Atka v. BP Kemi/Danske Spritfabrikker) OJ [1979] L286/32, [1979] 3 CMLR 684 44 80/1334/EEC (Re Italian Cast Glass) OJ [1980] L 383/19, [1982] 2 CMLR 61 42 82/756/EEC (Fédération Nationale de l’Industrie de la Chaussure de France) OJ [1982] L 319/12, [1983] 1 CMLR 575 120, 121 83/400/EEC (Windsurfing International) OJ 1983] L 229/1, [1984] 1 CMLR 1 45 84/282/EEC (Polistil/Arbois) OJ [1984] L 136/9, [1984] 2 CMLR 594 36 84/380/EEC (Re Synthetic Fibres) OJ [1984] L 207/17, [1985] 1 CMLR 787 43 84/405/EEC (Re the Zinc Producer Group) OJ [1984] L 220/27, [1985] 2 CMLR 108 42 85/74/EEC (Peroxygen Products) OJ [1985] L 35/1, [1985] 1 CMLR 481 36 85/609/EEC (AKZO) OJ [1985] L 374/1, [1986] 3 CMLR 273 125, 137 86/398/EEC (Re Propylene cartel) OJ [1986] L 230/1, [1988] 4 CMLR 347 23 87/409/EEC (Sandoz) OJ [1987] L 222/ 28, [1989] 4 CMLR 628 28 88/138/EEC (Hilti) OJ [1988] L 65/19, [1989] 4 CMLR 677 96 88/501/EEC (TetraPak I) OJ [1988] L 272/27, [1990] 4 CMLR 47 96 88/518/EEC (British Sugar) OJ [1988] L 284/41, [1990] 4 CMLR 196 83 89/22/EEC (British Plasterboard) OJ [1989] L 10/50, [1990] 2 CMLR 464 83, 87 89/93/EEC (Italian Flat Glass) OJ [1989] L 33/44, [1990] 4 CMLR 535 108
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89/512/EEC (Dutch banks) OJ [1989] L 253/1, [1990] 4 CMLR 768 30 90/299/ECC (Solvay) OJ (1991) L 152/ 21, (1994) 4 CMLR 645 106 90/645/EEC (Bayer) OJ [1990] L 351/ 46, [1992] 4 CMLR 61 28, 119 91/297/EEC (Re Soda Ash) OJ [1991] L 152/1, [1994] 4 CMLR 454 7, 43, 83, 87, 124 92/96/EEC (Re Arssupol) OJ [1992] L 37/16, [1993] 4 CMLR 338 49 92/204/EEC (Dutch building cartel) OJ [1992] l 92/1, [1993] 5 CMLR 135 129 92/213/EEC (Britsh Midland Airwarys v. Aer Lingus) OJ [1992] L 96/34, [1993] 4 CMLR 596 87 92/521/EEC (Re Distribution of package tours during the 1990 World Cup) OJ [1992] L 326/31, [1994] CMLR 253 11 92 (B&I Line plc v. Sealink Harbours) [1992] 5 CMLR 255 103
94/894/EEC (Eurotunnel) OJ [1994] L 354/66, [1995] 4 CMLR 801 133 94/19/EC (Sea Containers v. Stena Sealink) OJ [1994] L 15/8, [1995] 4 CMLR 84 103 94/296/EC (Stichting Baksteen) OJ [1994] L 131/15, [1995] 4 CMLR 646 116, 117 97/624/EEC (Re Irish Sugar) OJ [1997] L 258/1, [1997] 5 CMLR 666 84, 87, 94 98/273/EEC (Re Volkswagen and others) OJ [1998] L 124/60, [1998] 5 CMLR 333 28, 36, 44 99/271/EC (Re Greek Ferries) OJ [1999] L 109/24, [1999] 5 CMLR 47 20, 32 2000/12/EC (Re The 1998 Football World Cup) OJ [2000] L 5/55, [2000] 4 CMLR 963 7, 91 2000/74/EC (Virgin/British Airways) OJ [2000] L 30/1, [2000] 4 CMLR 999 95 2000/117/EC (Re FEG and TU) OJ [2000] L 39/1, [2000] 4 CMLR 1208 40
Table of cases
xi
Table of cases
European Court of Justice ACF Chemiefarma v. Commission (Case 41/69) [1970] ECR 661 18 Adams v. Commission (Case 145/83) [1985] ECR 3539, [1986] 2 CMLR 506 124, 144 AEG and Telefunken v. Commission (Case 107/82) [1983] ECR 3151, [1984] 3 CMLR 325 27 Ahlström and others v. Commission (Woodpulp I) (Joined Cases 89/95, 104/85, 114/85, 116–117/85, 125– 129/85) [1988] ECR 5193, [1988] 4 CMLR 901 13 Ahlström and others v CMS (Woodpulp II) Joined cases C-114/85 and C-125/ 85, C-89/85, C-104/85, C-116–117/ 85 and C-125–129/85 [1993] ECR I-1307, [1993] 4 CMLR 407 26, 123, 124 Ahmed Saeed v. Zentrale zur Bekämpfung Unlauteren Wettwerbs (Case 66/86) [1989] ECR 803, [1990] 4 CMLR 102 41, 91 AKZO v. Commission (Case 53/85) [1986] ECR 1965 125, 137 AKZO v. Commission (Case C-62/86) [1991] ECR I-3359, [1993] 5 CMLR 215 98, 123 Alsatel v. Novasam (Case 247/86) [1988] ECR 5987, [1990] 4 CMLR 434 75, 83 AM & S v. Commission (Case 155/79) [1982] ECR 1575, [1982] 2 CMLR 264 122 ANCIDES v. Commission (Case 43/85)
[1987] ECR 3131, [1988] 4 CMLR 821 125 Anne Marty v. Estée Lauder (Case 37/ 79) [1980] ECR 2481, [1981] 2 CMLR 143 128 Bagnasco v. Banca Popolare di Novara (Joined Cases C-215/96 and C-216/ 96) [1999] ECR I-135 30 Banks v. British Coal Corporation (Case C-128/92) [1994] ECR I-1209, [1994] 5 CMLR 30 149 BAT and Reynolds v. Commission (Joined Cases 142/84 and 156/84) [1987] ECR 4487, [1988] 4 CMLR 24 3, 117, 118, 129 Béguelin v. Import Export (Case 22/71) [1971] ECR 949, [1972] CMLR 81 19, 46 Bela-Mühle (Case 114/76) [1977] ECR 121, [1979] 2 CMLR 83 50 Belasco v. Commission (Case 246/86) [1989] ECR 2117, [1991] 4 CMLR 96 22, 40, 42 Bergaderm v. Commission (Case C-352/ 98P) [2000] ECR I-5291 144 Binon v. Agence et messageries de la presse (Case 243/83) [1985] ECR 2015, [1985] 3 CMLR 800 20, 41 BMW v. Commission (Joined Cases 32/ 78, 36–82/78) [1979] ECR 2435, [1980] 1 CMLR 370 28 BNIC v. Blair (Case 123/83) [1985] ECR 391, [1985] 2 CMLR 430 30, 41
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EC Competition Law and Policy
Boehringer v. Commission (Case 45/69) [1970] ECR 769 19 BP v. Commission (Case 77/77) [1978] ECR 1513, [1978] 3 CMLR 174 100, 111 Brasserie de Haecht v. Wilkin-Janssen (Case 23/67) [1967] ECR 407, [1968] CMLR 26 29, 37, 116 Brasserie du Pêcheur and Factortame (Joined Cases C-46 and C-48/93) [1996] ECR I-1029, [1996] 1 CMLR 889 148 British Leyland v. Commission (Case 226/84) [1986] ECR 3263, [1987] 1 CMLR 185 90 BRT v. SABAM (I) (Case 127/73) [1974] ECR 51, [1974] CMLR 238 6, 111 BRT v. SABAM (II) (Case 127/73) [1974] ECR 313, [1974] 2 CMLR 238 90, 150 Bundeskartellamt v. Volkswagen (Case C-266/93) [1995] ECR I-3477, [1996] 4 CMLR 478 10 Cadillon v. Höss (Case 1/71) [1971] ECR 351, [1971] CMLR 420 31 Camera Care v. Commission (Case 792/ 79R) [1980] ECR 119, [1980] 1 CMLR 334 127, 128, 156 Centre d’insémination de la Crespelle v. Coopérative de la Mayenne (Case C323/93) [1994] ECR I-5077 90 Cementhandelaren v. Commission (Case 8/72) [1972] ECR 977, [1973] CMLR 7 7, 29, 41 Chemiefarma v. Commission (Case 41/ 69) [1970] ECR 661 7, 36 CICCE v. Commission (Case 298/83) [1985] ECR 1105, [1986] 1 CMLR 486 9 Compagnie Maritime Belge v. Commission (Joined Cases C-395/ 96P and C-396/96P) [2000] 4 CMLR 1076 85, 99, 109 Compagnie Royale Asturienne des Mines v. Commission (Cases 29–30/83) [1984] ECR 1679, [1985] 1 CMLR 688 12 Commercial Solvents v. Commission (Joined Cases 6 and 7/73) [1974] ECR 223, [1974] 1 CMLR 309 11, 13, 99– 101, 106, 130 Commission v. UK (Newcastle disease) (Case 40/82) [1982] ECR 2793, [1982] 3 CMLR 497 50, 97
Consten and Grundig v. Commission (Joined Cases 56 and 58/64) [1966] ECR 299, [1966] CMLR 418 6, 21, 34, 44, 106, 123 Continental Can v. Commission (Case 6/ 72) [1973] ECR 215, [1973] CMLR 199 2, 5, 75, 77, 84, 86, 89 COSTA v. ENEL (Case 6/64) [1964] ECR 585, [1964] CMLR 425 8 Courage v Crehan (Case C-453/99, Judgment of 20 September 2001, not yet updated) 149 CRAM and Rheinzink v. Commission (Cases 29–30/83) [1984] ECR 1679, [1985] 1 CMLR 688 26 Deere v. Commission (Case C-7/95P) [1998] ECR I-3111 27 Delimitis v. Henninger Bräu (Case C234/89) [1991] ECR I-935, [1992] 5 CMLR 210 37, 69, 145, 152 Deutsche Grammophon v. Commission (Case 78/70) [1971] 1 CMLR 631 101 DGDC v. Asociación Española de Banca Privada (Case C-67/91) [1992] ECR I-4875 121 ENU v. Commission (Case C-107/91) [1993] ECR I-599 142 Europemballage Corporation and Continental Can Co. Inc. v. Commission (Case 6/72) [1973] ECR 215, [1973] CMLR 199 18, 75 Fedesa (Case C-331/88) [1990] ECR I4023 50 Ferrerie Nord v. Commission (Case C219/95P) [1997] ECR I-4414, [1997] 5 CMLR 575 29, 34 Ford Werke and Ford Europa v. Commission (Joined Cases 25 and 26/84) [1985] ECR 2725, [1985] 3 CMLR 528 28 France v. Commission (Case C-68/94) [1998] ECR I-1375 108 François v. Lucazeau v. SACEM (Case 397/87) [1989] ECR 2811, [1991] 4 CMLR 248 24 Francovich and Bonifaci (Joined Cases C6/90 and 9/90) [1991] ECR I-5357, [1993] 2 CMLR 66 148, 149 Fromançais v. Forma (Case 66/82) [1983] ECR 395, [1983] 3 CMLR 453 50
Table of cases General Motors v. Commission (Case 26/ 75) [1975] ECR 1367, [1976] 1 CMLR 95 78, 87, 89, 111 Gøttrup-Klim Grovvareforeninger and others v. Dansk Landbrugs Grovvareselskab (Case C-250/92) [1994] ECR I-5641, [1996] 4 CMLR 191 30, 85, 111 GEMA v. Commission (Case 125/78) [1979] ECR 3173, [1980] 2 CMLR 177 92, 119, 129, 141, 143 GT-Link v. De Danske Statsbaner (Case C-242/95) [1997] ECR I-4449, [1997] 5 CMLR 601 148 Guérin v. Commission (Case C-282/95P) [1997] ECR I-503, [1997] 5 CMLR 447 118, 119, 137 GVL v. Commission (Case 7/82) [1983] ECR 483, [1983] 3 CMLR 645 92 Hasselblad v. Commission (Case 86/82) [1984] ECR 883, [1984] 1 CMLR 559 36 Hoechst v. Commission (Cases 46/87 and 227/88) [1989] ECR 2859, [1991] 4 CMLR 410 121, 122 Hoffman-La Roche v. Commission (Case 85/76) [1979] ECR 461, [1979] 3 CMLR 211 77, 79, 80, 84, 85, 87, 88, 93, 94, 110 Höfner v. Macroton (Case C-41/90) [1991] ECR I-1979, [1993] 4 CMLR 306 11, 91, 106 Hugin v. Commission (Case 22/78) [1979] ECR 1869, [1979] 3 CMLR 345 77, 78, 105, 107 Hydrotherm v. Andreoli (Case 170/83) [1984] ECR 2999, [1985] 3 CMLR 224 11 Ice-cream cases (Langnese-Iglo v. Commission) (Case C-279/95P) [1998] ECR I-5609, [1998] 5 CMLR 933 130 ICI v. Commission (Case 48/69) [1972] ECR 619, [1972] CMLR 557 11, 13, 14, 23, 24, 36 IBM v. Commission (Case 60/81) [1981] ECR 2639, [1981] 3 CMLR 635 123, 136 Javico v. Yves Saint Laurent (Case C306/96) [1998] ECR I-1983, [1998] 5 CMLR 172 29
xiii
Koelman v. Commission (Case C-59/ 96P) [1997] ECR I-4812 128 Kruidvat v. Commission (Case C-70/ 97P) [1998] ECR I-7183, [1999] 5 CMLR 68 139 Lancôme v. Etos (Case 99/79) [1980] ECR 2511, [1981] 2 CMLR 164 39, 128 Lawrie-Blum v. Land BadenWürttemberg (Case 66/85) [1986] ECR 2121, [1987] 43 CMLR 389 11 Leclerc v. Au Blé Vert (Case 229/83) [1985] ECR 1, [1985] 2 CMLR 286 6 Levin v. Staatssecretaris van Justitie (Case 53/81) [1982] ECR 1035, [1982] 2 CMLR 454 11 L’Oréal v. PVBA De Nieuwe (Case 31/ 80) [1980] ECR 3775, [1981] 2 CMLR 235 75, 113, 128 Louis Erwauw-Jacquery v. La Hesbignonne (Case 27/87) [1988] ECR 1919, [1988] 4 CMLR 576 36 Masterfoods v. HB Ice Cream (Case C-344/98) [2000] ECR I-11369 [2001] 4 CMLR 449 145, 147 Merci (Case C-179/90) [1991] ECR I-5889 91 Metro v. Commission (Metro I) (Case 26/ 76) [1977] ECR 1875, [1978] 2 CMLR 1 70, 138 Metro v. Commission (Metro II) (Case 75/84) [1986] ECR 3021, [1987] 1 CMLR 118 138 Michelin v. Commission (Case 322/81) [1983] ECR 3461, [1985] 1 CMLR 282 75, 81, 83, 86, 88, 94, 105, 106 Ministère Public v. Jean-Louis Tournier (Case 395/87) [1988] ECR 2521, [1991] 4 CMLR 248 93 Montecatini v. Commission (Case C-235/ 91P) [2000] 4 CMLR 691 72 Musique Diffusion Française and others v. Commission (Joined Cases 100/80 to 103/80) [1983] ECR 1825, [1983] 3 CMLR 221 31, 123 National Carbonising Company (Case 109/75R) [1975] ECR 1193 127 National Panasonic v. Commission (Case 136/79) [1980] ECR 2033, [1980] 3 CMLR 169 120
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Nungeser and Eisele v. Commission (Case 258/78) [1982] ECR 2015, [1983] 1 CMLR 278 11 Oude Luttikhuis v. Verenigde Coöperatieve Melkindustrie (Case C399/93) [1995] ECR I-4515, [1996] 5 CMLR 178 39 Orkem v. Commission (Case 374/87) [1989] ECR 3283, [1991] 4 CMLR 502 120, 121 Oscar Bronner v. Mediaprint (Case C-7/ 97) [1998] ECR I-7791, [1999] 4 CMLR 112 103 Papiers Peints v. Commission (Case 73/ 74) [1975] ECR 11491, [1976] CMLR 1491 30, 40 Parke, Davis v. Centrafarm (Case 24/67) [1968] ECR 55, [1968] CMLR 47 102 Piraiki-Patriki v. Commission (Case 11/ 82) [1985] ECR 207, [1985] 2 CMLR 4 138 Plaumann v. Commission (Case 25/62) [1963] ECR 95, [1964] CMLR 29 138 Procurer de Roi v. Dassonville (Case 8/ 74) [1974] ECR 837, [1974] 2 CMLR 436 11 Pronuptia v. Schillgalis (Case 161/84) [1986] ECR 353, [1986] 1 CMLR 414 71 R. v. HM Treasury, ex parte BT (Case C-392/93) [1996] ECR I-1631, [1996] 2 CMLR 217 148 R. v. MAFF, ex parte Hedley Lomas (Case C-5/94) [1996] ECR I-2533 148 Remia v. Commission (Case 42/84) [1985] ECR 2545, [1987] 1 CMLR 1 29, 30, 49 Rendo v. Commission (Case C-19/93) [1995] ECR I-3319, [1997] 4 CMLR 392 118 Rewe-Zentral Finanz v. Landwirtschaftskammer für Saarland (Case 37/76) [1976] ECR 1989, [1977] 1 CMLR 533 148 RTE and ITP v. Commission (the Magill cases) (Cases C-241/91 etc.) [1995] ECR I-797, [1995] 4 CMLR 718 101, 130 San Giorgio (Case 199/82) [1983] ECR 3595 148 Sandoz v. Commission (Case C-277/87) [1990] ECR I-45 19, 20
Serena v. Eda (Case 40/70) [1971] ECR 69, [1971] CMLR 260 102 Société de Vente de Ciments et Bétons de l’est v. Kerpen & Kerpen (Case 319/ 82) [1983] ECR 4173, [1985] 1 CMLR 511 46 Société Technique Minière v. Maschinenbau Ulm (Case 56/65) [1966] ECR 234, [1966] CMLR 357 29, 34, 36, 69 Sonito v. Commission (Case C-87/89) [1990] ECR I-1981 144 Stichting Sigaretten-industrie v. Commission (Cases 242/82 etc.) [1985] ECR 3831, [1987] 3 CMLR 661 43, 116, 117 STM v. Maschinenbau Ulm (Cases 56 and 58/65) [1966] ECR 234, [1966] CMLR 357 7, 105 Suiker Unie v. Commission (Sugar cartel) (Joined Cases 40–48, 50, 54–56, 111, 113–114/73) [1975] ECR 1663, [1976] 1 CMLR 295 24, 36, 88, 93 T. Port (Case C-68/95) [1996] ECR I-6065, [1997] 1 CMLR 1 142 Tepea v. Commission (Case 28/77) [1978] ECR 1391, [1978] 3 CMLR 392 19 TetraPak International v. Commission (Case C-333/94P) [1996] ECR I-5951, [1997] 4 CMLR 662 97, 99 Toepfer v. Commission (Cases 106–107/ 63) [1965] ECR 405, [1966] CMLR 111 138 Transocean Marine Paint v. Commission (Case 17/74) [1974] ECR 1063, [1974] 2 CMLR 459 126 Tremblay v. Commission (Case C-91/ 95P) [1996] ECR I-5547, [1997] 4 CMLR 211 118 TWD (Case C-188/92) [1994] ECR I-833 140 United Brands v. Commission (Case 27/ 76) [1978] ECR 207, [1978] 1 CMLR 429 7, 75, 77, 79, 82, 84, 85, 86, 89, 90, 92, 99, 111, 132 V.A.G. France v. Etablissements Magne SA (Case 10/86) [1986] ECR 4071, 1988] 4 CMLR 98 Van Gend en Loos v. Nederlandse administratie der belastingen (Case 26/62) [1963] ECR 1 [1963] CMLR 105 5
Table of cases Van Landewyck v. Commission (Joined Cases 209–215 and 218/78) [1980] ECR 3125, [1981] 3 CMLR 134 19, 22, 41, 42, 50 Van Zuylen v. Hag (Case 192/73) [1974] ECR 731, [1974] 2 CMLR 127 19 VBVB and VBBB v. Commission (Joined Cases 43/82 and 63/82) [1984] ECR 19, [1985] 1 CMLR 27 48, 134 Viho Europe v. Commission (Case C-73/ 95P) [1996] ECR I-5457, [1997] 4 CMLR 419 19 Völk v. Vervaecke (Case 5/69) [1969] ECR 295, [1969] CMLR 273 31 Volvo v. Veng (Case 238/87) [1988] ECR 6211, [1989] 4 CMLR 122 101 Wilhelm v. Bundeskartellamt (Case 14/ 68) [1969] ECR 1, [1969] CMLR 100 8, 9, 10 Windsurfing International v. Commission (Case 193/83) [1986] ECR 611, [1986] 3 CMLR 489 30
xv
Case 24/67 Parke, Davis v. Centrafarm [1968] ECR 55, [1968] CMLR 47 102 Case 14/68 Wilhelm v. Bundeskartellamt [1969] ECR 1, [1969] CMLR 100 8, 9, 10 Case 5/69 Völk v. Vervaecke [1969] ECR 295, [1969] CMLR 273 31 Case 41/69 Chemiefarma v. Commission [1970] ECR 661 7, 18, 36 Case 45/69 Boehringer v. Commission [1970] ECR 769 19 Case 48/69 ICI v. Commission [1972] ECR 619, [1972] CMLR 557 11, 13, 23, 24, 36 Case 40/70 Serena v. Eda [1971] ECR 69, [1971] CMLR 260 102 Case 78/70 Deutsche Grammophon v. Commission [1971] 1 CMLR 631 101
Züchner v. Bayerische Vereinsbank (Case 172/80) [1981] ECR 2021, [1982] 1 CMLR 313 24
Case 1/71 Cadillon v. Höss [1971] ECR 351, [1971] CMLR 420 31 Case 22/71 Béguelin v. Import Export [1971] ECR 949, [1972] CMLR 81 19, 46
Case 25/62 Plaumann v. Commission [1963] ECR 95, [1964] CMLR 29 138 Case 26/62 Van Gend en Loos v. Nederlandse administratie der belastingen [1963] ECR 1, [1963] CMLR 105 5
Case 6/72 Continental Can v. Commission [1973] ECR 215, [1973] CMLR 199 2, 5, 18, 75, 77, 84, 86, 89, Case 8/72 Cementhandelaren v. Commission [1972] ECR 977, [1973] CMLR 7 7, 29, 41
Cases 106–107/63 Toepfer v. Commission [1965] ECR 405, [1966] CMLR 111 138 Case 6/64 COSTA v. ENEL [1964] ECR 585, [1964] CMLR 425 8 Joined Cases 56 and 58/64 Consten and Grundig v. Commission [1966] ECR 299, [1966] CMLR 418 6, 21, 34, 44, 106, 123 Case 56/65 Société Technique Minière v. Maschinenbau Ulm [1966] ECR 234, [1966] CMLR 357 7, 29, 34, 36, 39, 105 Case 23/67 Brasserie de Haecht v. Wilkin-Janssen [1967] ECR 407, [1968] CMLR 26 29, 37, 116
Joined Cases 6 and 7/73 Commercial Solvents v. Commission [1974] ECR 223, [1974] 1 CMLR 309 11, 13, 99–101, 106, 130 Joined Cases 40–48, 50, 54–56, 111, 113–114/73 Suiker Unie v. Commission (Sugar cartel) [1975] ECR 1663, [1976] 1 CMLR 295 24, 36, 88, 93 Case 127/73 BRT v. SABAM (I) [1974] ECR 51, [1974] CMLR 238 6, 111 Case 127/73 BRT v. SABAM (II) [1974] ECR 313, [1974] 2 CMLR 238 90, 150 Case 192/73 Van Zuylen v. Hag [1974] ECR 731, [1974] 2 CMLR 127 19 Case 8/74 Procurer de Roi v. Dassonville [1974] ECR 837, [1974] 2 CMLR 436 11
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Case 17/74 Transocean Marine Paint v. Commission [1974] ECR 1063, [1974] 2 CMLR 459 126 Case 73/74 Papiers Peints v. Commission [1975] ECR 11491, [1976] CMLR 1491 30, 40 Case 26/75 General Motors v. Commission [1975] ECR 1367, [1976] 1 CMLR 95 78, 87, 89, 111 Case 109/75R National Carbonising Company [1975] ECR 1193 127 Case 26/76 Metro v. Commission (Metro I) [1977] ECR 1875, [1978] 2 CMLR 1 70, 138 Case 27/76 United Brands v. Commission [1978] ECR 207, [1978] 1 CMLR 429 7, 75, 77, 79, 82, 84–86, 89, 90, 92, 99, 111, 132 Case 37/76 Rewe-Zentral Finanz v. Landwirtschaftskammer für Saarland [1976] ECR 1989, [1977] 1 CMLR 533 148 Case 85/76 Hoffman-La Roche v. Commission [1979] ECR 461, [1979] 3 CMLR 211 77, 79, 80, 84, 85, 87, 88, 93, 94, 110 Case 114/76 Bela-Mühle [1977] ECR 121, [1979] 2 CMLR 83 50 Case 28/77 Tepea v. Commission [1978] ECR 1391, [1978] 3 CMLR 392 19 Case 77/77 BP v. Commission [1978] ECR 1513, [1978] 3 CMLR 174 100, 111 Case 22/78 Hugin v. Commission [1979] ECR 1869, [1979] 3 CMLR 345 77, 78, 105, 107 Joined Cases 32/78, 36–82/78 BMW v. Commission [1979] ECR 2435, [1980] 1 CMLR 370 28 Case 125/78 GEMA v. Commission [1979] ECR 3173, [1980] 2 CMLR 177 92, 119, 129, 141, 143 Joined Cases 209–215 and 218/78 Van Landewyck v. Commission [1980] ECR 3125, [1981] 3 CMLR 134 19, 22, 41, 42, 50 Case 258/78 Nungeser and Eisele v. Commission [1982] ECR 2015, [1983] 1 CMLR 278 11 Case 37/79 Anne Marty v. Estée Lauder [1980] ECR 2481, [1981] 2 CMLR 143 128
Case 99/79 Lancöme v. Etos [1980] ECR 2511, [1981] 2 CMLR 164 39, 128 Case 136/79 National Panasonic v. Commission [1980] ECR 2033, [1980] 3 CMLR 169 120 Case 155/79 AM & S v. Commission [1982] ECR 1575, [1982] 2 CMLR 264 122 Case 792/79R Camera Care v. Commission [1980] ECR 119, [1980] 1 CMLR 334 127, 128, 156 Case 31/80 L’Oréal v. PVBA De Nieuwe [1980] ECR 3775, [1981] 2 CMLR 235 75, 113, 128 Joined Cases 100/80 to 103/80 Musique Diffusion Française and others v. Commission [1983] ECR 1825, [1983] 3 CMLR 221 31, 123 Case 172/80 Züchner v. Bayerische Vereinsbank [1981] ECR 2021, [1982] 1 CMLR 313 24 Case 53/81 Levin v. Staatssecretaris van Justitie [1982] ECR 1035, [1982] 2 CMLR 454 11 Case 60/81 IBM v. Commission [1981] ECR 2639, [1981] 3 CMLR 635 123, 136 Case 322/81 Michelin v. Commission [1983] ECR 3461, [1985] 1 CMLR 282 75, 81, 83, 86, 88, 94, 105, 106 Case 7/82 [1983] GVL v. Commission ECR 483, [1983] 3 CMLR 645 92 Case 11/82 Piraiki-Patriki v. Commission [1985] ECR 207, [1985] 2 CMLR 4 138 Case 40/82 Commission v. UK (Newcastle disease) [1982] ECR 2793, [1982] 3 CMLR 497 50, 97 Joined Cases 43/82 and 63/82 VBVB and VBBB v. Commission [1984] ECR 19, [1985] 1 CMLR 27 48, 134 Case 66/82 Fromançais v. Forma [1983] ECR 395, [1983] 3 CMLR 453 50 Case 86/82 Hasselblad v. Commission [1984] ECR 883, [1984] 1 CMLR 559 36 Case 107/82 AEG and Telefunken v. Commission [1983] ECR 3151, [1984] 3 CMLR 325 27 Case 199/82 San Giorgio [1983] ECR 3595 148
Table of cases Cases 242/82 etc. Stichting Sigarettenindustrie v. Commission [1985] ECR 3831, [1987] 3 CMLR 661 43, 116, 117 Case 319/82 Société de Vente de Ciments et Bétons de l’est v. Kerpen & Kerpen [1983] ECR 4173, [1985] 1 CMLR 511 46 Cases 29–30/83 Compagnie Royale Asturienne des Mines v. Commission [1984] ECR 1679, [1985] 1 CMLR 688 12 Cases 29–30/83 CRAM and Rheinzink v. Commission [1984] ECR 1679, [1985] 1 CMLR 688 26 Case 123/83 BNIC v. Blair [1985] ECR 391, [1985] 2 CMLR 430 30, 41 Case 145/83 Adams v. Commission [1985] ECR 3539, [1986] 2 CMLR 506 124, 144 Case 170/83 Hydrotherm v. Andreoli [1984] ECR 2999, [1985] 3 CMLR 224 11 Case 193/83 Windsurfing International v. Commission [1986] ECR 611, [1986] 3 CMLR 489 30 Case 229/83 Leclerc v. Au Blé Vert [1985] ECR 1, [1985] 2 CMLR 286 6 Case 243/83 Binon v. Agence et messageries de la presse [1985] ECR 2015, [1985] 3 CMLR 800 20, 41 Case 298/83 CICCE v. Commission [1985] ECR 1105, [1986] 1 CMLR 486 9 Joined cases 25 and 26/84 Ford Werke and Ford Europa v. Commission [1985] ECR 2725, [1985] 3 CMLR 528 28 Case 42/84 Remia v. Commission [1985] ECR 2545, [1987] 1 CMLR 1 29, 30, 49 Case 75/84 Metro v. Commission (Metro II) [1986] ECR 3021, [1987] 1 CMLR 118 138 Joined Cases 142/84 and 156/84 BAT and Reynolds v. Commission [1987] ECR 4487, [1988] 4 CMLR 24 3, 117, 118, 129 Case 161/84 Pronuptia v. Schillgalis [1986] ECR 353, [1986] 1 CMLR 414 71 Case 226/84 British Leyland v. Commission [1986] ECR 3263, [1987] 1 CMLR 185 90
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Case 43/85 ANCIDES v. Commission [1987] ECR 3131, [1988] 4 CMLR 821 125 Case 53/85 AKZO v. Commission [1986] ECR 1965 125, 137 Case 66/85 Lawrie-Blum v. Land BadenWürttemberg [1986] ECR 2121, [1987] 43 CMLR 389 11 Joined Cases 89/85, 104/85, 114/85, 116–117/85, 125–129/85 Ahlström and others v. Commission (Woodpulp I) [1988] ECR 5193, [1988] 4 CMLR 901 13 Joined Cases C-114/85 and C-125/85, C89/85, C-104/85, C116–117/85 and C-125–129/85 Ahlström and others v. Commission (Woodpulp II) Woodpulp (II) [1993] ECR I-1307, [1993] 4 CMLR 407 27, 123, 134 Case 10/86 V.A.G. France v. Etablissements Magne SA [1986] ECR 4071, [1998] 4 CMLR 98 46 Case C-62/86 AKZO v. Commission [1991] ECR I-3359, [1993] 5 CMLR 215 98, 123 Case 66/86 Ahmed Saeed v. Zentrale zur Bekämpfung Unlauteren Wettwerbs [1989] ECR 803, [1990] 4 CMLR 102 41, 91 Case 246/86 Belasco v. Commission [1989] ECR 2117, [1991] 4 CMLR 96 22, 40, 42 Case 247/86 Alsatel v. Novasam [1988] ECR 5987, [1990] 4 CMLR 434 75, 83 Case 27/87 Louis Erwauw-Jacquery v. La Hesbignonne [1988] ECR 1919, [1988] 4 CMLR 576 36 Cases 46/87 and 227/88 Hoechst v. Commission [1989] ECR 2859, [1991] 4 CMLR 410 121, 122 Case 238/87 Volvo v. Veng [1988] ECR 6211, [1989] 4 CMLR 122 101 Case C-277/87 Sandoz v. Commission [1990] ECR I-45 19, 20 Case 374/87 Orkem v. Commission [1989] ECR 3283, [1991] 4 CMLR 502 120, 121 Case 395/87 Ministère Public v. JeanLouis Tournier [1988] ECR 2521, [1991] 4 CMLR 248 93 Case 397/87 François v. Lucazeau v. SACEM [1989] ECR 2811, [1991] 4 CMLR 248 24
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Case C-331/88 Fedesa [1990] ECR I-4023 50 Case C-87/89 Sonito v. Commission [1990] ECR I-1981 144 Case C-234/89 Delimitis v. Henninger Bräu [1991] ECR I-935, [1992] 5 CMLR 210 37, 69, 145, 152 Joined Cases C-6/90 and 9/90 Francovich and Bonifaci [1991] ECR I5357, [1993] 2 CMLR 66 148, 149 Case C-41/90 Höfner v. Macroton [1991] ECR I-1979, [1993] 4 CMLR 306 11, 91, 106 Case C-179/90 Merci [1991] ECR I5889 91 Case C-67/91 DGDC v. Asociación Española de Banca Privada [1992] ECR I-4875 121 Case C-107/91 ENU v. Commission [1993] ECR I-599 142 Case C-235/91P Montecatini v. Commission [2000] 4 CMLR 691 72 Cases C-241/91 etc. RTE and ITP v. Commission (the Magill cases) [1995] ECR I-797, [1995] 4 CMLR 718 101, 130 Case C-128/92 Banks v. British Coal Corporation [1994] ECR I-1209, [1994] 5 CMLR 30 149 Case C-188/92 TWD [1994] ECR I-833 140 Case C-250/92 Gøttrup-Klim Grovvareforeninger and others v. Dansk Landbrugs Grovvareselskab [1994] ECR I-5641, [1996] 4 CMLR 191 30, 85, 111 Case C-19/93 Rendo v. Commission [1995] ECR I-3319, [1997] 4 CMLR 392 118 Joined Cases C-46 and C-48/93 Brasserie du Pêcheur and Factortame [1996] ECR I-1029, [1996] 1 CMLR 889 148 Case C-266/93 Bundeskartellamt v. Volkswagen [1995] ECR I-3477, [1996] 4 CMLR 478 10 Case C-323/93 Centre d’insémination de la Crespelle v. Coopérative de la Mayenne [1994] ECR I-5077 90 Case C-392/93 R. v. HM Treasury, ex parte BT [1996] ECR I-1631, [1996] 2 CMLR 217 148
Case C-399/93 Oude Luttikhuis v. Verenigde Coöperatieve Melkindustrie [1995] ECR I-4515, [1996] 5 CMLR 178 39 Case C-5/94 R. v. MAFF, ex parte Hedley Lomas [1996] ECR I2533 148 Case C-68/94 France v. Commission [1998] ECR I-1375 108 Case C-333/94P TetraPak International v. Commission [1996] ECR I-5951, [1997] 4 CMLR 662 97, 99 Case C-7/95P Deere v. Commission [1998] ECR I-3111 27 Case C-68/95 T. Port [1996] ECR I-6065, [1997] 1 CMLR 1 142 Case C-73/95P Viho Europe v. Commission [1996] ECR I-5457, [1997] 4 CMLR 419 19 Case C-91/95P Tremblay v. Commission [1996] ECR I-5547, [1997] 4 CMLR 211 118 Case C-219/95P Ferrerie Nord v. Commission [1997] ECR I-4414, [1997] 5 CMLR 575 29, 34 Case C-242/95 GT-Link v. De Danske Statsbaner [1997] ECR I-4449, [1997] 5 CMLR 601 148 Case C-279/95P Ice-cream cases (Langnese-Iglo v. Commission [1998] ECR I-5609, [1998] 5 CMLR 933 145, 147 Case C-282/95P Guérin v. Commission [1997] ECR I-503, [1997] 5 CMLR 447 118, 119, 137 Case C-59/96P Koelman v. Commission [1997] ECR I-4812 128 Joined Cases C-215/96 and C-216/96 Bagnasco v. Banca Popolare di Novara [1999] ECR I-135 30 Case C-306/96 Javico v. Yves Saint Laurent [1998] ECR I-1983, [1998] 5 CMLR 172 29 Joined Cases C-395/96P and C-396/96P Compagnie Maritime Belge v. Commission [2000] 4 CMLR 1076 85, 99, 109 Case C-7/97 Oscar Bronner v. Mediaprint [1998] ECR I-7791, [1999] 4 CMLR 112 103
Table of cases Case C-70/97P Kruidvat v. Commission [1998] ECR I-7183, [1999] 5 CMLR 68 139 Case C-352/98P Bergaderm v. Commission [2000] ECR I-5291 144
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Case C-344/98 Masterfoods v. HB Ice Cream [2000] ECR J-11369 [2001] 4 CMLR 449 145, 147 Case C-453/99 Courage v. Crehan, Judgment of 20 September 2001, not yet reported 149
Court of First Instance Aéroports de Paris v. Commission (Case T-128/98) [2000] ECR II3929 93 Air France v. Commission (Case T-3/93) [1994] ECR II-121 137, 139 Asia Motor France v. Commission (Case T-28/90) [1992] ECR II-2285, [1992] 5 CMLR 431 141 Automec v. Commission (Automec II) (Case T-24/90) [1992] 5 CMLR 431 118, 129, 131 Bayer v. Commission (Case T-41/96R) [1996] ECR II-381, [1996] 5 CMLR 290 134, 135 Bayer v. Commission (Case T-41/96) [2000] ECR II-3383 19, 20 BENIM v. Commission (Case T-5/93) [1995] ECR II-197, [1996] 4 CMLR 305 117 BPB v. Commission (Case T-65/89) [1993] ECR II-389, [1993] 5 CMLR 32 93, 100 BPB Eendracht v. Commission (Case T-311/94) [1998] ECR II-1129 123 Bureau Européen des Unions des Consommateurs v. Commission (Case T-37/92) [1994] ECR II-285, [1995] 4 CMLR 167 117 CB and Europay v. Commission (Joined Cases T-39/92 and T-40/92) [1994] ECR II-49 48 Cimenteries v. Commission (Cases T-10– 12/92 and T-15/92) [1992] ECR II2667, [1992] 4 CMLR 259 123 Cimenteries v. Commission (Joined Cases T-25/95) [2000] ECR II-491, [2000] 5 CMLR 204 124, 136 Comité Central d’entreprise de la Société Générale des Grandes Sources and others v. Commission (Case T-96/92) [1995] ECR II-1213 139
Comité Central d’entreprise de la Société Anonyme Vittel and others v. Commission (Case T-12/93) [1995] ECR II-1247 139 Compagnie Maritime Belge v. Commission (Joined Cases T-24–26 and 28/93) [1996] ECR II-1201 109 Deere v. Commission (Case T-35/92) [1994] ECR II-957 27 Deutsche Bahn v. Commission (Case T229/94) [1997] ECR II-1689, [1998] 4 CMLR 220 78, 87 Dutch banks (Case T-138/89) [1992] ECR II-2195, [1993] 5 CMLR 435 137 Enichem Anic v. Commission (Case T-6/ 89) [1991] ECR II-1623 12 ENS v. Commission (Joined Cases T-374– 375, 384, 388/94) [1998] ECR II3141 39 Ferriere Nord v. Commission (Case T-143/89) [1995] ECR II-917 39 Gencor v. Commission (Case T-102/96) [1999] ECR II-753, [1999] 4 CMLR 971 14, 109 Hercules v. Commission (Polypropylene cartel case) (Case T-7/89) [1991] ECR II-1711, [1992] 4 CMLR 84 20, 123 Hilti v. Commission (Case T-30/89) [1991] ECR II-1439, [1992] 4 CMLR 16 78, 82, 83 Ice-cream cases (Langnese-Iglo v. Commission) (Cases T-7/93 and T-9/ 93) [1995] ECR II-1633, [1995] 5 CMLR 602 128, 130 ICI v. Commission (Case T-36/91) [1995] ECR II-1847 124
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Irish Sugar (Case T-228/97) [1999] ECR II-2969, [1999] 5 CMLR 1300 87, 108 ITT Promedia v. Commission (Case T111/96) [1998] ECR II-2937, [1998] 5 CMLR 491 97 Kruidvat v. Commission (Case T-87/92) [1996] ECR II-1931, [1997] 4 CMLR 1046 139 La Cinq v. Commission (Case T-44/90) [1994] ECR II-1, [1992] 4 CMLR 449 128 Mayr-Melnhof Kartongedellschaft v. Commission (Case T-347/94) [1998] ECR II-1751 20 Métropole v. Commission (Joined Cases T-528/93, T-542/93, T-543/93 and T546/93) [1996] ECR II-649, [1996] 5 CMLR 386 139 Métropole v. Commission (Case T-112/ 99, Judgment of 17 September 2001, not yet reported 72 Métropole v. Commission (Case T-206/ 99) (judgment of 21 March 2001, not yet reported) 118 Montecatini v. Commission (Case T-14/ 89) [1992] ECR II-2409 72 Prodifarma v. Commission (Case T-3/90) [1991] ECR II-1 136, 142 RTE v. Commission (the Magill cases) (Cases T-69/70/89 etc.) [1991] ECR II-485, [1991] 4 CMLR 586 102, 106 Schöller v. Commission (Case T-9/93) [1995] ECR II-1611, [1995] 5 CMLR 602 32 Scottish Football Association v. Commission (Case T-46/92) [1994] ECR II-1039 121 Shell v. Commission (Case T-11/89) [1992] ECR II-757 12 Società Italiana Vetro v. Commission (Cases T-68, 77 and 79/89) [1992] ECR II-1403, [1992] 5 CMLR 302 107, 109 Solvay v. Commission (Case T-30/91) [1995] ECR II-1775, [1996] 5 CMLR 57 106, 124
TetraPak v. Commission (TetraPak II) (Case T-83/91) [1994] ECR II755 83, 88, 92, 96, 104 Tiercé Ladbrooke (Case T-504/93) [1997] ECR II-923, [1997] 5 CMLR 309 102 Tréfilunion v. Commission (Case T-148/ 89) [1995] ECR II-1063 36, 43
Case T-6/89 Enichem Anic v. Commission [1991] ECR II-1623 12 Case T-7/89 Hercules v. Commission (Polypropylene cartel case) [1991] ECR II-1711, [1992] 4 CMLR 84 20, 123 Case T-11/89 Shell v. Commission [1992] ECR II-757 12 Case T-14/89 Montecatini v. Commission [1992] ECR II-2409 72 Case T-30/89 Hilti v. Commission [1991] ECR II-1439, [1992] 4 CMLR 16 78, 82, 83 Case T-65/89 BPB v. Commission [1993] ECR II-389, [1993] 5 CMLR 32 93, 100 Cases T-68, 77 and 79/89 Società Italiana Vetro v. Commission [1992] ECR II-1403, [1992] 5 CMLR 302 107, 109 Cases T-69/70/89 etc. RTE v. Commission (the Magill cases) [1991] ECR II-485, [1991] 4 CMLR 586 101, 130 Case T-138/89 Dutch banks [1992] ECR II-2195, [1993] 5 CMLR 435 137 Case T-143/89 Ferriere Nord v. Commission [1995] ECR II-917 34 Case T-148/89 Tréfilunion v. Commission [1995] ECR II-1063 36, 43 Case T-3/90 Prodifarma v. Commission [1991] ECR II-1 136, 142 Case T-24/90 Automec v. Commission (Automec II) [1992] 5 CMLR 431 118, 129, 131 Case T-28/90 Asia Motor France v. Commission [1992] ECR II-2285, [1992] 5 CMLR 431 141 Case T-44/90 La Cinq v. Commission [1994] ECR II-1, [1992] 4 CMLR 449 128
Table of cases Case T-30/91 Solvay v. Commission [1995] ECR II-1775, [1996] 5 CMLR 57 106, 124 Case T-36/91 ICI v. Commission [1995] ECR II-1847 124 Case T-83/91 TetraPak v. Commission (TetraPak II) [1994] ECR II-755 83, 88, 92, 96, 104 Cases T-10–12/92 and T-15/92 Cimenteries v. Commission [1992] ECR II-2667, [1992] 4 CMLR 259 123 Case T-35/92 Deere v. Commission [1994] ECR II-957 27 Case T-37/92 Bureau Européen des Unions des Consommateurs v. Commission [1994] ECR II-285, [1995] 4 CMLR 167 117 Joined Cases T-39/92 and T-40/92 CB and Europay v. Commission [1994] ECR II-49 48 Case T-46/92 Scottish Football Association v. Commission [1994] ECR II-1039 121 Case T-87/92 Kruidvat v. Commission [1996] ECR II-1931, [1997] 4 CMLR 1046 139 Case T-96/92 Comité Central d’entreprise de la Société Générale des Grandes Sources and others v. Commission [1995] ECR II-1213 139 Case T-3/93 Air France v. Commission [1994] ECR II-121 137, 139 Case T-5/93 BENIM v. Commission [1995] ECR II-197, [1996] 4 CMLR 305 117 Cases T-7/93 and T-9/93 Ice-cream cases (Langnese-Iglo v. Commission) [1995] ECR II-1633, [1995] 5 CMLR 602 128, 130 Case T-9/93 Schöller v. Commission [1995] ECR II-1611, [1995] 5 CMLR 602 32 Case T-12/93 Comité Central d’entreprise de la Société Anonyme Vittel and others v. Commission [1995] ECR II-1247 139
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Joined Cases T-24–26 and 28/93 Compagnie Maritime Belge v. Commission [1996] ECR II-1201 109 Case T-504/93 Tiercé Ladbrooke [1997] ECR II-923, [1997] 5 CMLR 309 102 Joined Cases T-528/93, T-542/93, T-543/93 and T-546/93 Métropole v. Commission [1996] ECR II-649, [1996] 5 CMLR 386 118 Case T-229/94 Deutsche Bahn v. Commission [1997] ECR II-1689, [1998] 4 CMLR 220 78, 87 Case T-311/94 BPB Eendracht v. Commission [1998] ECR II-1129 123 Joined Cases T-374–375, 384, 388/94 ENS v. Commission [1998] ECR II3141 39 Joined Cases T-25/95 Cimenteries v. Commission [2000] ECR II-491, [2000] 5 CMLR 204 124, 136 Case T-41/96 Bayer v. Commission [2000] ECR II-3383 19, 20 Case T-41/96R Bayer v. Commission [1996] ECR II-381, [1996] 5 CMLR 290 134, 135 Case T-102/96 Gencor v. Commission [1999] ECR II-753, [1999] 4 CMLR 971 14, 109 Case T-111/96 ITT Promedia v. Commission [1998] ECR II-2937, [1998] 5 CMLR 491 97 Case T-228/97 Irish Sugar [1999] ECR II-2969, [1999] 5 CMLR 1300 87, 108 Case T-128/98 Aéroports de Paris v. Commission [2000] ECR II-3929 93 Case T-112/99 Métropole v. Commission (Judgment of 18 September 2001, not yet reported 72 Case T-206/99 Métropole v. Commission (judgment of 21 March 2001, not yet reported) 118
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National UK American Cyanamid v. Ethicon [1975] AC 396 150 Application des Gaz v. Falks Veritas [1974] Ch. 381 148 Chelmkarm v. Esso [1979] 1 CMLR 73 150 Cutsforth v. Mansfield Inns [1986]
1 CMLR 1 148, 150 Garden Cottage Foods v. Milk Marketing Board [1984] AC 130 148, 150
USA United States v. Alcoa, 148F 2d 416 (2 Circ. 1945) 13
Chapter title
Table of EC Treaty provisions
Art. 3(g) EC 2 Art. 10 EC 8 Art. 28 EC 111 Art. 30 EC 111 Art. 39 EC 11 Arts 81–89 EC 2 Art. 81 EC 15 Art. 81(1) EC 17, 113, 145, 150 Art. 81(2) EC 46, 113, 145, 150 Art. 81(3) EC 46, 47, 51, 113, 147 Art. 82 EC 15, 76 Art. 82(1)(a) EC 89 Art. 82(1)(b) EC 91 Art. 82(1)(c) EC 91 Art. 82(1)(d) EC 96 Art. 83 EC 155 Art. 85(3) 113, 116 Art. 86 EC 92 Art. 87 EC 3
Art. 87(2) EC 3 Art. 87(3) EC 3 Art. 88 EC 3 Art. 225 EC 135 Art. 229 EC 135 Art. 230 EC 119, 135, 140, 147 Art. 230(1) EC 133, 136, 137 Art. 230(3) EC 138 Art. 230(4) EC 138, 142 Art. 230(5) EC 140 Art. 232(2) EC 119, 135, 141 Art. 232(3) EC 119, 142 Art. 234 EC 140, 146, 147 Art. 235 EC 143 Art. 242 EC 135 Art. 243 EC 135 Art. 253 EC 118, 134 Art. 254(3) EC 134 Art. 288(2) EC 143
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EC Competition Law and Policy
Chapter title
xxv
Table of EC legislation
Council Regulations Reg. 17/62 OJ Sp. Ed. [1962] 204/62, p. 87 3, 47 Art. 2 116 Art. 3 116, 127, 129, 143, 155 Art. 4(1) 51, 116 Art. 4(2) 116, 152 Art. 4(2)(2) 116 Art. 5(1) 116 Art. 6(1) 58, 116 Art. 6(2) 58, 116 Art. 8(1) 133 Art. 9(1) 113, 116, 145 Art. 9(3) 145, 150 Art. 11 120, 153 Art. 11(2) 120 Art. 11(3) 120 Art. 11(4) 120, 137 Art. 11(5) 120, 127 Art. 12 121 Art. 13 121 Art. 14 120, 153 Art. 14(1) 120 Art. 14(3) 120, 127, 137 Art. 15(5) 117, 132, 136 Art. 15(6) 117, 126, 136 Art. 16 132 Art. 17 132 Art. 19 125, 139 Art. 19(1) 125 Art. 19(2) 125 Art. 20(1) 121 Reg. 141/62 OJ Sp. Ed. [1959–62] 291 11, 114
Reg. 19/65 OJ Sp. Ed. [1965] 35 47, 51 Art. 1(1)(a) 57 Reg. 1017/68 OJ Sp. Ed. [1968] 302 3, 11, 114 Art. 12(3) 133 Reg. 2821/71 OJ Sp. Ed. [1971] 1032 47, 51 Reg. 4064/89 OJ [1989] L 257/13 (amended OJ [1990] L 257/13) 3, 114, 139 Reg. 1534/91 OJ [1992] L 398/7 48, 51 Reg. 1310/97 OJ [1997] L 180/1 114 Reg. 659/1999 OJ [1999] L 83/1 3 Reg. 1215/99 OJ [1999] L 148/1 57 Reg. 1216/99 OJ [1999] L 148/5 57, 116
Commission Regulations
3,
Reg. 99/63 OJ Sp. Ed. [1963] 47 118 Art. 6 141 Reg. 67/67 OJ Eng. Sp. Ed. [1967] 52 Reg. 1983/83 OJ [1983] L 173/1 52 Art. 1 52 Art. 2 53 Art. 6 64 Reg. 1984/83 OJ [1983] L 173/5 37, 52 Art. 1 37 Art. 3(d) 37, 53 Art. 14 63 Reg. 417/85 OJ [1985] L 53/1 48, 53 Art.1 53 Reg. 418/85 OJ [1985] L 53/5 53 Art. 1 53 Reg. 4056/86 OJ [1986] L 378/4 3, 11, 114
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Reg. 1475/88 OJ [1995] L 145/25 52, 60 Art. 1 52 Reg. 4087/88 OJ [1988] L 359/46 52 Art. 1(3)(a) 52 Art. 1(3)(b) 52 Art. 6 53 Art. 8 64 Reg. 240/96 OJ [1996] L 31/2 45, 52, 60 Art. 7 64 Reg. 1582/97 OJ [1997] L 214/2 52 Reg. 2236/97 OJ [1997] L 306/12 53 Reg. 2842/98 OJ [1998] L 354/18 118, 134 Art. 3 122 Art. 4 122, 126 Art. 5 126 Art. 6 118, 137, 141 Art. 8 126 Art. 9 126 Art. 9(3) 126 Arts 10–14 126 Art. 13(1) 123 Reg. 2790/1999 OJ [1999] L 336/21, [2000] 4 CMLR 398 7, 33, 44, 46, 48, 66, 67 Art. 1 59, 67 Art. 1(c) 28, 60 Art. 2 59, 67 Art. 2(1) 60 Art. 2(1)(1) 59 Art. 2(1)(2) 60 Art. 2(2) 60, 61 Art. 2(3) 60 Art. 2(4) 60 Art. 2(5) 60 Art. 3 60, 67 Art. 4 60 Art. 4(a) 41, 62 Art. 4(b) 62 Art. 4(c) 62 Art. 4(d) 63 Art. 4(e) 63 Art. 5 63 Art. 5(a) 63 Art. 5(b) 63 Art. 5(c) 63 Art. 6 64 Art. 7 64 Art. 8 64 Art. 12 54 Art. 13 54 Reg. 2658/2000 OJ [2000] L 304/3, [2001] 4 CMLR 800 60, 65 Art. 1 53
Art. 5(1) 34 Reg. 2659/2000 OJ [2000] L 304/7, [2001] 4 CMLR 808 7, 42, 60, 65 Art. 1 53 Art. 5(1) 34
Commission Draft Regulations Draft regulation implementing Articles 81 and 82 EC [ 2000] 5 CMLR 1148 3, 10, 154, 155, 156, 157
Council Decisions 88/591 OJ [1988] L 319/1 135 93/350 OJ [1993] L 144/21 135
Commission Notices Notice on co-operation between national courts and the Commission in applying Articles 85 and 86 of the EEC Treaty, OJ [1993] C 39/6, [1993] 5 CMLR 95 6, 146, 147 Notice on co-operation between national competition authorities and the Commission in handling cases falling within the scope of Articles 85 and 86 of the EEC Treaty, OJ [1997] C 313/3, [1997] 5 CMLR 884 6, 9, 150 Notice on access to the file, OJ [1997] C 25/3 123 Notice on agreements of minor importance, OJ [1997] C 372/3 31, 32 Notice on market definition OJ [1997] C 372/5 75, 77, 79, 81, 82, 84
Commission Guidelines Guidelines on vertical restraints, OJ [2000] C 291/1, [2000] 5 CMLR 1074 41, 55 Guidelines on the applicability of Article 81 EC to categories of research and development agreements, OJ [2001] C 3/2, [2001] 4 CMLR 819 42
The foundations of EC competition law
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1 The foundations of EC competition law
1.1 Introduction Competition law is a rapidly developing area, fundamental to most legal systems. Despite its idiosyncratic and technical character, it influences numerous fields of law and itself draws heavily on principles of economics and politics. Its primary aim is to protect and encourage the competitive process, resulting in an optimum allocation of resources and the maximisation of consumer welfare. Bork points out: ‘antitrust was originally conceived as a limited intervention in free and private processes for the purpose of keeping these processes free’.1 In other words, competition law regulates market behaviour in order to preserve a free market economy. In a perfectly competitive market – i.e. one in which there are no barriers to entry or exit, where buyers and sellers of homogeneous products are plentiful, and where competitors have similar and very small market shares and there is total transparency – a system of competition law would be superfluous. This type of market is, however, almost impossible to find in practice, just as pure monopoly is unlikely to arise without state intervention. Most markets are placed between these two extremes and, in the absence of any form of control, undertakings are inclined to collude to fix prices, those in a dominant position misuse their market strength and mergers lead to excessive concentrations of economic power.2 All these practices hinder or impede the competitive process. Competition law has played a prominent role in the development of EC law. In addition to the general objectives outlined above, it has also contributed significantly, and often controversially, to the consolidation of the 1
2
See R. H. Bork, The Antitrust Paradox: A Policy at War with Itself (New York, 1978, reprinted with a new Introduction and Epilogue, 1993) at p. 418. For a full discussion of the economic background of competition policy, see E. Gellhorn and W. E. Kovacic, Antitrust Law and Economics (St Paul, MN, 1994).
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single market objective of the Treaty. In the following pages the basic principles that underpin EC competition law will be considered.
1.2 The EC Treaty provisions in competition Although the Preamble to the Treaty refers to the need to guarantee ‘steady expansion, balanced trade and fair competition’, the basis of EC competition policy is Article 3(g) EC. This Article provides that one of the activities intended to help the achievement of the aims of the Community is ‘the establishment of a system ensuring that competition in the internal market is not distorted’. Since this is a provision drafted in very general terms – as are many others in the Treaty – the Commission and Community judicature have been primarily responsible for the shaping of the aims and objectives of EC competition law. Articles 81–89 EC establish a set of rules on competition and can be divided into two main groups: (a) those that focus on the activities of undertakings, and (b) those that focus on the activities of governments.
1.2.1 Rules concerning the activities of undertakings Three provisions set out the parameters within which undertakings should operate to guarantee, as far as possible, the preservation of a competitive market: 1. Article 81 EC refers to anti-competitive behaviour that results from collusion between private undertakings. It prohibits agreements, decisions by associations of undertakings and concerted practices which may affect trade between Member States and that have the object or effect of preventing, restricting or distorting competition. 2. Article 82 EC aims to control abuses of dominant position, by one or more private undertakings, which may affect trade between Member States. 3. Article 86 EC sets out the rules that apply to public undertakings or to undertakings granted special rights. The Treaty did not establish a specific legal basis for mergers between undertakings. The European Court of Justice (ECJ) in some of its early case law, considered the suitability of Articles 81 EC or 82 EC as the means of controlling mergers. In particular, its judgment in Continental Can v. Commission,3 supported the Commission’s use of Article 82 EC for these
3
Case 6/72 [1973] ECR 215, [1973] CMLR 199.
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purposes.4 The adoption of the Merger Regulation in 1989, however, finally provided a separate substantive and procedural framework for the regulation of concentrations between undertakings.5
1.2.2 Rules concerning the activities of governments Competition may be distorted not only by undertakings, but also by the action of a Member State, most commonly where the latter gives artificial competitive advantages to declining national industries. Article 87 EC lays down the principle that state aids are incompatible with EC law, unless otherwise provided in the Treaty. This provision also sets out some kinds of aid that are automatically6 or that may be permitted.7
1.2.3 Procedural rules Article 83 EC provides that the Council will adopt appropriate regulations or directives to give effect to the principles in Articles 81 and 82 EC. On the basis of this provision, the Council enacted Regulation 17/62,8 which sets out the general procedure for the enforcement of Articles 81 and 82 EC at Community level. A radical reform of the system of enforcement provided in Regulation 17/62 was suggested by the Commission in its 1999 White Paper on enforcement.9 This crystallised in the recent proposal of the Commission for a draft enforcement regulation in September 2000.10 The current system of enforcement and the proposed reforms will be considered in detail in Chapter 4. Moreover, certain sectors of the economy are the subject of special regulations, such as transport.11 Likewise, mergers and state aids are subject to specific procedural rules set out respectively in the EC Merger regulation12 and in Article 88 EC and its implementing regulation.13
4
5 6 7 8 9 10 11
12 13
In BAT and Reynolds v. Commission [1987] ECR 4487, [1988] 4 CMLR 24, the Court confirmed the Commission’s view that Article 81 EC could be used in cases where an undertaking acquired a minority shareholding in a competitor, thus prompting fears that this was a stepping stone for the application of Article 81 EC to mergers. See Council Regulation 4064/89 OJ [1989] L 395/1 (amended OJ [1990] L 257/13). See Article 87(2) EC. See Article 87(3) EC. OJ Sp. Ed. [1962] 87. OJ [1999] C 132/1, [1999] 5 CMLR 208. [2000] 5 CMLR 1148. See Regulation 141/62 (OJ Sp. Ed. [1959–62] 291); Regulation 1017/68 (OJ Sp. Ed. [1968] 302); Regulation 4056/86 (OJ [1986] L 378/4). See supra n. 5. See Council Regulation 659/1999 (OJ [1999] L 83/1).
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1.3 The scope of application of Articles 81 and 82 EC As this work focuses on Articles 81 and 82 EC, it seems necessary at the outset to understand the basic structure and scope of application of these two provisions. This is set out in Figure 1.1.14 Article 81 EC deals with anti-competitive behaviour that results from collusion between undertakings. This provision therefore does not refer to unilateral but to bilateral or multilateral behaviour. It is divided into three paragraphs. The first lays down a general prohibition against anticompetitive forms of cooperation between undertakings. The second provides a sanction of nullity for the infringement of that prohibition. The third allows exemptions to be granted to forms of cooperation that come under the prohibition in the first paragraph, on account of their beneficial effects. Anti-competitive agreements, decisions by associations of undertakings and concerted practices.
Abuses of dominant position by one or more undertakings
▼ Article 81 EC (ex Art. 85)
▼ Article 82 EC (ex Art. 86 EC)
▼ Art. 81(1) = Prohibition
▼ Art. 82 = Prohibition
▼ Art. 81(2) = Sanction ▼ Art. 81(3) = Exemptions Figure 1.1 Scope of application of Articles 81 and 82 EC
14
See infra p. 4.
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Article 82 EC, by contrast, prohibits abuses of dominant position by one or more undertakings. As the Court expressed it in Continental Can,15 this provision concerns the unilateral activity of one or more undertakings. Even when more than one undertaking is involved – such as in the case of joint or collective dominance – their behaviour is still regarded as unilateral where they operate as a single economic unit which is dominant and abuse that position of dominance. The structure of Article 82 EC is simple: it comprises only a prohibition on abuses of dominant position and there is neither a provision for automatic nullity nor a provision for exemption equivalent to those in Article 81 EC. Articles 81 and 82 EC will be considered in detail in Chapters 2 and 3 of this work respectively.
1.4 The two levels of enforcement of EC competition law: the roles of the Commission, the national courts and national authorities Articles 81 and 82 EC are both enforced at Community level and at national level. At Community level, the Commission is the enforcement authority, as provided by Article 85 EC, and its specific powers are laid down in Regulation 17/62. Under this regulation, the Commission may find that there has been an infringement of Article 81 or 82 EC and, as a result, impose fines or, alternatively, it may adopt decisions finding that there has been no breach of the competition rules. It may also grant exemptions.16 Undertakings dissatisfied with Commission decisions may challenge them before the Court of First Instance and an appeal on points of law is available before the European Court of Justice.17 At national level, national courts and national competition authorities are competent to enforce competition law.18 National courts derive their power to apply Articles 81(1) and (2) and Article 82 EC from the direct effect of these provisions.19 The power of enforcement of national com15 16 17
18 19
See supra n. 3. See infra Chapter 4, section 4.2.1. The judicial review of acts adopted by the Commission in the enforcement of competition policy is discussed in detail in Chapter 4, section 4.2.2. See infra Chapter 4, section 4.3. The EC Treaty did not expressly lay down the principle of direct effect. This was enunciated by the Court in its seminal judgment in Van Gend en Loos v. Nederlandse administratie der belastingen (Case 26/62 [1963] ECR 1, [1963] CMLR 105), where the Court held that Treaty provisions were capable of giving rights to individuals that could be enforced before national courts (at p. 12). The Court explained that, to be directly effective, a provision had to be sufficiently clear and unconditional and not subject to further implementation (at p. 13). In competition law, the Court took the view that Articles 81(1)
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petition authorities is founded in Articles 84 EC and 9(3) of Regulation 17/62.20 However, in the current system of enforcement, neither national courts nor national authorities can grant exemption or, in other words, apply Article 81(3) EC. This is because Article 9(1) of Regulation 17/62 granted the Commission the exclusive power to grant exemptions. One of the core reforms suggested by the Commission in its 1999 White Paper is that Article 81 EC, as a whole, should be directly applicable by national courts and national authorities.21
1.5 The aims of EC competition policy In its XXIXth Report on Competition Policy, the Commission clearly set out the two principal objectives that underline Community Competition law: The first objective of competition policy is the maintenance of competitive markets. Competition policy serves as an instrument to encourage industrial efficiency, the optimal allocation of resources, technical progress and the flexibility to adjust to a changing environment … The second is the single market objective … 22
Therefore, in addition to the general goals pursued by any competition system, EC competition law fulfils the function of contributing to the achievement of the single market.23 The removal of barriers to the free movement of factors of production put in place by Member States would be pointless if private parties could divide the territories of the Common Market by means of anti-competitive practices or if concentrations of economic power could significantly restrict market access.24
20
21 22 23
24
and Article 82 EC were directly effective in BRT v. SABAM (I) (Case 127/73 [1974] ECR 51, [1974] CMLR 238). See also the Notice on co-operation between national courts and the Commission in applying Articles 85 [now 81] and 86 [now 82] of the EEC [now EC] Treaty (OJ [1993] C 39/6, [1993] 5 CMLR 95) at II.5. Unlike the national courts, however, they can only enforce Articles 81(1) and 82 EC as long as the Commission has not initiated enforcement proceedings (see Article 9(3) Regulation 17/62). See also the Notice on co-operation between national competition authorities and the Commission in handling cases falling within the scope of Articles 85 [now 81] and 86 [now 82] of the EC Treaty (OJ [1997] C 313/3, [1997] 5 CMLR 884). See infra Chapter 4, section 4.4 [1999]. See the XXIXth Report on Competition Policy at paragraphs 2 and 3. The inextricable link existing between the Treaty provisions on competition and the consolidation of the single market has been emphasised repeatedly by the Court (see, for example, its judgment in Leclerc v. Au Blé Vert (Case 229/83 [1985] ECR 1, [1985] 2 CMLR 286), at paragraph 9 of the judgment). In Consten and Grundig v. Commission (Joined Cases 56 and 58/64 [1966] ECR 299, [1966] CMLR 418), the Court held that ‘an agreement between a producer and a distributor
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The Commission and the Community judicature have, in their interpretation of Articles 81 and 82 EC, consistently upheld the single market objective. This has been achieved by the prohibition of agreements that may lead to the partitioning of the Common Market, such as market sharing agreements,25 and also with the exemption of certain agreements that may promote cross-border trade, such as research and development agreements26 or certain vertical agreements.27 The single market aim has also influenced the construction of certain types of abusive conduct, for example discriminatory practices.28 Finally the Court has also consistently interpreted the requirement in both Articles 81 and 82 EC that the anticompetitive practices should have an effect on intra-Community trade with a view to upholding the single market principle.29 The defence of this specific objective of EC competition law has not been uncontroversial. For example, in United Brands v. Commission,30 the Court upheld the Commission’s view that United Brands, a leading world producer of bananas, had abused its position of dominance in a series of practices which included the charging of different prices to its distributors in the Community. The principle of non-discrimination is, of course, one of the tenets of the Common Market. The Court took the view that the different prices, in combination with the other resale restrictions imposed by United Brands, created a rigid partitioning of national markets. The ruling of the Court was, however, criticised as lacking a proper economic basis and argued to be justified solely by the need to uphold the single market ideal.31
25
26 27 28
29
30 31
which might tend to restore the national division in trade between Member-States might be such as to thwart the most basic objectives of the Community. The Treaty, whose preamble and text aim to suppress the barriers between States, and which in several provisions gives evidence of a stern attitude with regard to their reappearance, could not allow undertakings to reconstruct such barriers’ (at p. 340). See Case 41/69 Chemiefarma v. Commission [1970] ECR 661, and the decision of the Commission in Re Soda Ash (Decision 91/297/EEC OJ [1991] L 152/1, [1994] 4 CMLR 454). See Regulation 2659/2000 (OJ [2000] L 304/7). See Regulation 2790/1999 (OJ [1999] L 336/21). See Case 27/76 United Brands v. Commission [1978] ECR 207, [1978] 1 CMLR 429, and the decision of the Commission in The Football World Cup 1998 (Decision 2000/12/EC OJ [2000] L 5/55, [2000] 4 CMLR 963). See, for example, the very wide interpretation of the test by the Court in STM v. Maschinenbau Ulm (Case 56/65 [1966] ECR 234, [1966] CMLR 357) or the consistent line of case law that holds that even a purely national agreement can have an effect on intraCommunity trade if it contributes to the isolation of national markets and makes the penetration of imports difficult (see Case 8/72 Cementhandelaren v. Commission [1972] ECR 977, [1973] CMLR 7). Case 27/76, supra n. 28. See W. Bishop, ‘Price discrimination under Article 82 EC: political economy in the European Court’ [1981] 4 MLR 282.
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1.6 Community competition law and national law Member States of the Community have their own systems of national competition law, which may differ substantially from the one provided in the EC Treaty. This was the case in the United Kingdom until the enactment of the 1998 Competition Act, the Chapter I and II prohibitions of which mirror closely Articles 81 and 82 EC respectively. The EC Treaty remained silent about how conflicts between EC law and national law should be resolved. In COSTA v. ENEL,32 the Court laid down the principle of the supremacy of EC law, which, together with the principle of direct effect, constitutes the cornerstone of the Community legal order. It held that, in the event of a conflict between national law and directly effective Community law, the latter should prevail. The Court applied this principle in the framework of EC competition law in Wilhelm v. Bundeskartellamt.33 Moreover, Article 10 EC imposes on Member States an obligation to refrain from enacting any measures ‘that could jeopardise the attainment of the objectives of the Treaty’.34 In Wilhelm v. Bundeskartellamt35 the Court considered the issue of the concurrent application of national competition law and EC competition law. In that case, the German Federal Cartel Bureau (Bundeskartellamt) investigated and fined a group of undertakings, which had engaged in price fixing, pursuant the German Law against Restraint of Competition (GWB). A few months before the final decision of the Bundeskartellamt, the Commission commenced proceedings against the same undertakings, under Article 81(1) EC. The main argument of the undertakings before the national court was that the Bundeskartellamt could not continue proceedings for an offence which was being simultaneously investigated by the Commission. The Court recognised that the same agreement could be subject to parallel proceedings and, therefore, that national competition law and EC competition law could apply concurrently to it. This could be the case provided that a parallel application did not ‘prejudice the uniform application, throughout the Common Market, of the Community rules on cartels and the full effect of the acts adopted in implementation of those 32 33 34
35
Case 6/64 [1964] ECR 585, [1964] CMLR 425. Case 14/68 [1969] ECR 1, [1969] CMLR 100, at paragraph 6 of the judgment. This has been interpreted by the Court as follows: ‘Whilst it is true that the rules on competition are concerned with the conduct of undertakings and not with national legislation, Member States are none the less obliged under the second paragraph of Article 5 [now 10] of the Treaty not to detract, by means of national legislation, from the full and uniform application of Community law or from the effectiveness of its implementing measures; nor may they introduce or maintain in force measures, even of a legislative nature, which may render ineffective the competition rules applicable to undertakings’ (Case 229/83, supra n. 23, at paragraph 14 of the judgment). Case 14/68, supra n. 33.
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rules’.36 It would follow from this that parallel proceedings are possible as long as the Commission and the national authorities do not issue conflicting decisions. In Wilhem v. Bundeskartellamt,37 there was no conflict because both the Commission and the national competition authority had reached the conclusion that the agreement ought to be prohibited. But in the event of a conflict, should national authorities always give priority to the Commission’s view? The principle of supremacy of EC law and the statement in Wilhelm would seem to dictate this conclusion, but considerable debate has surrounded the issue. On the one hand, it seems clear from the judgment that if the Commission reaches the conclusion that an agreement (in the context of Article 81 EC) or abusive practice (in the context of Article 82 EC) should be prohibited, then the national authority should not reach a different conclusion.38 If a national competition authority could authorise an agreement that the Commission had prohibited, this would effectively mean that the force of Community law could vary from one Member State to another, thereby jeopardising the attainment of the objectives of the Treaty.39 The Commission explained this in very clear terms in its Notice on co-operation between national competition authorities and the Commission: Where an infringement of Articles 85 [now 81] or 86 [now 82] is established by Commission decision, that decision precludes the application of a domestic legal provision authorising what the Commission has prohibited. The objective of the prohibitions in Articles 85(1) [now 81(1)] and 86 [now 82] is to guarantee the unity of the Common Market and the preservation of undistorted competition in that market. They must be strictly complied with if the functioning of the Community regime is not to be endangered.40
On the other hand, if the Commission finds that an agreement is not restrictive of competition or exempts it, could the national authority apply stricter national law and prohibit the agreement? Could it be argued that the application of stricter national law poses no danger to the fundamental objectives of the Treaty and therefore should be allowed?41 In 36 37 38
39 40 41
Case 14/68, supra n. 33, at paragraph 5 of the judgment. Case 14/68, supra n. 33. Even where national and EC competition law is similar or identical, if the Commission reaches the conclusion that an agreement should be prohibited, national courts may not decide otherwise (see Case 298/83 CICCE v. Commission [1985] ECR 1105, [1986] 1 CMLR 486, at paragraph 27 of the judgment). In this respect, see also COSTA v. ENEL (Case 6/64, supra n. 32, at p. 594). OJ [1997] C 313/3, [1997] 5 CMLR 884. See K. Markert, who considered this possibility in detail in ‘Some legal and administrative problems of the co-existence of Community and national competition law’ [1974] CMLRev 92 at pp. 96–8. See also the Opinion of AG Roemer in Wilhelm v. Bundeskartellamt (Case 14/ 68, supra n. 33). He took the view that in this case there would not be a real conflict between Community and national law because the fundamental objectives of the Treaty would not be threatened (at. pp. 23–4).
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Bundeskartellamt v. Volkswagen42 the Commission and Advocate General Tesauro43 vigorously defended the view that national authorities should not be able to prohibit an exempted agreement. Any other conclusion would be at variance with the principle of supremacy of EC law and would undermine the uniform application of Community law. Unfortunately, the Court did not consider the issue in this case, and clarification remained necessary. Article 3 of the new draft enforcement regulation,44 however, has finally addressed this issue by taking the bold step of regulating the relationship between national and EC competition law. It provides that where an agreement or practice ‘may affect trade between Member States, Community competition law shall apply to the exclusion of national competition laws’. In other words, the draft regulation introduces the view that the concurrent application of EC and national law should be avoided and that, if an agreement or practice might have an effect on Community trade, national competition authorities should refrain from applying national competition law and should apply exclusively EC competition law. The Explanatory Memorandum to the Draft Regulation justifies this approach on the need to ensure a level playing field throughout the Community and on the protection of the single market ideal of the Treaty. It points out that ‘it is inconsistent with the notion of a single market that agreements and practices capable of affecting cross-border trade should be subject to different standards and that agreements which would be considered innocuous or beneficial under Community law can be prohibited under national competition law.’45 This development is to be welcomed as it resolves the uncertainties that followed the judgment in Wilhem v. Bundeskartellam.46 One problem that may arise, however, is that the requisite effect on intra-Community trade, although fairly straightforward in principle, is not always easy to ascertain in practice.47
1.7 The common elements in Articles 81 and 82 EC Three issues, common to both Articles 81 and 82 EC, deserve specific comment before these provisions are examined in detail in Chapters 2 and 3 respectively. 42 43 44 45
46 47
Case C-266/93 [1995] ECR I-3477, [1996] 4 CMLR 478. See Case C-266/93, supra n. 42, at paragraphs 50–1 of his Opinion. See supra n. 10 and infra Chapter 4, section 4.4.3. See the Explanatory Memorandum to the Draft Regulation (supra n. 10), section 4, ‘The Regulation, Article by Article’). Case 14/68, supra n. 33. See further infra Chapter 2, section 2.2.2.
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1.7.1 The notion of undertaking Both Articles 81 and 82 EC apply to the behaviour of ‘undertakings’ but, unsurprisingly for EC Treaty provisions, the term is not defined. Lack of definition is not uncommon in the Treaty. For example, in the field of free movement of goods and persons, no definition is given by the Treaty to key concepts, such as measures having equivalent effect to quantitative restrictions in Article 30 EC, or the notion of a worker in Article 39 EC. These concepts have been rendered meaningful by the case law of the European Court. 48 The Court generally construes the notion of undertaking very widely. In Höfner v. Macroton,49 the Court defined an undertaking as ‘every entity engaged in an economic activity regardless of the legal status of the entity and the way in which it is financed’.50 This wide interpretation has various implications. First, not only companies but also natural persons can constitute undertakings, as the Court has ruled in several of its decisions.51 Secondly, the Court has also made it clear that the term ‘undertaking’ designates an ‘economic unity for the purposes of the subject-matter of the agreement, even if in law that economic unit consists of several persons, natural or legal’.52 This means that several independent undertakings with separate legal personalities may constitute only one undertaking for the purposes of EC competition law. Thus a parent company and its subsidiary,53 or 48
49 50
51
52 53
See, for a definition of measures having equivalent effect to quantitative restrictions, Procurer de Roi v. Dassonville (Case 8/74 [1974] ECR 837, [1974] 2 CMLR 436, at paragraph 5 of the judgment); for a definition of work and of a worker, see Levin v. Staatssecretaris van Justitie (Case 53/81[1982] ECR 1035, [1982] 2 CMLR 454, at paragraph 17 of the judgment) and Lawrie-Blum v. Land Baden-Württemberg (Case 66/85 [1986] ECR 2121, [1987] 4 CMLR 389). Case C-41/90 [1991] ECR I-1979, [1993] 4 CMLR 306. Ibid., at paragraph 21 of the judgment. The Commission has consistently adopted this definition (see Commission Decision 92/521/EEC Re Distribution of package tours during the 1990 World Cup, OJ [1992] L 326/31, [1994] CMLR 253, at paragraph 43 of the Decision). See Case 170/83 Hydrotherm v. Andreoli [1984] ECR 2999, [1985] 3 CMLR 224 at paragraph 11 of the judgment. See also Case 258/78 Nungeser and Eisele v. Commission [1982] ECR 2015, [1983] 1 CMLR 278. See Case 170/83, supra n. 51, at paragraph 11 of the judgment. See ICI v. Commission (Case 48/69 [1972] ECR 619, [1972] CMLR 557), a case under Article 81 EC, where the Court held: ‘The fact that a subsidiary has separate legal personality is not sufficient to exclude the possibility of imputing its conduct to the parent company. Such may be the case, in particular where the subsidiary, although having separate legal personality, does not decide independently upon its own conduct on the market, but carries out, in all material respects, the instructions given to it by the parent company’ (at paragraphs 132–3 of the judgment). In Commercial Solvents v. Commission (Joined Cases 6 and 7/73 [1974] ECR 223, [1974] 1 CMLR 309), a case under Article 82 EC, the Court took the same view, i.e. since it was clear that the parent company exercised a power of control over the subsidiary, the two would be considered as a single economic entity.
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several companies belonging to the same group,54 might be treated as one undertaking. The defining criterion for treating a parent and its subsidiary as a single undertaking is that the subsidiary should act under the direction or control of the parent company. In the case of treating a group of companies as one undertaking it is whether the group constitutes a ‘unitary organisation of personal, tangible and intangible elements which pursues a specific economic aim on a long-term basis’.55 Finally, changes in the corporate structure of an undertaking do not allow parties responsible for an infringement to escape liability. For example, in Enichem Anic v. Commission,56 the Court of First Instance made it clear that where an undertaking that committed an infringement of the competition rules has ceased to exist in law at the time when it must answer for that infringement, it is necessary ‘first to find the combination of physical elements which contributed to the commission of the infringement and then to identify the person who has become responsible for their operation’.57 Similarly, in Compagnie Royale Asturienne des Mines v. Commission,58 the Court upheld the Commission’s view that when an undertaking succeeds another that has committed an infringement of EC competition, the former will remain liable for the behaviour of the latter, when from an economic point of view the two are identical.59
1.7.2 The jurisdiction of the Commission to apply Articles 81 and 82 EC Both Articles 81 and 82 EC prohibit practices that distort competition within the Common Market. This clearly means that the Commission does have jurisdiction to prohibit agreements or abuses of dominant position by undertakings established in the Common Market. But does it have the power to apply the EC Treaty competition provisions extraterritorially? The case law has shed light on this important issue. First, in cases where a parent company is established outside the Common Market but its subsidiary is established within the Common Market, the Court has consistently held that the Commission can address 54
55
56 57 58 59
See Shell v. Commission (Case T-11/89 [1992] ECR II-757) at paragraphs 311–12 of the judgment. See Case T-11/89, supra n. 54, at paragraph 311. In this case the Court went even further, as it held that not only the Shell Group operating companies (in charge of manufacturing and sales) constituted a single economic unit, but also that one of Shell’s service companies (in charge of planning and coordination of the activities of the Shell Group) also was part of the same economic unit. Case T-6/89 [1991] ECR II-1623. Ibid., at paragraph 237 of the judgment. Cases 29–30/83 [1984] ECR 1679, [1985] 1 CMLR 688. Ibid., at paragraphs 7–9 of the judgment.
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a decision to the parent company concerning the anti-competitive behaviour of its subsidiary. For example, in ICI v. Commission (Dyestuffs),60 a case decided before the United Kingdom acceded to the European Community, the applicant had its registered office outside, but subsidiaries within, the Common Market and it objected that the anticompetitive conduct of its subsidiaries was imputed to it by the Commission. The Court took the view that the Commission had jurisdiction to do so, on the basis that the parent company and its subsidiaries constituted one ‘economic unity’ for the purposes of EC competition law. In other words, it was clear that the parent company had a decisive influence on the policy of its subsidiaries.61 An analogous conclusion was reached, within the framework of Article 82 EC, in Commercial Solvents v. Commission.62 Interestingly, however, Advocate General Mayrás, in his Opinion in ICI v. Commission,63 had not suggested this approach, for he thought that, taken to the extreme, ‘it would amount to denying any substance to the legal personality of the subsidiaries’.64 He suggested instead that the defining criterion should be that the anti-competitive practice in question has effects within the Common Market. This is known as the ‘doctrine of effects’, which has been intensely debated in public international law. In its purest form, it implies that a state has jurisdiction over activities of non-nationals abroad where these have effects within its territory.65 Advocate General Mayrás suggested that this doctrine should apply in the framework of EC competition law, subject to certain conditions. In particular, only where the effects of anti-competitive practices within the Community were direct and immediate, reasonably foreseeable and substantial, would the Commission have jurisdiction to apply EC competition law to undertakings not established in the Community.66 The Court was able to avoid considering the application of the doctrine of effects in cases involving parent companies established outside, but with subsidiaries within the Common Market, by using the ‘economic unity’ approach. However, it was only a matter of time before a case arose in which the companies responsible for the infringement had no subsidiaries within the Common Market, such as in the case of Ahlström 60 61 62 63 64 65 66
Case 48/69, supra n. 53. Ibid., at paragraphs 133–7 of the judgment. Joined Cases 6 and 7/73, supra n. 53. Case 48/69, supra n. 53. Ibid., at p. 693. See United States v. Alcoa, 148F 2d 416 (2 Circ. 1945). Ibid., at pp. 693–4. This mitigated form of the doctrine of effects is also based on American law, where it was put forward as a reaction to the criticism levelled at the absolute form of the doctrine in Alcoa (see the Opinion of AG Darmon in Ahlström and others v. Commission (Woodpulp I) (Joined Cases 89/95, 104/85, 114/85, 116–117/85, 125–129/85 [1988] ECR 5193, [1988] 4 CMLR 901) at paragraphs 32–46 of his Opinion, where he summarises the principles in US law).
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and others v. Commission (Woodpulp I).67 The Commission found that various Scandinavian, Canadian and North American producers of woodpulp were in breach of Article 81(1) EC. Several of them argued before the Court that the Commission had no jurisdiction to apply EC competition rules to them. Advocate General Darmon endorsed as a jurisdictional criterion the qualified form of the doctrine of effects suggested by Advocate General Mayrás in ICI v. Commission.68 The judgment of the Court was terse and did not explicitly embrace the doctrine of effects. The key paragraph of the judgment reads as follows: It should be observed that an infringement of Article 85 [now 81], such as the conclusion of an agreement which has had the effect of restricting competition within the common market, consist of conduct made up of two elements, the formation of the agreement, decision or concerted practice and the implementation thereof. If the applicability of the prohibitions laid down under competition law were made to depend on the place where the agreement, decision or concerted practice was formed, the result would obviously be to give undertakings an easy means of evading those prohibitions. The decisive factor is therefore the place where it is implemented [emphasis added].69
Accordingly, the Court decided that the Commission had jurisdiction on the basis that the practice had been implemented in the Common Market. The judgment left open the question whether the ‘implementation’ test was substantially identical to the qualified doctrine of effects described above. The recent decision of the Court of First Instance in Gencor v. Commission,70 a merger case, has the potential to resolve the debate about whether these two jurisdictional tests are one and the same. The case concerned a proposed merger between a South African company and a company incorporated under English law. The Commission declared that the proposed concentration was incompatible with the Common Market. Gencor, the South African company, argued that the Commission had no jurisdiction to do so, as the merger had originated and would have been implemented in South Africa. The Court of First Instance held that the application of the EC Merger Regulation71 would be justified when it was foreseeable that the merger would have an immediate and substantial effect in the Community.72 Thus, the Court adopted almost verbatim the suggestions of Advocates General Mayrás and Darmon in ICI and Woodpulp respectively. The Court did not reject the implementation test. In fact, it 67 68 69 70 71 72
Joined Cases 89/95, 104/85, 114/85, 116–117/85, 125–129/85, supra n. 66. Ibid., at paragraphs 47–59 of his Opinion. Ibid., at paragraph 16 of the judgment. Case T-102/96 [1999] ECR II-753. See supra n. 5. Ibid., at paragraphs 92–101 of the judgment.
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explained that the implementation test would be satisfied, contrary to Gencor’s submissions, because the companies’ aggregated sales worldwide and Community-wide were well above the thresholds in the EC Merger Regulation.73 More importantly, however, the Court of First Instance went further by tackling the argument that the European Court had failed to address in previous cases. Although Gencor is a merger case,74 there is no reason why the same approach should not extend to cases under Articles 81 and 82 EC.
1.7.3 The effect on trade between Member States A third essential element in both Articles 81 and 82 EC is that the anticompetitive practice in question – whether an agreement or an abuse of dominant position – should have an effect on trade between Member States. This element establishes, in principle, the boundary between the application of EC and national competition law. It is an element inextricably linked to the other constitutive elements of the prohibitions in Articles 81 and 82 EC, rather than a pre-condition. Therefore, it will be considered in detail in the analysis of these provisions in Chapters 2 and 3.75
73
74
75
Ibid., at paragraph 87 of the judgment. The EC Merger Regulation (see supra n. 5) refers only to concentrations that have a Community dimension. Articles 1(2) and 3 of the Merger Regulation set out the thresholds that are applied to establish whether or not a merger has a Community dimension. The thresholds refer mainly to the Community and world-wide turnover of the companies involved. The Gencor approach also pervades the recent Decision of the Commission that declares the proposed merger between two American companies, General Electric Co. and Honeywell Inc. to be incompatible with EC law (see the Commission Decision of 3 July 2001, Commission Press Release of 3 July 2001, IP/01/939). See infra Chapter 2, section 2.2.2 (Article 81 EC), and Chapter 3, section 3.2.3 (Article 82 EC).
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2 Anti-competitive agreements, decisions and concerted practices: Article 81 EC
2.1 Introduction Article 81 EC is the Treaty provision that covers anti-competitive behaviour that results from collusion between undertakings. It reads as follows: 1. The following shall be prohibited as incompatible with the common 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 Common 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,
Anti-competitive agreements, decisions, practices
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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 benefits, 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 substantial part of the products in question.
Article 81 EC has, therefore, a clear structure, which has been set out in Figure 2.1.1 It lays down: • a basic prohibition on anti-competitive agreements, decisions by associations of undertakings and concerted practices that may affect trade between Member States (Article 81(1) EC); • a sanction of nullity for any such agreements, decisions and concerted practices (Article 81(2) EC); • the possibility that such agreements, decisions or concerted practices may be given an exemption because of their beneficial effects (Article 81(3) EC). Step 1: Basic prohibition (Article 81(1) EC): • Form of cooperation: agreements, decisions, concerted practices • Effect on trade between Member States • Object or effect to prevent, restrict or distort competition within the Common Market Step 2: The sanction (Article 81(2) EC): • Agreements, decisions and concerted practices that fulfil the conditions in Article 81(1) are, in principle, void Step 3: Exemptions (Article 81(3) EC): • An agreement that fulfils the conditions in Article 81(1) EC may, nevertheless, be the subject of an exemption • Conditions in Article 81(3) EC must be satisfied: two positive and two negative conditions • Two types of exemption: (a) individual and (b) block exemptions Figure 2.1 Basic steps in the application of Article 81 EC 1
See infra p. 17.
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The three paragraphs of Article 81 EC will now be considered in turn.
2.2 Article 81(1) EC: the basic prohibition on anticompetitive agreements, decisions by associations of undertakings and concerted practices There are three elements necessary to determine that the basic prohibition set out in Article 81(1) EC applies. First, the existence of a form of cooperation between undertakings has to be shown. Article 81(1) EC enumerates three possible forms of cooperation: agreements, decisions by associations of undertakings and concerted practices. Secondly, the form of cooperation has to have the potential to affect trade between Member States. Thirdly, the form of cooperation must have an anti-competitive object or effect within the Common Market. Article 81 EC also provides a non-exhaustive list of practices that would generally be caught by the prohibition. Those include price fixing, production restrictions, market sharing, discriminatory conditions and tying.
2.2.1 Forms of cooperation The basic distinction between the scope of application of Article 81 and Article 82 EC is that the first provision applies to the anti-competitive behaviour that results from concerted action, whereas the second applies to the unilateral behaviour of one or more undertakings.2 It is therefore, logical that the first requisite for the application of Article 81 EC should be the existence of a form of cooperation between undertakings. Three forms of cooperation are expressly recognised by Article 81 EC: agreements, decisions by associations of undertakings and concerted practices. Agreements The EC Treaty does not include a definition of agreements for the purposes of the application of Article 81 EC, but the European Court has defined them broadly in its case law. Clear examples of agreements would be written contracts,3 but the Court has also brought within this category other less formal means of cooperation. One of the early cases where the Court had the opportunity to interpret the notion of agreement was ACF Chemiefarma v. Commission.4 A group of European quinine producers 2
3
4
Case 6/72 Europemballage Corporation and Continental Can Co. Inc. v. Commission [1973] ECR 215, [1973] CMLR 199, at paragraph 25. In this respect, see exclusive and selective distribution agreements and franchise agreements, infra section 2.4.5. Case 41/69 [1970] ECR 661.
Anti-competitive agreements, decisions, practices
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concluded an agreement relating to trade with third countries, which provided inter alia for the fixing of prices and rebates relating to exports and for the sharing of export markets. Two gentlemen’s agreements5 between the same parties extended similar arrangements to sales within the Common Market. The Court took the view that, given that the parties to the export agreement had declared themselves willing to abide by the gentlemen’s agreements,6 Article 81 EC should apply to the latter.7 The Court explained that ‘[t]his document … amounted to the faithful expression of the joint intention of the parties to the agreement with regard to their conduct in the Common Market’.8 The crucial element therefore is that the parties should have a joint intention, without it being necessary for the intention to take the form of a valid and binding contract under national law,9 or indeed to be expressed formally.10 The Court has also made it clear that the parties to an agreement should be two or more independent undertakings, therefore excluding internal agreements between parent companies and their subsidiaries, where the subsidiaries do not enjoy real autonomy in determining their course of action.11 The non-formalistic approach of the Court has been richly reflected in the case law. First, the Court has accepted that oral agreements are covered, as in Tepea v. Commission,12 where two oral exclusive distribution and exclusive licensing agreements were held to come under Article 81 5
6 7
8
9
10
11
12
This type of agreement has been defined as one ‘which is not enforceable at law, and which is only binding as a matter of honour’ (A Supplement to the Oxford English Dictionary, ed. by R. W. Burchfield (Oxford, 1972), p. 1216). Case 41/69, supra n. 4, at paragraph 112 of the judgment. See also Case 45/69 Boehringer v. Commission [1970] ECR 769, at paragraphs 27–9 of the judgment. Case 41/69, supra n. 4, at paragraph 113 of the judgment. The Court took into consideration a second element: the parties had agreed that, in the event of the infringement of the gentlemen’s agreement, the export agreement would automatically be considered to have been infringed. See Joined Cases 209–215 and 218/78 Van Landewyck v. Commission [1980] ECR 3125, [1981] 3 CMLR 134, at paragraph 86 of the judgment and Case C-277/87 Sandoz v. Commission [1990] ECR I-45, at paragraph 2 of the summary of the judgment. In its recent decision in Bayer v. Commission (Case T-41/96, [2000] ECR II-3383 [2001] 4 CMLR 126), the Court of First Instance has held that ‘an agreement within the meaning of Article 85(1) (now 81(1)) EC, as interpreted by the case-law, centres around the existence of a concurrence of wills between at least two parties, the form in which it is manifested being unimportant so long as it constitutes the faithful expression of the parties’ intention’ (at paragraph 69 of the judgment). Case 22/71 Beguelin [1971] ECR 949, [1972] CMLR 81, at paragraph 8 of the judgment and Case C-73/95P Viho Europe v. Commission [1996] ECR I-5457, [1997] 4 CMLR 419, where the Court upheld the view of the Court of First Instance that ‘where there is no agreement between economically independent entities, relations within an economic unit cannot amount to an agreement or concerted practice [emphasis added]’ (at paragraph 17 of the judgment). See also the Opinion of AG Mayrás in Van Zuylen v. Hag [1974] ECR 731, [1974] 2 CMLR 127. Case 28/77 [1978] ECR 1391, [1978] 3 CMLR 392, at paragraph 41 of the judgment.
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EC. Secondly, tacit cooperation – although frequently coming under the heading of concerted practices – might also constitute an agreement.13 In Sandoz v. Commission,14 the dispatching by a supplier to his customers of invoices bearing the words ‘export prohibited’ was held to be an agreement both because it took place in the context of a continuing commercial relation framed by a previous general agreement and because the customers had tacitly accepted the conduct of the supplier by placing further orders.15 However, the recent judgment of the Court of First Instance in Bayer v. Commission,16 a case on suspected prohibition of parallel importation, sits uncomfortably with this approach as the Court struck down a Commission decision that took a broad view of the concept of agreement to promote market integration.17 Thirdly, the Court has held that Article 81 EC is applicable to agreements which are no longer in force but which continue to produce effects after they have formally ceased to be in force.18 Fourthly, the Court has considered that once an agreement has been concluded, it is irrelevant for the purposes of the application of Article 81 EC whether the undertakings consider themselves bound to adopt the agreed conduct.19 Finally, and in an effort to facilitate the efficient application of Article 81 EC, the Court and the Commission have also treated as one single agreement those complex networks of agreements with a common economic aim.20 There are two different types of agreement, which are relevant for the purposes of the application of the competition rules: horizontal and vertical agreements. Horizontal agreements are those between undertakings operating at the same level of production or marketing, whereas vertical agreements are those concluded between undertakings operating at different economic levels. An example of the first type would be an agreement concluded between two producers or manufacturers, whereas
13
14 15 16 17
18
19
20
See the Order of the President of the Court of First Instance in Case T-41/96R Bayer v. Commission [1996] ECR II-381, [1996] 5 CMLR 290, at paragraph 40, where he explained that the consent between the parties to an agreement ‘may also arise implicitly from clear and unequivocal conduct by undertakings in the context of continuing commercial relations’. Case C-277/87, supra n. 9. See also Case T-41/96R Bayer v. Commission, supra n. 13. See Case T-41/96, [2000] ECR II-3383, [2001] 4 CMR 126. The decision of the Court of First Instance has been appealed and is, at the time of writing, pending before the European Court. See Binon v. Agence et messageries de la presse (Case 243/83 [1985] ECR 2015, [1985] 3 CMLR 800, at paragraph 17 of the judgment) and the Polypropylene cartel case (Case T-7/89, [1991] ECR II-1711, [1992] 4 CMLR 24, at paragraph 257 of the judgment). Case T-347/94 Mayr-Melnhof Kartongesellschaft v. Commission [1998] ECR II-1751 at paragraph 65 of the judgment. See the Polypropylene cartel case (Case T-7/89, supra n. 18) and the decision of the Commission in Re Greek Ferries, OJ [1999] L 109/124, [1999] 5 CMLR 47.
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an example of the second type would be an agreement concluded between a supplier and its distributor. This is illustrated in Figures 2.2. and 2.3.21
Manufacturer A
Manufacturer B
Figure 2.2 Horizontal agreements
Manufacturer
Wholesaler
Retailer Figure 2.3 Vertical agreements
Traditionally, horizontal agreements are more objectionable from the point of view of competition policy, because they are more likely to be made between parties that compete inter se. However, even agreements between non-competitors may be caught by Article 81 EC. In one of the landmark competition cases, Consten and Grundig v. Commission,22 the Court considered a vertical agreement, i.e. an exclusive distribution agreement. The applicants tried to argue that vertical agreements are not caught by Article 81 EC because the parties are not competitors inter se and not on an equal footing. The Court, however, took the view that Article 81 EC also applies to vertical agreements. It gave two main reasons. First, competition can be distorted not only by agreements that restrict competition between the parties, but also by those that restrict competition between one of them and third parties.23 Secondly, vertical agreements may have the aim of dividing the Community market along national lines (i.e. 21 22 23
See supra p. 21. Joined Cases 56 and 58/64 [1966] ECR 299, [1966] CMLR 418; see also infra section 2.2.3. Ibid., at p. 339 (ECR), and at p. 470 (CMLR).
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exclusive distributorships, coupled with attempts to secure absolute territorial protection), which would frustrate one of the fundamental objectives of the Community, the creation of a single market.24 Decisions by associations of undertakings The second category envisaged in Article 81 EC aims to cover the anticompetitive practices of associations or of member undertakings. The Court has given a broad interpretation to the expression ‘decisions by associations of undertakings’ and has held that it covers not only agreements between its members but also recommendations issued by the association, provided that they are shown to be binding, either in law or in fact, on its members. An example of the former is Belasco v. Commission, 25 where the members of Belasco, a co-operative association of Belgian roofing felt manufacturers, entered into an agreement among its members that provided for the adoption of price lists, a system of quotas and defensive measures against competition from foreign undertakings. The agreement was implemented by resolutions passed at the general meeting of the association. An example of the latter is Van Landewyck,26 where the Commission found that FEDETAB, a trade association of Belgian and Luxembourg tobacco manufacturers, had breached Article 81(1) EC, inter alia by issuing a recommendation in relation to the sale of cigarettes on the Belgian market. Seven prominent members of the association challenged the Commission Decision, on the grounds that the recommendation could not be classified as a decision by an association of undertakings because it had only advisory and not binding effect. The Court rejected that argument: first, because according to the statutes of the association the recommendation was binding, and secondly, because the applicants – who controlled a substantial part of the total cigarette sales in Belgium – had complied with the recommendation.27 In other words, the recommendation was binding both in law and in fact, as demonstrated by the compliance with it by the relevant undertakings. Concerted practices This category is intended to catch all those anti-competitive practices that do not fall within the definition of an agreement or of a decision by an association of undertakings, but which still involve collusion between undertakings. Its raison d’être is clearly to prevent companies from evading the prohibition in Article 81 EC by the adoption of co-operative practices
24 25 26 27
Ibid., at p. 340. Case 246/86 [1989] ECR 2117, [1991] 4 CMLR 96. Joined Cases 209–215 and 218/78 [1980] ECR 3125, [1981] 3 CMLR 134. Ibid., at paragraph 89 of the judgment.
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which could not be classified properly as an agreement or as a decision.28 Given the Court’s liberal interpretation of the notion of agreement,29 the borderline between an agreement and a concerted practice is not always clear-cut, especially in cases involving complex cartels30 or those involving tacit collusion.31 In cases involving complex cartels, the Court has dismissed the need for a rigid classification of a set of practices as either an agreement or a concerted practice and has been willing to find elements of both.32 Tacit collusion will generally come under the heading of a concerted practice, but it could also be classified as an agreement if it takes place within the framework of an existing agreement between the parties.33 The Treaty did not define concerted practices but the Court of Justice provided the standard definition in its decision in ICI v. Commission (Dyestuffs).34 A concerted practice was defined as ‘… a form of cooperation 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 [emphasis added]’.35 The gist of the definition is therefore the existence of an act of
28
29 30 31 32
33 34 35
See the Decision of the Commission in Re Polypropylene cartel (Decision 86/398/EEC, OJ [1986] L 230/1, [1988] 4 CMLR 347 at paragraph 87), where the Commission explained that ‘… [T]he objective of the Treaty in creating a separate concept of concerted practice was to forestall the possibility of undertakings evading the application of Article 85(1) [now 81(1)] by colluding in an anti-competitive manner falling short of a definite agreement by, for example, informing each other in advance of the attitude each intends to adopt, so that each could regulate its commercial conduct in the knowledge that its competitors would behave in the same way’. See also the Opinion of AG Mayrás in ICI v. Commission (Case 48/69 [1972] ECR 619, [1972] CMLR 557, at p. 671). See supra n.n. 12–20 and relevant text. See the Opinion of AG Mayrás in ICI v. Commission (Case 48/69, supra n. 18 at p. 669). See Case T-41/96R Bayer v. Commission (supra n. 10). Thus, in the Polypropylene cartel case (Case T-7/89, supra n. 18), the Court of First Instance found that the Commission was entitled to treat a series of practices carried out by 15 undertakings in the petrochemical sector with the common aim of distorting prices within the Common Market as ‘one agreement and a concerted practice’. As the Court explained: ‘such dual characterisation, must be understood, not as requiring simultaneously and cumulatively, proof that each aspect of the cartel’s behaviour contained elements both of an agreement and of a concerted practice, but rather referring to a complex whole comprising a number of aspects some of which were characterised as agreements and others as concerted practices’ (at paragraphs 262–4 of the judgment). See also the Decision of the Commission in that case (supra n. 18 at paragraph 86), where the Commission took the view that, although the two concepts are distinct, some types of collusion may present elements of both forms of cooperation. Thus see Sandoz v. Commission (Case C-277/87, supra n. 9 and supra p. 20). Case 48/69, supra n. 28. Case 48/69, supra n. 28, at paragraph 64 of the judgment.
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reciprocal communication36 between undertakings, which has the aim of distorting competition in a particular market. It follows that, in order to escape the application of Article 81 EC, undertakings must determine independently the economic policy they intend to adopt.37 That includes, as the Court has recognised, their ability to adapt themselves intelligently to the existing or anticipated conduct of their competitors.38 Beyond that, any form of direct or indirect coordination between undertakings that aims to create artificial conditions of competition in a given market will come under Article 81 EC.39 The application of these concepts may pose difficulties: in the absence of any written or documentary evidence, the existence of a concerted practice needs to be inferred from the behaviour of the undertakings. The burden of proof of the existence of a concerted practice normally falls on the Commission.40 One of most revealing indicators that undertakings might have colluded is similar or parallel behaviour. In ICI v. Commission,41 the Commission had investigated three general and uniform increases in the prices of dyestuffs in 1964, 1965 and 1967 within the Common Market. The Commission found that several undertakings with subsidiaries in the Common Market were in breach of Article 81 EC for participating in concerted practices which aimed to fix prices for dyestuffs. The Commission used the following evidence to prove the existence of a concerted 36
37
38
39
40
41
As AG Darmon explained in his Opinion in the Woodpulp (II) case (Joined Cases C-114/85 and C-125/85, C-89/85, C-104/85, C-114/85, C-116–117/85 and C-125–129/85 [1993] ECR I-1307, [1993] 4 CMLR 407, at paragraph 171), that reciprocal act of communication needs to be defined in a case-to-case basis. Joined Cases 40–48, 50, 54–56, 111, 113–114/73 Suiker Unie v. Commission (Sugar cartel) [1975] ECR 1663, [1976] 1 CMLR 295, at paragraph 173 of the judgment. Case 48/69, supra n. 28, at paragraph 118 of the judgment; Joined Cases 40–48, 50, 54–56, 111, 113–114/73, supra n. 37, at paragraph 174 of the judgment; Case 172/80 Züchner v. Bayerische Vereinsbank [1981] ECR 2021, [1982] 1 CMLR 313, at paragraph 14 of the judgment, and Case T-7/89 supra n. 18, at paragraph 258 of the judgment. The nature of that act of communication has been liberally interpreted by the Court: mere attendance at meetings where information on prices or market shares has been discussed has been held to constitute such an act. See Polypropylene cartel case (Case T-7/89, supra n. 28, at paragraph 259 of the judgment). But it may also fall on a private party, when Article 81 EC is invoked in proceedings before a national court. See Züchner v. Bayerische Vereinsbank (Case 172/80, supra n. 38), where the holder of an account with a German bank argued that the imposition of a bank charge on transfers was contrary to Article 81 EC because it was part of a concerted practice followed by most banks, both in Germany and in other Member States. See also François Lucazeau v. SACEM (Case 397/87 [1989] ECR 2811, [1991] 4 CMLR 248), where three discotheque operators refused to pay royalties to SACEM (the society that manages copyright in musical works in France) for the performance of protected musical works on their premises. They argued, inter alia, that the collective practice of national copyright societies of systematically refusing to grant direct access to their repertoires to foreign users could constitute a concerted practice under Article 81 EC. Case 48/69, supra n. 28.
Anti-competitive agreements, decisions, practices
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practice. First, the prices applied by the undertakings were not only identical but also applied simultaneously.42 Secondly, the orders issued by the producers of dyestuffs to their subsidiaries to implement the price increases were similar in content.43 Thirdly, the records of informal meetings held in Basel and London by the producers showed that prices for dyestuffs were discussed and that, in the 1967 meeting, one of the producers had announced its intention to raise prices before the end of that year.44 The Commission, therefore, inferred the existence of a concerted practice primarily from the parallel behaviour of the producers. The producers of dyestuffs argued, however, that their parallel behaviour was the result of the characteristics of the dyestuffs market and not of concertation between them. In particular, they argued that the market was oligopolistic. An oligopolistic market is one essentially characterised by the presence of a few producers of homogeneous goods, by very high barriers of entry (in other words, very difficult to penetrate) and by a high degree of transparency. In an oligopoly, producers are naturally interdependent. If, for example, one producer lowers its prices, the others will follow suit, for fear of losing their market share.45 Likewise, a producer will not raise prices unless it is confident that the other producers will fall in line with the increase. In such markets, parallel behaviour is the norm and does not necessarily reflect the existence of collusion between the parties. Similar arguments based on the existence of an ‘oligopolistic market’ have been frequently deployed by parties accused of engaging in concerted practices on the basis of their parallel courses of action. The Commission can only refute the argument by an economic analysis of the market in question. In its decision in Dyestuffs, that analysis was not conducted in any detail,46 but more recent case law of the Court has
42
43
44 45
46
See Commission Decision in Dyestuffs (OJ [1969] L 195/11, [1969] CMLR D23) at paragraph 7. Ibid., at paragraph 8. In fact, some of the orders to make the 1964 price increases were drafted in identical terms, with messages sent on the same day and at the same time. Ibid., at paragraph 9 of the decision. On the theory of oligopolistic interdependence and criticisms levelled at it, see R. Whish, Competition Law, 3rd edn (London, 1993), pp. 467–73. See paragraph 6 of the Commission’s Decision (supra n. 42) which stated: ‘The investigations made by the Commission have revealed that the successive price increases and the conditions in which they were carried out cannot be explained by the oligopolistic structure of the market in question but are indeed the consequence of a concerted practice.’ The Court, however, was more explicit and took the view that the lack of price transparency in the market and the fact that the producers were sufficiently powerful and numerous ruled out the oligopoly argument (at paragraphs 105–10 of the judgment).
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emphasised the importance of the Commission carrying out that analysis.47 Although parallelism has been successfully defended in the unusual context of oligopolies, there nevertheless exists a particularly high risk that innocent and natural behaviour could be seen as constituting illegal cooperation. This begs the question of whether parallel behaviour per se constitutes evidence of a concerted practice in markets where a healthy degree of competition exists. In Dyestuffs,48 the Court took the view that parallel behaviour in itself cannot be identified with a concerted practice but can amount to strong evidence of such a practice if it leads to different conditions of competition from those prevalent in the market.49 An examination of the market for dyestuffs showed that the simultaneous – and identical – rises in prices could not be seen as spontaneous in a market that was clearly divided into five different national markets where different conditions of competition applied and where there was a lack of price transparency. In later cases, the Court has refined its approach and has taken the view that parallel behaviour will furnish proof of concertation only when it is ‘the only plausible explanation for that conduct’.50 Even in such cases, the parties accused of engaging in a concerted practice should be able to show there is an alternative explanation for their behaviour.51 The Woodpulp (II) case52 patently illustrates the complexities surrounding the notion of concerted practice. In that case, a group of woodpulp producers53 operated a system of quarterly announcements of prices. Under that system, a few weeks or days before the beginning of each quarter all woodpulp producers communicated to their customers the prices they wished to obtain for each type of pulp. The Commission regarded that parallel action as proof that concertation had taken place
47
48 49 50 51
52
53
Joined Cases C-114/85 and C-125/85, C-89/85, C-104/85, C-114/85, C-116–117/85 and C-125–129/85, supra n 36. In that case, the Commission had taken the view that the parallel behaviour of a number of woodpulp producers could not be spontaneous but was the result of concerted action and had dismissed, with little analysis, the theory that the market was oligopolistic. The Court, however, relied on detailed economic analysis undertaken by experts in order to show that the market showed oligopolistic tendencies and to highlight the flaws of the Commission’s approach (see paragraphs 102–27 of the judgment) Case 48/69, supra n. 28. Case 48/69, supra n. 28, at paragraph 66 of the judgment. Joined Cases 40–48, 50, 54–56, 111, 113–114/73, supra n. 37. See Cases 29–30/83 CRAM and Rheinzink v. Commission [1984] ECR 1679, [1985] 1 CMLR 688. Joined Cases C-114/85 and C-125/85, C-89/85, C-104/85, C-114/85, C-116–117/85 and C-125–129/85, supra n. 36. See, for the jurisdictional aspects of the case, the decision of the Court in Woodpulp (I), which is considered in Chapter 1, section 1.7.2.
Anti-competitive agreements, decisions, practices
27
between the producers in order to influence conditions of competition, as it could not find any other plausible explanation for the simultaneous timing of the announcements and the uniformity of the prices published. The Court, however, disagreed with the Commission’s findings and concluded, mainly on the basis of expert economic advice, that the parallel behaviour could be justified. The Court held that the price announcements could be explained as a rational response to the long-term nature of the market, where producers and customers tried to limit risks, while the timing of the announcements could result directly from the high degree of market transparency.54 Finally, the oligopolistic tendencies of the market could explain the parallelism in prices and price trends.55 Another case concerning exchanges of information is Deere v. Commission,56 which can usefully be compared with the decision in Woodpulp (II). In Deere, the members of a trade association agreed upon a system of exchange of information between them that would enable their sales to be identified. The Commission took the view – upheld by the Court of First Instance – that such exchanges of information had the effect of restricting competition by removing uncertainty about the nature of the competitors’ conduct and by raising barriers to entry for non-members.57 The European Court, on appeal, helpfully distinguished the ruling in Woodpulp (II) from the one in the present case. It explained that in the former case the system of quarterly announcements involved communication of information to purchasers, whereas in the latter the information was to be shared only by certain undertakings that were parties to the system.58 Apparent unilateral behaviour Since the first step in the application of Article 81 EC is the finding of a form of cooperation between undertakings, it would follow that strictly unilateral anti-competitive action by one undertaking would not fall within that provision.59 The Court has sometimes classified seemingly unilateral behaviour as a form of disguised cooperation and has applied Article 81 EC to such instances. A good example is furnished by the decision of the Court in AEG and Telefunken v. Commission.60 In that case, AEG, a manufacturer of electronic goods, operated a system of selective distribution61 in all the Member States of the European Community. The 54
55 56 57 58 59 60
Joined Cases C-114/85 and C-125/85, C-89/85, C-104/85, C-114/85, C-116–117/85 and C-125–129/85, supra n. 36, at paragraph 126 of the judgment. Ibid. Case C-7/95P [1998] ECR I-3111. Case T-35/92 Deere v. Commission [1994] ECR II-957, at paragraphs 51–81 of the judgment. Case C-7/95, supra n. 56, at paragraph 91 of the judgement. If the undertaking is dominant, then Article 82 EC might apply instead. Case 107/82 [1983] ECR 3151, [1984] 3 CMLR 325.
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Commission found that AEG’s system of selective distribution contravened Article 81 EC. This was because the selling prices charged by the dealers had been determined by AEG and some dealers who satisfied the qualitative criteria set out in the selective distribution agreement had been refused access to the contract goods. The underlying intention of AEG was to maintain high prices.62 AEG tried to argue that the acts complained of were strictly unilateral and that, therefore, Article 81 EC was not applicable to them. The Court, however, explained that the conduct of the manufacturer was not unilateral but took place within the framework of the contractual relationship between AEG and its authorised distributors, who had obviously agreed to the anti-competitive terms set by AEG.63 In other words, the Court took the view that all those distributors who had been allowed to continue as part of the distribution system and who had continued to receive the contract goods must have agreed implicitly to the anti-competitive conditions imposed by AEG. Therefore, a form of cooperation within the meaning of Article 81 EC had taken place. Many other examples of this approach can be found in the case law64 and in the decisions of the Commission.65
2.2.2 Effect on trade between Member States The second element in the prohibition set out in Article 81 EC is that the form of cooperation should have an effect on intra-Community trade. This clause draws the prima facie boundary between the application of EC and of national competition law.66 In the absence of guidance from the Treaty about how this requirement should be applied, it fell to the Court to give
61
62 63 64
65
66
The new umbrella block exemption regulation on vertical restraints (see infra section 2.4.5) has defined a selective distribution agreement as one ‘where the supplier undertakes to sell the contract goods or services, either directly or indirectly, only to distributors selected on the basis of certain predefined criteria and where these distributors undertake not to sell such goods or services to unauthorised distributors’ (Article 1(c) of Regulation 2790/99 (OJ [1999] L 336/21, [2000] 4 CMLR 398). Case 107/82, supra n. 60, at paragraph 37 of the judgment. Ibid., at paragraph 38 of the judgment. See, for example, Joined Cases 32/78, 36–82/78 BMW v. Commission [1979] ECR 2435, [1980] 1 CMLR 370; Joined Cases 25 and 26/84 Ford Werke and Ford Europa v. Commission [1985] ECR 2725, [1985] 3 CMLR 528. See Commission Decisions in Sandoz (Decision 87/409, OJ [1987] L 222/28, [1989] 4 CMLR 628, at paragraphs 25 to 28), in Bayer (Decision 90/3645, OJ [1990] L 351/46, [1992] 4 CMLR 61, at paragraph 9 of the Decision) and in Volkswagen and others (Decision 98/273, OJ [1998] L 124/60, [1998] 5 CMLR 333, at paragraphs 111–29 of the Decision). Joined Cases 56 and 58/64, supra n. 22, at p. 341. See also Part I, Chapter I, s. 2 of the UK 1998 Competition Act, which contains a prohibition almost identical to that found in Article 81 EC, except that anti-competitive agreements, decisions and concerted practices should have the potential to affect trade within the United Kingdom.
Anti-competitive agreements, decisions, practices
29
content to it. The Court has developed two important parameters in its case law: first, a basic test and, secondly, a de minimis rule. The basic test In Société Technique Minière v. Maschinenbau Ulm,67 the Court explained that, for the effect on Community trade 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 the agreement in question may have an influence, direct or indirect, actual or potential, on the pattern of trade between the Member States’.68 In later cases, the Court explained that the agreement or practice must influence the patterns of trade in such a way as to cause concern that it might prejudice the realisation of the single market objective of the Treaty.69 The Court has acknowledged that it is not necessary to demonstrate that an agreement or concerted practice has had an effect on trade; it suffices to show that is likely to distort the normal patterns of trade.70 For example, an exclusive distribution agreement that aims to secure absolute territorial protection will affect trade between Member States by restricting exports and will be at variance with the fundamental single market aim of the Treaty.71 The Court has held since its early case law that, even if the parties to an agreement operate in the same Member State, an effect on intraCommunity trade cannot be ruled out. One of the early examples was the decision of the Court in Brasserie de Haecht v. Wilkin.72 In that case, the national court considered the breach of an exclusive purchasing agreement in favour of a Belgian brewery by the proprietors of a small café in Esneux. In the Belgian market there was a network of similar contracts imposed by a small number of Belgian breweries. The Court not only explained that the agreement in question should be considered within its economic context (i.e. within the framework of the network of similar agreements), but also implied that, despite the national character of the agreements, there could be an effect on intra-Community trade.73 In later cases, such as Cementhandelaren v. Commission,74 the Court made that point 67 68 69
70
71 72 73 74
Case 56/65 [1966] ECR 234, [1966] CMLR 357. Ibid., at p. 249. See Case 42/84 Remia v. Commission [1985] ECR 2545, [1987] 1 CMLR 1, at paragraph 22 of the judgment, and Case C-306/96 Javico v. Yves Saint Laurent [1998] ECR I-1983, [1998] 5 CMLR 172, at paragraph 16 of the judgment. Joined Cases 209–215 and 218/78 supra n. 26, at paragraph 172 of the judgment; Case C219/95P Ferrerie Nord v. Commission [1997] ECR I-4414, [1997] 5 CMLR 575, at paragraph 19. Joined Cases 56 and 58/64, supra n. 22, at p. 341. Case 23/67 [1967] ECR 407, [1968] CMLR 26. Ibid., at pp. 415–16. Case 8/72 [1972] ECR 977, [1973] CMLR 7.
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explicitly. In that case, the Dutch Cement Dealers’ Association issued a series of decisions establishing target prices and standard conditions of sale, for application in the Dutch market. These included the prohibition against selling cement to traders other than members of the Association or resellers approved by the Association. The Association argued that Article 81 EC was inapplicable to a purely national cartel that had no effect on exports. The Court, however, took the view that, despite their national character, the decisions could affect intra-Community trade, because they extended to the whole Dutch territory thereby reinforcing the compartmentalisation of the national market. In particular, the prohibition against selling to unauthorised resellers, made it difficult for producers or sellers from other Member States to penetrate or be active in that market.75 Often it will be fairly clear that a national agreement is likely to affect 76 – or not likely to affect77 – trade between Member States. The Court has held, however, that in less obvious cases economic analysis will be necessary to decide whether or not such effect on trade has taken place.78 Sometimes, not all the anti-competitive provisions found in an agreement might have an effect on intra-Community trade. The general rule set out by the Court is that if the overall effect of the agreement is to hinder trade between the Member States, there is no need to examine whether each clause individually has such an effect.79 75
76
77
78
79
Ibid., at paragraphs 29 and 30 of the judgment. See also BNIC v. Blair [1985] ECR 391, [1985] 2 CMLR 430, where the Court held that an agreement of a purely regional character had an effect on intra-Community trade. See, for example, Case 42/84 Remia v. Commission (supra n. 69), where the Court examined a non-competition clause which was included in an agreement for the sale of an undertaking and which covered the entirety of the Dutch market. See, for example, Joined Cases C-215/96 and C-216/96 Bagnasco v. Banca Popolare di Novara [1999] ECR I-135, where the Court examined, inter alia, the compatibility with Article 81 EC of standard bank conditions relating to the provision of general guarantees required to secure the opening of a current-account credit facility imposed by the Italian Banking Association. The Court was satisfied with the findings of the Commission that the banking service in question involved economic activities that had limited impact on trade between Member States and that the participation of subsidiaries of non-Italian banks – which may have wished to apply more favourable conditions – was limited (see paragraphs 49–53 of the judgment). See Case C-250/92 Gøttrup-Klim Grovvareforeninger and others v. Dansk Landbrugs Grovvareselskab [1994] ECR I-5641, [1996] 4 CMLR 191, at paragraph 55 of the judgment. For an early example of a case where the Court found that the Commission had failed to provided adequate reasoning to show that a purely national agreement had effect on intra-Community trade, see Case 73/74 Papiers Peints v. Commission [1975] ECR 11491, [1976] CMLR 1491, at paragraphs 22–35 of the judgment. Case 193/83 Windsurfing International v. Commission [1986] ECR 611, [1986] 3 CMLR 489. In cases where an agreement did not have the overall effect of affecting trade between Member States, the Commission considered the effect of each clause individually (see the Commission Decision on the Dutch banks, Decision 89/512/EEC, OJ [1989] L 253/1, [1990] 4 CMLR 768, at paragraphs 58–60 of the decision).
Anti-competitive agreements, decisions, practices
31
De minimis rule In addition to the basic test, the Court has formulated the requirement that the effect on trade must not be insignificant. In Völk v. Vervaecke,80 the Court held that an agreement would fall outside the prohibition in Article 81 EC ‘when it has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question’.81 In that case, an exclusive distribution agreement between a small German manufacturer of washing and drying machines and a Belgian company, which attempted to secure absolute territorial protection for the latter in Belgium and Luxembourg, fell outside Article 81 EC because of the small market share held by the supplier.82 The question is, of course, how to decide when an agreement has an insignificant effect on competition. The Commission has issued several notices setting some quantitative guidelines for the application of the de minimis rule. The current Notice83 lays down the following general criteria: 1. An agreement will fall outside Article 81 EC if the aggregate market shares held by all participant undertakings do not exceed 5 per cent in the case of horizontal agreements and 10 per cent in the case of vertical agreements.84 2. These benchmarks will not apply where competition is restricted in a relevant market by parallel networks of agreements.85 3. Further, the application of Article 81 EC to horizontal agreements that fix prices or share markets or sources of supply, and to vertical agreements that fix prices or that aim to secure territorial protection, even if the market shares of participant undertakings fall below the 80 81 82
83 84
85
Case 5/69 [1969] ECR 295, [1969] CMLR 273. Ibid., at paragraphs 5–7 of the judgment. The Court has confirmed in later case law that ‘an exclusive dealing agreement may escape the prohibition laid down in Article 81(1) because, in view of the weak position of the parties on the market in the products in question in the territory covered by the exclusive dealing agreement, it is not capable of hindering the attainment of the objectives of a single market between the States, even if it creates absolute territorial protection’ (Case 1/71 Cadillon v. Höss [1971] ECR 351, [1971] CMLR 420, at paragraph 9 of the judgment). See also Musique Diffusion Française and others v. Commission (Joined Cases 100/80 to 103/80 [1983] ECR 1825, [1983] 3 CMLR 221, at paragraph 85 of the judgment). OJ [1997] C 372/13. Ibid., at paragraph 9 of the Notice. An additional criterion set out in the Notice is that both horizontal and vertical agreements do not fall under Article 81(1) EC if the thresholds laid down in paragraph 9 of the Notice are exceeded by no more than one-tenth during two successive financial years (paragraph 10 of the Notice). Ibid., at paragraph 18 of the Notice. See also Case 23/67, supra n. 72, and accompanying text.
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EC Competition Law and Policy established thresholds, cannot be ruled out, but the Commission will only intervene if there is sufficient Community interest.86
4. There is a presumption that agreements between small and mediumsized undertakings do not significantly affect trade between Member States even if they exceed the market thresholds set out in the Notice.87 The Notice also makes it clear that sometimes agreements between undertakings whose market shares exceed the established thresholds may still have a negligible effect on intra-Community trade and therefore may not be caught by Article 81 EC.88 The criteria set out in the Notice are shown in Figure 2.4.89 In May 2001, the Commission published a new Draft Notice on agreements of minor importance, which revises the criteria set out in the current Notice and opens a two-month period of public consultation.90 The Commission has explained that the current Notice needs to be coherent with the new rules applicable to horizontal and vertical agreements.91 The following aspects of the Commission’s Draft are noteworthy: • The system of market thresholds is maintained but raised to 10 per cent for agreements between competitors and to 15 per cent for agreements between non-competitors. A residual 10 per cent threshold is laid down for agreements which are difficult to classify under either of these categories.92 This seems broadly to reflect the traditional distinction between horizontal and vertical agreements, although framed in terminology based more on economic analysis. • Where competition is restricted by parallel networks of agreements, a threshold of 5 per cent is introduced, below which Article 81(1) would not apply.93 86 87
88
89 90
91
92 93
Ibid., at paragraph 11 of the Notice. Ibid., at paragraph 19 of the Notice. That presumption may be waived by the Commission if such agreements either significantly impede competition in a substantial part of the relevant market or if a network of parallel agreements exists in that market which cumulatively restricts competition (paragraph 20 of the Notice). See the decision of the Commission in Re Greek Ferries (supra n. 20). See paragraph 3 of the Notice. See also Case T-9/93 Schöller v. Commission [1995] ECR II1611, [1995] 5 CMLR 602, at paragraph 75 of the judgment. See infra p. 33. The Draft Notice was published on the Commission’s website on 16 May 2001 and then in the Official Journal (OJ [2001] C 149/28). See the Commission’s Press Release of 16 May 2001 (IP/01/709). See also section 2.4.5 (infra), for a consideration of the new block exemption regulations on horizontal and vertical agreements. See the Draft Notice, at II.8. See the Draft Notice at, II.9.
Anti-competitive agreements, decisions, practices
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Agreements which are presumed to be de minimis and which escape the application of Article 81(1) EC
Agreements which might significantly affect trade between Member States or restrict competition to an appreciable extent
1. Total market shares of all participant undertakings do not exceed: – horizontal agreements: 5% – vertical agreements: 10%
1. Total market shares of participant undertakings exceed: – horizontal agreements: – vertical agreements:
2. Total market shares of participant undertakings exceed the established thresholds by no more than 1 during two consecutive 10 financial years.
2. Parallel networks of agreements (even if the market shares of the participant undertakings in each individual agreement fall below the established thresholds) that cumulatively restrict competition.
3. Agreements between small and medium-sized undertakings (even if they exceed the established thresholds) but Commission may intervene: (a) if they significantly impede competition in a substantial part of the relevant market; (b) if competition is restricted in the relevant market by the cumulative effect of a network of similar agreements.
3. Horizontal agreements that fix prices or share markets or sources of supply and vertical agreements that fix resale prices or that aim to secure territorial protection (even if the market shares of participants undertakings fall below the established thresholds) but Commission will only intervene if there is sufficient Community interest.
5% 10%
Figure 2.4 The 1997 Commission’s Notice on agreements of minor importance
• In line with the current Notice, vertical and horizontal agreements containing certain hardcore restrictions will not be treated as de minimis, even if the threshold rules are satisfied. The Draft Notice, however, has modified the list of these restrictions94 to reflect the hardcore restrictions in the new umbrella block exemption regulation on vertical restraints95 in the case of vertical agreements, and 94 95
See the Draft Notice at, II.12. Regulation 2790/99 (OJ [1999] L 336/21).
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EC Competition Law and Policy
those in the new block exemption regulations on specialisation96 and research and development97 agreements in the case of horizontal agreements.
2.2.3 Anti-competitive object or effect The third element in the basic prohibition in Article 81 EC is that the agreement, decision or concerted practice must have the object or effect of preventing, restricting or distorting competition within the Common Market. To this, the Court has added that restriction or distortion of competition should be ‘appreciable’.98 The quantitative criteria set out in the 1997 Commission Notice on Minor Agreements, based on the market shares of the undertakings participating in an agreement, are used to give meaning to the term ‘appreciable’.99 Object or effect to restrict competition In Société Technique Minière v. Maschinenbau Ulm100 the Court followed a literal interpretation of the expression ‘object or effect’ and explained that these were alternative and not cumulative conditions. In other words, if the object of an agreement is clearly anti-competitive, there is no need to consider its effects.101 This premise is clearly illustrated in the key decision of the Court in Consten and Grundig,102 delivered only a few days later. The structure of the agreement in that case is represented in Figure 2.5.103 Grundig, a German manufacturer of electronic goods, appointed Consten as its exclusive distributor in France. Under the terms of the agreement, Consten undertook not to sell the contract goods outside France, and a similar prohibition was imposed on all Grundig’s exclusive distributors in other Member States and on the German wholesalers. In addition, Consten was authorised to register in France in its own name the trade mark ‘GINT’, which appeared on all Grundig appliances. The combined 96 97 98 99
100 101
102 103
See Article 5(1) of Regulation 2658/2000 (OJ [2000] L 304/3, [2001] 4 CMLR 800). See Article 5(1) of Regulation 2659/2000 (OJ [2000] L 304/7, [2001] 4 CMLR 808). Case 56/65, supra n. 67, at p. 249. See the Commission Notice on agreements of minor importance (supra n. 90), at paragraphs 2, 3, 9 and 10. Case 56/65, supra n. 67, at p. 249. Only the Italian version of Article 81 EC can be read as requiring the Commission to demonstrate that an agreement has both an anti-competitive object and effect by the use of the coordinating conjunction ‘e’. The Court of First Instance, however, held in Ferriere Nord v. Commission (Case T-143/89 [1995] ECR II-917, at paragraph 31) that that version could not prevail by itself against all the versions of that provision in other languages, where the two conditions could only be read disjunctively. Joined Cases 56 and 58/64, supra n. 22. See infra p. 35.
Anti-competitive agreements, decisions, practices
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Grundig
Exclusive distribution agreement France Consten (exclusive distributor) 1. Prohibition on selling contract goods outside France 2. Assignment of ‘GINT’ trade mark for the French territory
Exclusive distribution agreements in other EC countries + Germany German wholesalers 1. Prohibition on selling contract goods outside their respective contract territories
SOLD BOUGHT
UNEF Figure 2.5 Consten and Grundig
aim of those clauses was effectively to ‘seal off’ the French market or, in other words, to grant absolute territorial protection to Consten. The export bans standing in isolation would have still permitted a parallel importer104 to buy the contract goods in Germany and then sell them in France. The assignment of the trade mark, however, ensured that, should that be the case, Consten could use French intellectual property law to bring an action before the national courts for infringement of the trade mark against a parallel importer. This is precisely what happened when UNEF, a French parallel importer, bought Grundig products in Germany and resold them at more favourable prices than Consten in the French market. 104
A parallel importer is an independent undertaking which acquires goods in one Member State and sells them in another Member State.
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EC Competition Law and Policy
The Court explained that the agreement clearly had an anti-competitive object as its purpose was to grant absolute territorial protection and thus eliminate any possibility of competition in Grundig products at the wholesale level, thereby allowing higher prices to be charged in the French market. This anti-competitive object was evident from the terms of the agreement and the economic context in which it was to be applied.105 In the circumstances, there was no need to take into account the effects of the agreement.106 Traditionally, the Court and the Commission have viewed horizontal agreements that fix prices107 or share markets108 or sources of supply109 as having an anti-competitive object.110 Likewise, contractual clauses in vertical agreements that aim to secure territorial protection (i.e. by imposing export bans on distributors111 or prohibiting cross-supplies between authorised dealers112 or that fix resale prices113 have consistently been held by the Court to have such an object. The strength of opposition to such provisions stems not only from the fact that they are manifestly detrimental to competition but also they are antagonistic to the single market objective of the Treaty.114 In those cases where it is not clear that the object of an agreement is clearly anti-competitive, an economic analysis is necessary to establish whether the agreement or practice has the effect of preventing, restricting or distorting competition.115 The case law of the Court concerning parallel networks of exclusive purchasing bears this out. In one of the early cases, Brasserie de Haecht v. Wilkin,116 the Court held that the effects of an exclusive purchasing agreement on competition had to be considered not 105
106 107 108
109 110
111
112
113
114
115
116
See Case 56/65 (supra n. 67, at p. 249). Those criteria had been set out in Société Technique Minière v. Maschinenbau Ulm (Joined Cases 56 and 58/64, supra n. 22, at pp. 342–3). Ibid. Case 48/69 ICI v. Commission, supra n. 28. Case 41/69 Chemiefarma v. Commission, supra n. 4; see also the Decision of the Commission in Peroxygen Products (OJ [1985] L 35/1, [1985] 1 CMLR 481). Joined Cases 40–48/73 etc., Suiker Unie (Sugar cartel), supra n. 37. See Case T-148/89 Tréfilunion v. Commission [1995] ECR II-1063, at paragraphs 108–9 of the judgment. Joined Cases 56 and 58/64, supra n. 22, at pp. 342–3. See also the Decision of the Commission in Polistil/Arbois (OJ [1984] L 136/9, [1984] 2 CMLR 594). See Case 86/82 Hasselblad v. Commission [1984] ECR 883, [1984] 1 CMLR 559, at paragraph 46 of the judgment, and the decision of the Commission in Volkswagen and others (Decision 98/273, supra n. 65, at paragraph 139). Case 27/87 Louis Erauw-Jacquery v. La Hesbignonne [1988] ECR 1919, [1988] 4 CMLR 576, at paragraph 15 of the judgment. On the importance of the single market objective as an aim of EC competition law, see supra Chapter 1, section 1.5. For a recent analysis of the restrictive effect in Article 81(1) EC see O. Odudu, ‘Interpreting Article 81(1) EC: demonstrating restrictive effect’ [2001] 26 ELRev 261. Case 23/67, supra n. 72. The facts of that case have been described above at section 2.2.2.
Anti-competitive agreements, decisions, practices
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in isolation but in conjunction with the network of similar contracts that existed in the same market, so that their cumulative effect on competition could be appreciated. The Court undertook a much more exhaustive and helpful analysis of this issue in Delimitis v. Henninger Bräu.117 The analysis carried out by the Court has been summarised in Figure 2.6.118 That case, like Brasserie de Haecht, concerned an exclusive purchasing agreement in the beer market, this time between a German publican and a German brewery. The Court explained that an exclusive purchasing agreement does not have an obvious anti-competitive object and therefore that the effects of the agreement ought to be examined.119 The Court, drawing on its judgment in Brasserie de Haecht, began by establishing that the agreement had to be considered within the context of the network of similar agreements that existed in the German market.120 It then explained that two cumulative conditions had to be satisfied for the agreement to have the effect of distorting competition: (a) that the network of agreements where it was found should have the effect of denying competitors – whether national or from other Member States – access to the market, and (b) that the agreement in question should contribute significantly to the sealing-off effect of the market.121 The two requirements entailed a logical and progressive analytical sequence. Only if an examination of the first element revealed that the effect of the network was to deny access to the market, did the contribution of the individual agreement to the sealing-off effect have to be considered. The Court went on to elucidate in detail the steps that had to be followed in the application of those cumulative requirements. The steps will now be considered in turn. First, the Court established that the basic premise in the application of the requirements was the definition of the relevant market from the point of view of the nature of the economic activity in question and from a geographical perspective.122 In relation to the former, the Court held that 117 118 119
120 121 122
Case C-234/89 [1991] ECR I-935, [1992] 5 CMLR 210. See infra p. 38. Ibid. at paragraphs 10–13 of the judgment. At the time, exclusive purchasing agreements fell within the scope of Regulation 1984/83 (OJ [1983] L 173/5). Under Article 1 of that Regulation, the exclusive purchasing obligation was exempted from the prohibition in Article 81(1) EC – provided it was not concluded for a period exceeding five years (Article 3(d) of the Regulation), on account of its overall beneficial effects on competition (see infra section 2.5). In Delimitis, however, the national court asked whether an exclusive purchasing agreement, considered within the framework of a network of similar agreements fell within the scope of Article 81(1) EC. Ibid., at paragraph 14 of the judgment. Ibid., at paragraphs 15 and 24 of the judgment. The definition of the relevant market is discussed in Article 82 EC cases (see infra Chapter 3, section 3.2.1).
EC Competition Law and Policy
38
Small number of breweries Network of similar exclusive purchasing agreements Network of similar exclusive purchasing agreements
Delimitis
Purchaser X
Purchaser Y Purchaser Z
Cumulative conditions: 1. The network of agreements = effect of denying competitors access to the market • definition of the market: relevant economic activity and geographical area; • mere existence of network per se not sufficient to render market inaccessible; • other important factors: opportunities for access and conditions in which competitive forces operate in the market. 2. The agreement should contribute significantly to the sealing-off effect • market share of producer; • number of outlets tied to it; • duration of the agreement. Figure 2.6 Delimitis: analysis of the effects on competition of an exclusive purchasing agreement in the market of beer supply
the relevant market was that for the distribution of beer in premises for the sale and consumption of drinks. In relation to the latter, it held that the relevant geographic market was the national market – Germany – as most beer supply agreements were entered into at the national level.123 Secondly, the Court laid down the basic criteria for deciding whether the network of agreements had the effect of preventing access to the market. The mere existence of a network of similar agreements – even if, as might be expected, it had a considerable effect on market access – was held not to be 123
Case C-234/89, supra n. 117, at paragraphs 16–18 of the judgment.
Anti-competitive agreements, decisions, practices
39
sufficient per se to render the market inaccessible.124 Other factors that had to be taken into account were the opportunities for access – i.e. whether a new entrant into the market could circumvent the network by opening new public houses125 – and the conditions under which competitive forces operate in the relevant market – i.e. the degree of saturation of that market and customer loyalty to existing brands.126 Thirdly, the Court held that in order to assess the contribution of the individual contract to the sealing-off effect, several indicators had to be considered. Those indicators were: the market share of the brewery or the group to which it belonged, the number of outlets tied to it (in relation to the number of public houses found in the relevant market) and the duration of the exclusive purchasing agreements.127 The Delimitis judgment constitutes a rare instance when the Court laid down in great detail the parameters necessary to ascertain the restrictive or distorting effect on competition of a particular type of agreement: exclusive purchasing agreements found in the framework of a network of similar agreements in the beer market. There are, however, countless other types of agreement which do not have such a clear anti-competitive object. There are indications in the Court’s judgments, especially over the last decade, that economic analysis is crucial to the determination of the effect of such agreements on competition,128 and the Court of First Instance has, in some cases, scrutinised very carefully the economic analysis undertaken by the Commission.129 Within the Common Market The prevention, distortion or restriction of competition has to take place within the Common Market. Therefore, if an anti-competitive agreement is concluded within the European Community but has effects only outside 124 125 126 127 128
129
Ibid., at paragraphs 19–20 of the judgment. Ibid., at paragraph 21 of the judgment. Ibid., at paragraph 22 of the judgment. Ibid., at paragraphs 25–7 of the judgment. See Case 99/79 Lancôme v. Etos [1980] ECR 2511, [1981] 2 CMLR 164, at paragraph 24 of the judgment (selective distribution agreement); Case C-250/92, supra n. 78, at paragraph 31 (provision in the statutes of a cooperative purchasing association forbidding members to participate in other forms of cooperation in competition with it); Case C-399/93 Oude Luttikhuis v. Verenigde Coöperatieve Melkindustrie [1995] ECR I-4515, [1996] 5 CMLR 178, at paragraph 10 of the judgment (provision in statutes of a cooperative association for processing milk imposing a fee payable by the members in the event of withdrawal or expulsion); Joined Cases T-374–375, 384, 388/94 ENS v. Commission [1998] ECR II-3141, at paragraph 136 of the judgment (agreements concerning the formation of a new international railway grouping and between five national railway undertakings and the former). See Joined Cases T-374–375, 384, 388/94 ENS v. Commission, supra n. 128, at paragraphs 135–60, where the Court reached the conclusion that the analysis of the Commission was not sufficiently reasoned.
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that territory, Article 81 EC does not apply to it. Thus, in Re Rieckermann and AEG-Elotherm,130 the Commission examined the terms of an agency agreement between two German companies that granted Reickermann the exclusive right to sell AEG’s heating, fusion and induction-tempering installations in the Japanese market. Under the terms of the agreement, Reickermann – a company specialising in exports to countries in the Far and Middle East – undertook not to sell AEG’s installations in countries other than Japan and not to sell goods competing with AEG’s goods. AEG in return undertook not to export directly to Japan and to forbid its other purchasers to resell its goods in Japan. The Commission examined all those clauses and concluded that none of them was likely to have a substantial effect on competition within the Common Market, and therefore ruled out the application of Article 81 EC to that agreement. However, as seen above,131 the Court has accepted that anti-competitive agreements concluded outside the European Community, but implemented within the Community, may be subject to the prohibition in Article 81(1) EC.
2.2.4 Examples of practices that normally fall within the scope of Article 81(1) EC Article 81(1) EC includes a list of examples of practices that are normally caught by the prohibition on anti-competitive agreements and concerted practices. The list is by no means exhaustive, but provides a useful summary of the main types of behaviour that are considered to fall foul of Article 81(1) EC. Article 81(1)(a): fixing of prices and trade conditions Price fixing is a particularly objectionable practice with reference both to horizontal and vertical agreements.132 In its decision in the Quinine cartel,133 the Commission explained that price fixing is anti-competitive because it restricts price competition between the members of the cartel.134
130 131 132
133 134
Decision 68/376/EEC, OJ [1968] L 276/25, [1968] CMLR D78. See Chapter 1, section 1.7.2. This is reflected in the Notice on Minor agreements of the Commission, where even undertakings whose market shares fall below the established thresholds may fall within the scope of Article 81(1) EC if they have entered into price-fixing agreements – either vertical or horizontal; see supra n. 86. Decision 69/240, OJ [1969] L 192/5, [1969] CMLR D41. See also Case 73/74 Papiers Peints v. Commission (supra n. 78) at paragraphs 6–12 of the judgment; Case 246/86 Belasco v. Commission (supra n. 25), at paragraph 12 of the judgment, and the Decision of the Commission in Re FEG and TU [2000] 4 CMLR 1208, at paragraphs 133–4 of the decision.
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In that case, the principal producers of quinine in the Common Market had jointly agreed, inter alia, on uniform price increases for the sale of quinine in that territory. The Commission pointed out the unfavourable effects of those price increases for consumers, who had been deprived of the possibility of obtaining supplies at lower prices.135 The prohibition of price fixing at the horizontal level also extends to the fixing of minimum prices136 and target prices,137 to the adoption of a common rebate or discount policy138 and to indirect price fixing such as secret exchanges of price information.139 In the context of vertical restraints, price fixing also comes under Article 81(1) EC. The most typical example is resale price maintenance (RPM), whereby a supplier imposes on the distributor or retailer the resale price for the contract goods.140 This has been duly reflected in Article 4(a) of the new umbrella block exemption regulation on vertical restraints.141 That provision deprives from the benefit of the exemption vertical agreements that have as their direct or indirect object the fixing of a minimum resale price or a fixed or minimum price level to be observed by the buyer.142 The fixing of other trading conditions is also prohibited by Article 81(1) EC. Examples of this practice include the setting out of a common sales policy or of common sales conditions. An early example of a common sales policy is the decision of the Commission in Re French and Taiwanese Mushrooms.143 In that instance, the Commission applied Article 81(1) EC to an agreement between the principal French and Taiwanese producers of mushrooms who agreed to coordinate their sales policy in Germany by observing an annual export quota and a pricing policy and to provide each 135 136 137
138
139
140
141 142
143
Ibid., at paragraph 23 of the Decision. Case 123/83 BNIC v. Blair (supra n. 75), at paragraph 26 of the judgment. Case 8/72 Cementhandelaren (supra n. 74), at paragraphs 21–2 of the judgment. The Court held that the fixing of a target price ‘… affects competition because it enables all the participants to predict with a reasonable degree of certainty what the pricing policy pursued by their competitors will be’. Joined Cases 209–215 and 218/78 Van Landewyck v. Commission (supra n. 9). In that case, an association of tobacco manufacturers issued a recommendation that set out an end-ofyear rebate to be paid to wholesalers and retailers. In the Commission’s view, that system ‘stifled all competition between the manufacturers … inasmuch as it removed the incentive for intermediaries to make greater competitive efforts with a view to obtaining improved benefits or to take their custom exclusively to a given manufacturer and made it more difficult for manufacturers desirous of penetrating the market to do so’ (at paragraph 144 of the judgment). Case 66/86 Ahmed Saeed v. Zentrale zur Bekämpfung Unlauteren Wettbewerbs [1989] ECR 803, [1990] 4 CMLR 102, at paragraph 27 of the judgment. Case 243/83 Binon v. Agence et messageries de la presse (supra n. 18), at paragraph 44 of the judgment. See Article 4(a) of Regulation 2790/99 (supra n. 95). See paragraph 47 of the Guidelines on vertical restraints issued by the Commission on 20 May 2000 (OJ [2000] C 291/1, [2000] 5 CMLR 1074). Commission Decision 75/77, OJ [1975] L 29/26, [1975] 1 CMLR D83.
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other with all information relevant to the establishment and monitoring of sales quotas for Germany. An example of the imposition of common sales conditions is Van Landewyck v. Commission,144 where the fixing of uniform maximum terms of payment by the members of an association of tobacco manufacturers was held to be anti-competitive.145 Article 81(1) (b): limitation or control of production, markets, technical development or investment Agreements to limit or control production often appear in combination with price fixing agreements as a means of supporting price controls. In Re Italian Cast Glass,146 three Italian manufacturers of cast glass had agreed, inter alia, to fix sales quotas for the Italian market. The Commission took the view that such production quotas fell foul of Article 81(1) EC because the agreement aimed to stabilise the production of those undertakings and to enable them to protect the prices of their products.147 Research and development agreements may come under Article 81(1) EC when they are agreed between competitor companies in either existing technology markets or innovation markets,148 but they have frequently benefited from automatic exemption under the block exemption regulation on research and development agreements149 or given individual exemption.150 Agreements that limit technological development or investment, however, are caught by Article 81(1) EC. For example, in Belasco v. Commission151 the members of an association of roofing felt manufacturers agreed, inter alia, on measures for the standardisation of their products. The Court took the view that such measures were restrictive of competition because they aimed to prevent the members from differentiating their products and to obviate competition between them.152 Also relevant to limits on production are the so-called crisis cartels. The term refers to agreements between undertakings – in industries suffering from overcapacity and operating losses – as a means of reducing pro144
145 146 147
148
149
150 151 152
Joined Cases 209–215 and 218/78, supra n. 9. For a summary of the main facts, see supra section 2.2.1. Ibid., at paragraph 155 of the judgment. Commission Decision 80/1334/EEC, OJ [1980] L 383/19, [1982] 2 CMLR 61. Ibid., at paragraph 45. See also the Decision of the Commission in Re the Zinc Producer Group (Commission Decision 84/405/EEC, OJ [1984] L 220/27, [1985] 2 CMLR 108), where a group of zinc producers agreed on the prices that they would charge and to keep within collectively agreed and allocated production quotas. See the Commission Guidelines on the applicability of Article 81 EC to horizontal cooperation, at paragraph 2.3.1.3 (OJ [2001] C 3/2). See the new Commission Regulation on the application of Article 81(3) EC to categories of research and development agreements, Regulation 2659/2000, supra n. 97. See Wish, op. cit., at pp. 442–43. Case 246/86, supra n. 25. For a summary of the facts, see supra section 2.2.1. Ibid., at paragraph 30 of the judgment.
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duction so that the remaining capacity can be operated at a more economical level. This was the case in Re Synthetic Fibres,153 where a group of undertakings entered into such an agreement in order to combat the overcapacity resulting from rapid technological advances and the trend towards stationary demand in the market for synthetic fibres. Although in principle that limitation of capacity came under Article 81(1) EC, because it amounted to a restriction on investment,154 the Commission exempted the agreement,155 after weighing up the economic and consumer benefits to the market of synthetic fibres.156 Those benefits included the possibility of eliminating heavy financial burdens, of keeping under-utilised capacity available, of achieving a greater degree of specialisation and of improving the quality of products. The Commission took the view that after the restructuring of the industry, the undertakings would emerge more profitable and competitive.157 Article 81(1)(c): sharing of markets or sources of supply Market sharing agreements, like price fixing agreements, are dealt with severely by the Commission and they invariably fall foul of Article 81(1) EC.158 The reason why the Commission regards market sharing as particularly harmful is twofold. First, such practice is clearly anti-competitive because it allows undertakings, freed from any competitive challenge, to charge high prices in their home markets, and because it limits consumers in the choice of sources of supply. Secondly, it is inimical to the idea of a common market, as it reinforces the division of markets along national lines. Competitors occasionally resort to market sharing in a bid to divide either territories or customers among themselves. For example, in Re Soda Ash159 the Commission investigated the activities of ICI and Solvay, the 153 154 155 156
157
158
159
Commission Decision 84/380/EEC, OJ [1984] L 207/17, [1985] 1 CMLR 787. Ibid., at paragraph 26 of the Decision. Ibid., at paragraphs 28–52 of the Decision. The Commission, however, also ordered the deletion of certain clauses in that agreement, which seemed unreasonably restrictive and were not necessary to achieve the aim of the agreement, which was to rationalise the production process (see paragraph 19 of the Commission Decision, supra n. 153). The approach of the Commission to crisis cartels is outlined in the XIIth Report on Competition Policy [1982] (points 38–41) where the Commission pointed out that such arrangements ‘… [C]an only be condoned if they are aimed solely at achieving a co-ordinated reduction of overcapacity and do not in any other way restrict the commercial freedom of the firms involved’. Ibid. See also the Commission Decision in Stichting Baksteen (OJ [1994] L 131/15, [1995] 4 CMLR 646) and the decision of the Court of First Instance in Tréfilunion v. Commission (supra n. 110, at paragraphs 116–17 of the judgment). See the Notice on Minor agreements (supra section 2.2.2), where horizontal market sharing agreements and vertical agreements that aim to secure territorial protection are given the same treatment as price fixing agreements. Commission Decision 91/297/EEC, OJ [1991] L 152/1, [1994] 4 CMLR 454.
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two leading producers of soda ash within the Community. The Commission concluded that a concerted practice had taken place between the two companies, whereby ICI confined its activities to the United Kingdom and Ireland, and Solvay to the continent. The facts at issue in Atka v. BP Kemi/Danske Spritfabrikker160 constitute a good example of the sharing of customers between competitors. In that instance, two Danish companies agreed which customers each was to supply. The Commission took the view that such customer allocation was contrary to Article 81 EC because it hindered any competition between the companies and was detrimental to consumers.161 The rigorous approach of the Commission to territorial protection extends also to vertical agreements. Its decision in Re Volkswagen162 is very illustrative. In that case, Volkswagen had imposed an export ban on its Italian distributors. The system was enforced by means of penalties and by prohibiting cross-supplies with other Volkswagen dealers in the Common Market. The Commission took the view that the measures were clearly anti-competitive because their effect was to partition the market and that, by eliminating the Italian market as a source of imports, dealers in other Member States could charge higher prices. Another clear example is the decision of the Court in Consten and Grundig v. Commission,163 discussed above.164 The new block exemption on vertical restraints165 also reflects concerns to prevent territorial protection. Thus, Article 4(b) of the Regulation withdraws the benefit of the exemption from vertical agreements that provide for the restriction of the territory into which, or of the customers to whom, the buyer may sell contract goods or services. Article 81(1)(d): discriminatory trading conditions Horizontal and vertical agreements that lay down discriminatory trading conditions are always caught by Article 81 EC unless there is an objective justification for that unequal treatment. In Re German Ceramic Tiles,166 the German association of producers of ceramic tiles concluded a joint discount agreement. Under the terms of that agreement, a sliding-scale discount was to be given to purchasers on the basis of their total purchases from all the producers belonging to the association. The Commission held that Article 81(1) EC applied to the agreement because it resulted in different treatment of trading partners for equivalent services. Thus German purchasers would have a much greater incentive to buy ceramic 160 161 162 163 164 165 166
Decision 79/934/EEC, OJ [1979] L 286/32, [1979] 3 CMLR 684. Ibid., at paragraph 80 of the decision. Decision 98/273, OJ [1998] L 124/60, [1998] 5 CMLR 333. Joined Cases 56 and 58/64, supra n. 22. See supra section 2.2.3. Regulation 2790/1999, supra n. 95. Commission Decision 71/23/EEC, OJ [1971] L 10/15, [1971] CMLR D6.
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tiles consistently from members of the association rather than from nonGerman producers.167 In Re Pittsburgh Corning Europe,168 an American company – Pittsburgh Corning Europe (PCE) – and its Belgian and Dutch concessionaires agreed on a discriminatory pricing arrangement intended to protect the German subsidiary of PCE. For some years, the prices charged for cellular glass by the German subsidiary of PCE were substantially higher than those charged by PCE concessionaires in other Member States. In order to prevent parallel imports of cellular glass into Germany, PCE issued new price lists for its Belgian and Dutch concessionaires. The new prices were high enough to render parallel imports into Germany unfeasible, but a rebate of 20 per cent would be given if it could be shown that the contract goods were destined for work sites in Belgium or Holland. The Commission took the view that the arrangements amounted to a (vertical) concerted practice between PCE and its Dutch and Belgian concessionaires, with a clear anti-competitive object because it sought to prevent imports of cellular glass at better prices from Belgium and Holland.169 Article 81(1)(e): tie-in clauses Tie-in clauses are those which oblige one of the contracting parties to accept supplementary obligations – i.e. other goods or services – unconnected with the subject of an agreement. In Windsurfing International,170 the Commission explained why a tie-in clause is anti-competitive. In that case, Windsurfing International, the patent holder of a rig used in a sailboard, licensed a number of companies to produce and sell the rigs. One of the clauses in the licensing agreement stipulated that the rigs – the subject of the contract – could only be sold in conjunction with sailboards approved by Windsurfing. The Commission took the view that such a clause was restrictive of competition for two reasons: first, because it limited the freedom of licensees to produce their own sailboards or sell only rigs to third parties; secondly, because it prevented other sailboard manufacturers from supplying their boards to the licensees.171 167 168 169
170 171
Ibid., at paragraph 2(b) of the Decision. Decision 72/403/EEC, OJ [1972] L 272/35, [1973] CMLR D2. Ibid., at paragraph 15 of the Decision. See also the decision of the Commission in Re Kodak (Decision 70/332, OJ [1970] L 147/24, [1970] CMLR D19). Commission Decision 83/400/EEC, OJ [1983] L 229/1, [1984] 1 CMLR 1. Ibid., at paragraph 82 of the Decision. See also the judgment of the Court (Case 193/83 Windsurfing International v. Commission, supra n. 79, at paragraph 56 of the judgment). In its judgment (at paragraph 57), the Court indicated that the only possible justification for the imposition of that obligation would have been that the proper exploitation of the patent would have been impossible unless the rigs were mounted only on certain sailboards. This was later reflected in Article 2(5) of the Technology Transfer Agreements Regulation (Regulation 240/96, OJ [1996] L 31/2).
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2.3 Article 81(2) EC: the sanction Article 81(2) EC provides that any agreement, decision or concerted practice that fulfils the conditions in Article 81(1) EC will be void automatically. The Court has explained that the nullity referred to in Article 81(2) EC is an absolute one; therefore an agreement that is void by virtue of that provision has no effect as between the contracting parties and cannot be enforced against third parties.172 This sanction of nullity provided in Article 81(2) EC raises the important question of severance. Can an agreement containing prohibited clauses stand after the deletion of those clauses, or would the nullity of those clauses vitiate the agreement as a whole? The approach of the Court has been that this is a matter for national law and not for Community law to decide.173 In the framework of vertical agreements, the new umbrella block exemption regulation on vertical restraints,174 has taken the novel step of distinguishing between two sets of clauses restrictive of competition that occur in vertical agreements. On the one hand, Article 4 of the regulation refers to hardcore restrictions that per se are non-severable from the rest of an agreement, e.g. resale price maintenance. If one of these restrictions appears in a certain agreement, that clause cannot be severed from the rest of the agreement and the whole agreement will automatically fall outside the scope of the block exemption.175 On the other hand, Article 5 lists some restrictive clauses that are severable from the rest of the agreement e.g. non-compete obligations exceeding five years. Should one of these clauses appear in a given agreement, then the remainder of the agreement may still benefit from the block exemption after the deletion of that clause.176
2.4 Article 81(3) EC: exemptions As seen above, an agreement or concerted practice that fulfils all the conditions laid down in Article 81(1) EC would in principle be null and
172
173
174 175 176
Case 22/71 Béguelin v. Import Export [1971] ECR 949, [1972] CMLR 81, at paragraph 29 of the judgment. Thus, the Court has explained that ‘it is for the national court to decide in accordance with the relevant national law the extent and consequences, for the contractual relations as a whole, of the nullity of certain contractual provisions by virtue of Article 85(2) [now 81(2)] EC’ (Case 10/86 V.A.G. France v. Etablissements Magne SA [1988] 4 CMLR 98, at paragraphs 14–15 of the judgment; see also Case 319/82 Société de Vente de Ciments et Bétons de l’est v. Kerpen & Kerpen [1983] ECR 4173, [1985] 1 CMLR 511). Regulation 2790/99, supra n. 61. See Guidelines of the Commission on vertical restraints, supra n. 142, at paragraph 46. Ibid., at paragraph 57.
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void. The third paragraph of Article 81 EC, however, allows the prohibition set out in Article 81(1) to be declared inapplicable to an agreement or concerted practice on account of its beneficial effects.
2.4.1. Power to grant exemptions Although Article 81 EC is silent on this point, Article 9(1) of Regulation 17/62,177 the first regulation implementing Articles 81 and 82 EC, states that the Commission has the sole power to grant exemption, subject to review by the Court of Justice. As the Commission itself has explained, that exclusive power was initially necessary to ensure the coherent and uniform development of the interpretation and application of Article 81(3) EC.178 In its new White Paper on Modernisation of the Rules Implementing Articles 85 (now 81) and 86 (now 82) EC, the Commission has outlined a radical programme of reform aimed at decentralising the application of Article 81(3) EC. If this programme is carried through, Article 81(3) EC would be rendered directly applicable by national courts and national authorities. This does not mean that national courts and authorities would issue decisions granting exemptions, but that they would be able to apply the conditions in Article 81(3) EC when considering an agreement. In other words, Article 81 EC as a whole would become directly effective and would be applied by national courts and authorities just as they already apply Article 82 EC.179
2.4.2. Types of exemption Article 81(3) EC allows for two kinds of exemption. First, there are individual exemptions, which are those granted for a particular agreement, decision or concerted practice. Secondly, there are block exemptions, which are provided for categories of agreements, decisions or concerted practices. The Council enacted Regulations 19/65180 and 2821/71,181 enabling the Commission to adopt block exemption regulations in pursuance of Article 81(3) EC concerning, respectively, certain types of vertical and horizontal agreements.182 The system of block exemption regulations adopted by the Commission is examined in section 2.4.5.
177 178
179 180 181
OJ Sp. Ed. [1962], 204/62, p. 87. See White Paper on Modernisation of the Rules Implementing Articles 85 (now 81) and 86 (now 82) OJ [1999] C 132/1, at paragraph 17. See also the 7th recital in the Preamble to Regulation 17. See infra Chapter 4, section 4.4.1. OJ Sp. Ed. [1965] 35. OJ Sp. Ed. [1971] 1032.
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2.4.3. Conditions for the granting of an exemption There are two positive and two negative conditions that need to be fulfilled for an agreement or concerted practice to benefit from exemption. The two positive conditions are: (a) that the agreement must contribute to the improvement, production or distribution of goods, or promote technical progress, and (b) that it must allow consumers a fair share of the resulting benefit. The two negative conditions are: (a) that the agreement can only impose restrictions of competition which are indispensable to the attainment of these benefits, and (b) that it should not afford the undertakings concerned the possibility of eliminating competition in respect of a substantial proportion of the products in question. These four conditions are cumulative183 and, therefore, they all need to be satisfied for the agreement to be exempted. They are, moreover, drafted in very general terms, and the Commission has a very wide margin of discretion in their application, as the Court of Justice has repeatedly emphasised.184 In the case of individual exemptions, the Commission considers whether the four requirements are satisfied in a specific agreement. In the case of block exemptions, the Commission carries out that analysis generically for a group of agreements (i.e. vertical agreements) and sets it out in the preamble to the block exemption regulation.185 Positive conditions How has the Commission interpreted the criteria laid down in Article 81(3) EC? The best way to illustrate its approach is by considering an example where the Commission granted an individual exemption. In Re Bayer & Gist-Brocades186 a series of specialisation agreements concluded between Bayer, a German pharmaceutical company, and GistBrocades, a Dutch company, were notified to the Commission.187 Under the terms of the agreements, each of the firms had agreed to give up part of its business in favour of the other. Thus Bayer undertook not to expand its raw penicillin plant whereas Gist-Brocades undertook not to expand its 6aminopenicillanic acid (6-APA) plant. In return for financial assistance and a long-term purchase agreement, Gist-Brocades agreed to expand its raw penicillin plant and Bayer did the same in relation to its 6-APA plant. The 182
183
184 185 186 187
Regulation 1534/91 (OJ [1992] L 398/7) also allowed the Commission to enact block exemption regulations in the insurance sector. See Joined Cases 43/82 and 63/82 VBVB and VBBB v. Commission [1984] ECR 19, [1985] 1 CMLR 27, at paragraph 61 of the judgment, and Joined Cases T-39/92 and T-40/92 CB and Europay v. Commission [1994] ECR II-49, at paragraph 110 of the judgment. See Joined Cases T-39/92 and T-40/92, supra n. 183, at paragraph 109 of the judgment. See, for example, Recitals 6 to 12 in the Preamble of Regulation 2790/99 (supra n. 61). OJ [1976] L 30/13, [1976] 1 CMLR D98. The Decision of the Commission was taken prior to the adoption of the first block exemption on specialisation agreements (Regulation 417/85, OJ [1985] L 53/1).
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Commission took the view that such specialisation agreements were restrictive of competition because the two companies had effectively agreed not to compete with each other in the manufacture of the products that each one assigned to the other when they could have continued to produce them.188 The agreements did therefore fall, in principle, within the scope of Article 81(1) EC. The Commission then went on to consider whether the agreements could merit an exemption. The Commission considered that the first positive condition, contribution to economic progress, would only be fulfilled in those cases where fair and undistorted competition is unable to produce the best economic result or, in other words, in those cases where a restrictive agreement is an improvement on the situation that would otherwise have existed.189 It explained that, given that Bayer produced low-quality rawpenicillin, the improvement and expansion of its raw penicillin plant was not as economical as a jointly financed expansion of Gist-Brocades, raw penicillin plant. At the same time, the agreements would enable Bayer to concentrate its efforts on manufacturing 6-APA in more modern conditions.190 The Commission therefore concluded that the agreements contributed to the improvement of production.191 The Commission then turned to consider the second positive condition, namely whether the agreements in question allowed consumers to enjoy a fair share of the resulting benefits. This requirement was also satisfied. The agreements would lead to an increase of production of both raw penicillin and 6-APA, and to a drop in prices. As a result, other firms without raw material production facilities would be able to produce larger quantities of penicillin specialities in competition with those produced by Bayer and Gist-Brocades.192 Finally, there would be an increase in the number of endproducts and a downward trend in prices, which would obviously benefit the consumers. Negative conditions The first negative condition in Article 81(3) EC is a reflection of an important principle in the Community legal order: the principle of 188 189 190 191
192
Ibid., at paragraphs 50–5 of the Decision. Ibid., at paragraph 57 of the Decision. Ibid., at paragraph 59 of the Decision. As explained above, the Commission has broad discretion in ascertaining whether an agreement produces economic benefits. There is evidence in some decisions that the Commission, in applying this requirement, has taken into account social considerations, i.e. the preservation of jobs (see Case 42/84 Remia v. Commission [1985] ECR 2545, [1987] 1 CMLR 1, at paragraph 42 of the judgment), or environmental ones. See Re Arssupol, which concerned a co-reinsurance agreement for the covering of certain environmental damage risks, (Commission Decision 92/96/EEC, OJ [1992] L 37/16, [1993] 4 CMLR 338 at paragraph 38 of the agreement). Ibid., at paragraph 60 of the Decision.
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proportionality.193 It states that only restrictive clauses that are strictly necessary to the attainment of the economic and consumer benefits described above will be permitted. The second negative condition, i.e. that an agreement should not afford the participants the possibility of eliminating competition in respect of a substantial part of the products in question, involves first the definition of the relevant market and secondly the consideration of the market shares of the undertakings involved. In Van Landewyck,194 a Belgian trade association of tobacco manufacturers sought exemption for a recommendation issued by the association which provided, inter alia, for the concerted setting of credit facilities for customers and for measures to ensure a system of minimum prices. In considering the second negative condition in Article 81(3) EC, the Commission explained that the members of the association produced or imported 95 per cent of the cigarettes sold in Belgium and that cigarette sales in Belgium were represented by only 10 brands, largely marketed by members of the association. It was therefore clear that the recommendation could potentially eliminate competition in relation to a substantial proportion of the products in question.195 It follows from the consideration of the four conditions set out in Article 81(3) EC that the Commission carries out a careful balancing exercise in deciding whether or not these conditions are met. The Commission has, in short, to decide whether an agreement or concerted practice produces overall benefits that compensate for the restrictions it imposes in the free play competition, and whether the restrictions are really necessary for the achievement of those benefits. That assessment is a complex one and it requires a detailed economic analysis, which the Court is reluctant to scrutinise unless the Commission decision involves a manifest error in fact or in law, or a misuse of powers.196
2.4.4. The requirement of notification of agreements in order to qualify for individual exemption In the current system, agreements need to be notified to the Commission in order to be considered for individual exemption. This is set out in 193
194 195 196
The principle of proportionality entails that limitations on basic freedoms will only be tolerated to the extent that they are necessary to achieve certain legitimate objectives (see Case 66/82 Fromançais v. Forma [1983] ECR 395, [1983] 3 CMLR 453, and Case C-331/88 Fedesa [1990] ECR I-4023). The principle has been widely used as a ground for review of EC legislation (Case 114/76 Bela-Mühle [1977] ECR 121, [1979] 2 CMLR 83) and as a ground for review of national measures derogating from the EC Treaty freedoms (Case 40/82 Commission v. UK (Newcastle disease) [1982] ECR 2793, [1982] 3 CMLR 497). Joined Cases 209–215 and 218/78, supra n. 9. Ibid., at paragraphs 188–9 of the judgment. See Joined Cases T-39/92 and T-40/92, supra n. 183, at paragraph 109 of the judgment.
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Article 4(1) of Regulation 17/62.197 Until an agreement is notified, the Commission cannot adopt a decision under Article 81(3) EC.198 There is, however, no need to notify an agreement that falls within the scope of a block exemption regulation. The agreement receives an automatic exemption. The centralised system of notifications imposed a crushing administrative burden on the Commission, which soon faced an increasing backlog of cases waiting to be considered for individual exemption. The Commission took steps to reduce the number of notifications, such as the Notice on minor agreements,199 the block exemption regulations, the socalled ‘comfort letters’,200 and the notices on cooperation between the Commission and the national courts201 and between the Commission and national competition authorities.202 These proved to be helpful but insufficient. The most radical proposal so far, however, is the White Paper of the Commission on the modernisation of the rules implementing Articles 81 and 82 EC. It suggests the abolition of the system of notifications and its replacement by a system in which Article 81(3) EC would be directly applicable by national courts and national authorities. This system would imply that agreements that fall within the Article 81(1) EC prohibition, but which fulfil the conditions in Article 81(3) EC, would be valid from the time they are concluded, without the need to notify the agreement. Unlike the system of notifications, which is a centralised and ex ante method of control, the system of directly applicable exception suggested in the White Paper is a decentralised system of control that would allow for an ex post supervision of restrictive practices by the national courts and national authorities. The Commission would then be allowed to concentrate its efforts and resources on policy aspects and on the consideration of the most serious infringements of EC competition law.203
2.4.5. Block exemption regulations The Council enacted three basic regulations empowering the Commission to adopt block exemption regulations for certain categories of agreements. These are Council Regulation 19/65 for vertical agreements,204 Council
197 198 199 200 201 202 203 204
See supra n. 177. Article 4(1) of Regulation 17/62. See supra section 2.2.2. See infra Chapter 4, section 4.2.1 (Phase five). OJ [1993] C 39/6, [1993] 5 CMLR 95 and infra Chapter 4, section 4.3. OJ [1997] C 313/3 [1997] 5 CMLR 884 an infra Chapter 4, section 4.3. On the reforms suggested by the White Paper, see Chapter 4, section 4.4.1. See supra n. 180.
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Regulation 2821/71205 for horizontal agreements and Council Regulation 1534/91206 for insurance agreements. On the basis of Council Regulation 19/65, the Commission adopted five block exemption regulations concerning vertical agreements: Regulation 1983/83 on exclusive distribution agreements,207 Regulation 1984/83 on exclusive purchasing agreements,208 Regulation 4087/88 on franchise agreements,209 Regulation 1475/95 on motor vehicle distribution and servicing agreements210 and Regulation 240/96 on technology transfer agreements.211 There was no general block exemption covering selective distribution agreements212 and those agreements were considered in the light of the guidelines set out by individual Commission decisions and by the case law.213 205 206 207
208
209
210
211
212 213
See supra n. 181. See supra n. 182. OJ [1983] L 173/1, as amended by Regulation 1582/97 (OJ [1997] L 214/2). An exclusive distribution agreement is one ‘to which only two undertakings are party and whereby one party agrees with the other to supply certain goods for resale within the whole or defined area of the Common Market only to that other’ (Article 1 of Regulation 1983/83). OJ [1983] L 173/5, as amended by Regulation 1582/97 (supra n. 207). An exclusive purchasing agreement is one ‘to which only two undertakings are party and whereby one party, the reseller, agrees with the other, the supplier to purchase certain goods specified in the agreement for resale only from the supplier or from a connected undertaking or from another undertaking which the supplier has entrusted with the sale of his goods’ (Article 1 of Regulation 1984/83). Initially, there was only one block exemption regulation on exclusive dealing agreements (Regulation 67/67, OJ Eng. Sp. Ed. [1967], 10), which was replaced by Regulation 1983/83 and Regulation 1984/83, on exclusive distribution and exclusive purchasing respectively. OJ [1988] L 359/46. A franchise agreement is one ‘whereby one undertaking, the franchiser, grants the other, the franchisee, in exchange for direct or indirect financial consideration, the right to exploit a franchise for the purposes of marketing specified types of goods and/or services’ (Article 1(3)(b) of Regulation 4087/88). A franchise is defined as a ‘package of industrial or intellectual property rights relating to trade marks, trade names, shop signs, utility models, designs, copyrights, know-how or patents, to be exploited for the resale of goods or the provision of services to end users’ (Article 1(3)(a) of Regulation 4087/88). OJ [1995] L 145/25. A motor vehicle distribution and servicing agreement is ‘an agreement to which only two undertakings are party and in which one contracting party agrees to supply within a defined territory of the Common Market only to the other party, or only to the other party and to a specified number of undertakings within the distribution system, for the purpose of resale of certain motor vehicles intended for use on public roads and having three or more road wheels together with spare parts therefor’ (Article 1 of Regulation 1475/95). OJ [1996] L 31/2. The term ‘technology transfer agreements’ ‘encompasses patent and know-how licensing agreements, namely ‘agreements where one undertaking which holds a patent or know-how (‘the licensor’) permits another undertaking (‘the licensee’) to exploit the patent thereby licensed, or communicates the know-how to it, in particular for purposes of manufacture, use or putting into the market’ (5th recital of the Preamble of Regulation 240/96). For a definition of a selective distribution agreement, see supra n. 61. See infra section 2.5.
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On the basis of Council Regulation 2821/71, the Commission adopted Regulation 417/85 on specialisation agreements214 and Regulation 418/85 on research and development agreements.215 The typical structure of these block exemption regulations consisted of: (a) a white list: clauses commonly found in agreements which are restrictive of competition but which are exempted;216 (b) a black list: clauses which are restrictive of competition and which do not benefit from the exemption.217 In some block exemption regulations, provision is made for an opposition procedure that allows certain clauses to be notified to the Commission and gives the Commission a certain time limit to decide that the clauses do not benefit from the exemption. If the Commission keeps silent, the clauses will benefit from the exemption.218 The advent of the block exemption regulations eased to some extent the pressure on the Commission due to the large number of notifications of agreements seeking individual exemption. As seen above, agreements falling squarely within the scope of the block exemption automatically benefited from the exemption, without the need for prior notification. National courts and national authorities were therefore able to ascertain whether the terms of an agreement complied exactly with the white clauses in the relevant block exemption regulation. If they did, the agreement would benefit from the exemption. If they did not, or some clauses were black clauses, the benefit of the exemption was removed. It then fell to the parties either to modify the agreement to bring it within the scope of the block exemption or to notify the Commission in order to obtain an individual exemption. As a result, the Commission still received many 214
215
216 217 218
OJ [1985] L 53/1, as amended by Regulation 2236/97 (OJ [1997] L 306/12). A specialisation agreement was defined as one ‘whereby, for the duration of the agreement, undertakings accept reciprocal obligations: (a) not to manufacture certain products or have them manufactured, but leave it to other parties to manufacture or have them manufactured or (b) to manufacture certain products or have them manufactured only jointly’ (Article 1 of Regulation 417/85). The new block exemption regulation on specialisation agreements provides a similar definition (see Article 1 of Regulation 2658/ 2000, OJ [2000] L 304/3, [2001] 4 CMLR 800). OJ [1985] L 53/5, as amended by Regulation 2236/97 (OJ [1997] L 306/12). A research and development agreement is ‘one entered into between undertakings for the purpose of: (a) joint research and development of products or processes and joint exploitation of the results of that research and development; or (b) joint exploitation of the results of research and development of products or processes jointly carried out pursuant to a prior agreement between the same undertakings; or (c) joint research and development of products or processes excluding joint exploitation of the results, in so far as such agreements fall within the scope of Article [81](1)’ (Article 1 of Regulation 418/85). The new block exemption regulation on research and development agreements provides a similar definition (see Article 1 of Regulation 2659/2000, OJ [2000] L 304/7, [2001] 4 CMLR 808). See, for example, Article 2 of Regulation 1983/83, supra n. 207. See, for example, Article 3 of Regulation 1984/83, supra n. 208. See, for example, Article 6 of Regulation 4087/88, supra n. 209.
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notifications for agreements that did not conform precisely to the terms of the block exemptions. The system of block exemptions had, moreover, other important drawbacks, notably this excessive formalism and straightjacket effect, and insufficient emphasis on economic analysis. In 1997, the Commission initiated a radical process of reform in the field of vertical restraints that has culminated in the adoption of a new umbrella block exemption regulation, Regulation 2790/99,219 and of the Guidelines on vertical restraints that set out the principles for the assessment of vertical restraints.220 The regulation has replaced the current system of different block exemptions for different categories of vertical agreements and covers all vertical agreements that would normally fall within the scope of Article 81(1) EC.221 The regulation was adopted in December 1999, entered into force on 1 June 2000 and will remain valid for a period of 10 years.222 Agreements in force on 31 May 2000 that satisfied the conditions of the previous block exemption regulations – Regulation 1983/83, Regulation 1984/83 and Regulation 4087/88 – will continue to have the benefit of the exemption until 31 December 2001.223 The process of reform undertaken by the Commission and the new regulation itself are examined in detail in section 2.4.6. In the field of horizontal agreements, the Commission carried out a similar process of reform that culminated in the adoption, in November 2000, of two new block exemption regulations on specialisation agreements224 and on research and development agreements.225 A set of guidelines on horizontal agreements followed in January 2001.226
2.4.6. The process of reform of the Commission’s policy on vertical restraints Four preparatory steps The new Commission regulation was preceded by four landmarks that progressively outlined the reform of vertical restraints. These steps are now only of historical importance, but they are essential to an understanding of the way in which the Commission’s policy was shaped.
219 220 221
222 223 224 225 226
See supra n. 61. See supra n. 142. The only exceptions are those vertical agreements expressly excluded from the scope of the Regulation. See Articles 2(2), 2(3), 2(4), and 2(5) of the Regulation. See Article 13 of Regulation 2790/99. See Article 12 of Regulation 2790/99. Regulation 2658/2000, supra n. 96. Regulation 2659/2000, supra n. 97. OJ [2001] C 3/2, [2001] 4 CMLR 819.
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Step I : The 1997 Commission’s Green Paper on Vertical Restrants227 In its Green Paper, the Commission launched a radical review of its policy on vertical restraints. That review was timely because the existing block exemption regulations were about to expire and they were outdated given changes in the traditional methods of distribution that resulted from the information technology revolution. The Commission set out in the Green Paper the results of recent economic analysis suggesting that it could not be assumed that vertical restraints per se were either beneficial or detrimental to competition, but rather that market structure was crucial in determining the impact of vertical restraints. Vertical agreements could have both pro-competitive effects (through the reduction in transaction and distribution costs) and anti-competitive effects (through restrictive clauses), and the Commission was required to balance the two in order to establish a coherent policy on vertical restraints. The Green Paper suggested that the question of whether the pro-competitive effects outweighed the anti-competitive effects would largely depend on the economic power of the undertakings involved. As the Commission explained, ‘the fiercer is inter-brand competition, the more likely are procompetitive and efficiency effects to outweigh any anti-competitive effects of vertical restraints. Anti-competitive effects are only likely where interbrand competition is weak and there are barriers to entry at either producer or distributor level’.228 Following interviews with the socio-economic operators concerned – i.e. manufacturers, retailers, trade and consumer associations, etc. – the Commission established the key drawbacks of the system of block exemptions that had been in place since the 1980s. Essentially, these block exemptions were too rigid and legalistic. Thus, unless the clauses of an agreement fell squarely within the white list in the relevant block exemption, the benefit of the exemption was removed. Naturally, the presence of black-listed clauses also meant the agreement was outside the scope of a block exemption. Clauses in the agreement that did not correspond to those set out in the regulation had to be notified to the Commission in order to be considered for individual exemption.229 Moreover, the block exemptions did not take account of the market shares of the undertakings participating in agreements. Agreements conforming to the terms of a block exemption were exempted irrespective of the market power of the contracting parties, and therefore irrespective of their impact on market structure. Small companies suffered excessive and unnecessary regulation, whereas agreements between companies with large market power could still benefit from the exemption regardless of 227 228 229
[1997] 4 CMLR 519. See paragraph 10 of the Green Paper. See supra section 2.4.5.
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their real impact on the market. A less formalistic, more ‘economic effects’ based approach was therefore necessary. The Commission suggested five possible options for reform, which can be outlined as follows: • Option 1: Maintain the current system. • Option 2: Wider block exemptions without a market share cap.230 This option would entail giving more flexibility to the existing block exemptions and the adoption of a block exemption regulation for selective distribution agreements. • Option 3: (1) More focused block exemptions with a market share cap of 40 per cent; (2) Above the market share cap, an agreement may need individual examination by the Commission. The result of that examination may be: (a) negative clearance (confirming the agreement does not breach Article 81 EC), (b) individual exemption or (c) prohibition. Market share below 40% Application of focused block exemptions to vertical agreements
Market share above 40% Agreements may require individual examination by the Commission
• Option 4-I: (1) Negative clearance presumed up to 20 per cent market share cap. (2) Wider block exemptions without a market share cap apply above 20 per cent market share. Market share below 20% Presumption of legality of the agreement
Market share above 20% Application of wider block exemptions
• Option 4-II: (1) Negative clearance presumed up to 20 per cent market share. (2) Wider block exemptions apply between 20 per cent and 40 per cent market share. (3) Above the market share cap (40 per cent), agreement may need individual examination by Commission. The result of that examination can be: (a) negative clearance, (b) individual exemption or (c) prohibition. Market share below 20% Presumption of legality of the agreement 230
Market share between 20 and 40% Wider block exemptions apply
Market share above 40% Agreement may require individual examination by Commission.
The market share is that of the undertakings participating in the agreement.
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Step II: The 1998 Commission’s Communication on the application of EC competition rules to vertical restraints: A follow-up to the Green Paper on Vertical Restraints231 Following the debate generated by the Green Paper, the Commission’s Communication set out the key aspects of its new policy on vertical restraints.232 First, the Commission suggested the adoption of one umbrella block exemption regulation that would cover all vertical agreements, instead of the existing system of different block exemptions for each category of agreements (i.e. exclusive distribution, exclusive purchasing, franchising, etc.). Secondly, the new regulation would only have a list of ‘black clauses’, but not a list of ‘white clauses’. The regulation would therefore define only clauses that are not exempted. This would have the effect of leaving the parties much more freedom in the configuration of their agreements and removing the straightjacket effect of the existing block exemption regulations. It was anticipated that those hardcore clauses would include, inter alia, resale price maintenance and attempts to grant absolute territorial protection.233 Thirdly, the Commission signalled its intention to use market share caps to link exemption to market power. The Commission still debated whether one or two market share thresholds should be set. On the one hand, the adoption of one market threshold (25–35 per cent), as suggested in both Options III and IV-II in the Green Paper, had the advantages of clarity and simplicity. On the other hand, the adoption of two market thresholds, which mirrored Option IV-II in the Green Paper, would allow a graduation of the treatment of vertical restraints with a better economic justification. Step III: Council Regulation 1215/99234 and Council Regulation 1216/99235 These two regulations embody the legislative changes that were necessary to enable the Commission to carry out its programme of reform of block exemptions. On the one hand, Regulation 1215/99 extended the powers of the Commission under Regulation 19/65,236 thus allowing the Commission to enact regulations to cover all types of vertical agreement. This was necessary because Regulation 19/65 in its original form only allowed the Commission to adopt block exemption regulations with reference to certain types of vertical agreements.237 231 232 233 234 235 236 237
[1999] 4 CMLR 281. See Section V.2 of the Commission’s Communication. See supra section 2.2.2. OJ [1999] L 148/1. OJ [1999] L 148/5. See supra n. 204. See Articles 1(1)(a) of Regulation 19/65.
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On the other hand, Regulation 1216/99 amended Article 4(2)(2) of Regulation 17/62, which in its original form exempted a number of agreements from notification before an individual exemption could be granted.238 That dispensation did not cover most vertical agreements whereas Regulation 1216/99 has amended it to cover all vertical agreements. Therefore, if a vertical agreement does not come under the scope of a block exemption regulation, the parties can still apply for individual exemption, regardless of the fact that the agreement was not notified. If the exemption is granted, it will be backdated to the date when the agreement was concluded.239 This Regulation removes the unnecessary administrative burden on the Commission and allows a more efficient treatment of vertical restraints. Step IV: The Draft block exemption regulation on vertical restraints and the Draft Guidelines on vertical restraints240 In September 1999, the Commission published the eagerly awaited draft of the umbrella block exemption regulation on the application of Article 81(3) EC to vertical agreements, together with a draft set of Guidelines on vertical restraints. The Guidelines aim to set out the principles that will allow undertakings to make their own assessment of vertical agreements. As in the case of the Green Paper, the Commission opened a public consultation by inviting all interested parties to submit comments, within a time limit of one month with reference to the draft regulation and two months in respect of the draft Guidelines. One of the most important aspects of the draft regulation was the fact that the Commission finally opted for the use of one market share threshold (30 per cent) that would act as a ceiling for the application of the block exemption.241 Since the text of the draft regulation largely agrees with the final text of the umbrella block exemption regulation, any important differences between the two will be highlighted in the next section, where the structure and provisions of the new regulation are set out in detail. The provisions of the new umbrella block exemption Regulation 2790/99 on vertical agreements and the Guidelines on vertical restraints Following the preparatory steps outlined above, in December 1999, the Commission adopted Commission Regulation 2790/99,242 the new umbrella block exemption regulation on vertical agreements, and, in 238 239
240 241 242
See supra section 2.4.4. See Articles 6(1) and 6(2) of Regulation 17/62. And see supra section 2.4.4, for those agreements where notification is a necessary requirement, the exemption is backdated to the date of notification. OJ [1999] C 270/7. See Article 3 of the draft block exemption regulation, supra n. 240. See supra n. 61.
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May 2000, the definitive set of Guidelines on vertical restraints.243 The Regulation itself is a relatively brief document, but the Guidelines, finally published in the form of a Commission Notice, are both lengthy and intricate. The first part of the Guidelines is devoted to clarifying and facilitating the application of the provisions of the block exemption, while the second part sets out the economic principles applicable to individual vertical agreements that do not fall within the scope of the block exemption. This book will only examine the principles concerning the application of the block exemption.244 Key definitions Article 1 of the Regulation provides a useful set of definitions for some of the key concepts that appear in the Regulation, such as ‘competing undertakings’, ‘non-compete obligation’, ‘exclusive supply obligation’, ‘selective distribution system’, etc.245 Scope of the Regulation Articles 2 and 3 set out the scope of application of the Regulation. It is necessary first to define two key concepts in the Regulation, which are essential to an understanding of the scope of the block exemption: vertical agreements and vertical restraints. What are vertical agreements for the purposes of the Regulation? Article 2(1)(1) defines them as ‘agreements or concerted practices entered into between two or more undertakings, each of which operates, for the purposes of the agreement, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services’. The Guidelines246 elucidate three elements in that definition. First, the agreement must be between two or more undertakings. This is not only different from the former block exemptions, which only covered bilateral agreements, but also has the effect of excluding agreements with consumers. Secondly, the participant undertakings must operate at a different level of the production or distribution chain. Thirdly, the agreement must relate to the conditions under which the parties may ‘purchase, sell or resell certain goods or services’. Again this constitutes an expansion of the earlier block exemption regulations, which only covered goods and not services.
243
244
245 246
The Commission Guidelines were adopted on 24 May 2000 and published on 13 October 2000 in the Official Journal in the form of a Commission Notice; see supra n. 142. For an exhaustive study of the criteria set out in the Guidelines for the evaluation of particular vertical restraints, see P. Taylor, Vertical Agreements: The New Regulation in Context (Sudbury, 2000). The draft of the block exemption did not contain such a list. See paragraph 24 of the Guidelines.
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What are vertical restraints? According to Article 2(1)(2), these are ‘restrictions of competition falling within the scope of Article 81(1) EC’ that are included in a vertical agreement. The scope of the Regulation is exceptionally wide. In principle, all vertical agreements containing clauses restrictive of competition benefit from the exemption, with the exception of those expressly excluded from the Regulation.247 This is the case, provided that the market share of the supplier – or of the buyer in the case of exclusive supply obligations248 – does not exceed 30 per cent of the relevant market249 and provided the agreement does not contain hard-core restrictions.250 Above that market share, the agreement is subject to individual consideration by the Commission. This could be represented as follows: Market share below 30% Application of umbrella block exemption to vertical agreements
Market share above 30% Agreements may require individual examination by the Commission Result of individual examination: (a) negative clearance, (b) individual exemption or (c) prohibition
The block exemption thus creates a safe harbour for vertical agreements that contain no hardcore restrictions, on condition that the market share held by the supplier does not exceed 30 per cent of the relevant market on which the goods or services are sold. In the case of agreements concerning exclusive supply obligations, it is the market share of the buyer that should not exceed 30 per cent of the relevant market.251 The rules for the calculation of the market share are set out in Article 9 of the Regulation. Furthermore, the Guidelines shed light both on the criteria for the definition of the relevant market and on the methods for the calculation of the market share held by the supplier or by the buyer.252 Certain agreements are excluded from the scope of application of the Regulation. Thus the Regulation applies to agreements concluded by associations of retailers with their members or their suppliers only in cases 247 248
249 250
251 252
See Articles 2(2), 2(3), 2(4) and 2(5) of the Regulation. An ‘exclusive supply obligation’ is defined by Article 1(c) of the Regulation as ‘any direct or indirect obligation causing the supplier to sell the goods or services specified in the agreement only to one buyer inside the Community for the purposes of a specific use or for resale’. See Articles 2(1) and 3 of the Regulation. Hard-core restrictions are those restrictions of competition, the presence of which withdraws the benefit of the exemption. They are listed in Article 4 of the Regulation (see infra nn. 260–264 and accompanying text). See Article 3 of the Regulation. See paragraphs 88–99 of the Guidelines.
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where all the members of the association are retailers of goods (not services) and where no individual member of the association has a total annual turnover exceeding 50,000,000 EUR.253 The Regulation applies also to vertical agreements containing provisions on intellectual property rights only if the five conditions set out in Article 2(3) of the Regulation are fulfilled. The Regulation will apply to agreements between competing undertakings only when they are non-reciprocal and the three conditions in Article 2(4) are satisfied. Finally, under Article 2(5), the Regulation will not apply to agreements the subject matter of which falls within the scope of another (specific) block exemption regulation, such as vertical agreements covered by the technology transfer regulation,254 by the regulation on car distribution255 and by the regulations exempting vertical agreements concluded in connection with horizontal agreements.256 Likewise, the Guidelines make it clear that certain vertical agreements generally do not infringe Article 81(1) EC and therefore need not be subject to the application of the block exemption regulation. These include agreements of minor importance, agreements between small and medium-size undertakings and agency agreements.257 Quite naturally, the block exemption only applies to agreements that are caught by Article 81(1) EC. If the agreement does not infringe Article 81(1) EC in the first place, there is no need to exempt it.258 ‘Black-clauses’ Unlike the ‘old’ system of block exemption regulations, the new regulation does not set out lists of ‘white, grey’.259 One of the reasons why the Commission initiated its programme of reform of vertical agreements was the excessive formalism and straightjacket effect of the ‘old’ system of block exemptions. The new regulation only defines what is not exempted, thus leaving the parties to an agreement a much greater degree of flexibility. There are two lists of ‘black clauses’ in the new Regulation, in Articles 4 and 5 respectively. The Guidelines explain the essential distinction between the two lists. The list in Article 4 is a list of hard-core restrictions. If one of those clauses is found in an agreement, the whole agreement will be deprived of the benefit of the block exemption.260
253 254 255 256
257 258
259 260
Article 2(2) of the Regulation. Regulation 240/96 (OJ [1996] L 31/2). Regulation 1475/95 (OJ [1995] L 145/25). See Regulation 2658/2000 on specialisation agreements (supra n. 214) and Regulation 2659/2000 on research and development agreements (supra n. 215). See Section II of the Guidelines. See further, R. Whish, ‘Regulation 2790/99: the Commission’s ‘new style’ block exemption for vertical agreements’, [2000] 37 CMLRev 887, at pp. 897–8. See supra nn. 216–218 and accompanying text. See paragraphs 46 and 66 of the Guidelines.
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Article 5, however, contains a list of ‘black clauses’, which are severable from the agreement. In other words, once the ‘black clauses’ have been ‘deleted’ from the agreement, the remaining parts of the agreement may still benefit from the block exemption.261 The list of hard-core restrictions in Article 4 is as follows: • Resale price maintenance (Article 4(a)): establishment of a fixed or minimum resale price level to be observed by the buyer in respect of its customers (the establishment of a maximum resale price or the recommendation of a resale price is allowed). The prohibition also includes indirect means of fixing resale prices (grant of rebates, threats, penalties, suspension of deliveries, etc.) (paragraph 47 of the Guidelines). • Territorial and customer restrictions (Article 4(b)): establishment of restrictions of the territory into which or of the customers to whom the buyer may sell the contract goods. The only territorial and customer restrictions allowed under the regulation are: (a) A restriction of active sales [i.e. canvassing for orders] into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer. A restriction on passive sales [i.e. general advertising, promotion in the media or on the Internet, response to unsolicited orders, etc.] is, however, not permitted;262 (b) A restriction of sales (both active and passive) to end users by a buyer operating at the wholesale level of trade; (c) A restriction of sales (both active and passive) to unauthorised distributors by members of a selective distribution system [this is a logical consequence that follows from the nature of selective distribution agreements];263 (d) A restriction of a buyer’s ability to sell components supplied for the purposes of incorporation, to customers who would use them to manufacture the same type of goods produced by the suppliers. • Restriction of active or passive sales to end users by members of a selective distribution system operating at the retail level of trade (Article 4(c)). The Guidelines also explain that selective distribution may be combined with exclusive distribution, provided that active and passive sales are not restricted anywhere.264
261 262 263
264
See paragraphs 57 and 67 of the Guidelines. See paragraphs 50–1 of the Guidelines. This provision was not found in the draft of the block exemption regulation. See OJ [1999] C 270/7, and supra n. 240 and accompanying text. See paragraph 53 of the Guidelines.
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• Restriction of cross-supplies within a selective distribution network (Article 4(d)). Restrictions of cross-supplies between distributors in a selective distribution system are not allowed, and include distributors operating at different levels in the market. • Restrictions on the supplier’s ability to supply components to third parties not appointed by the buyer (Article 4(e)). This ‘black clause’ aims to prevent agreements whereby a manufacturer of spare parts may not sell them to end-users or repairers not appointed by the buyer. The list of black clauses in Article 5 of the Regulation is as follows: • Non-compete obligations, the duration of which is indefinite or exceeds five years (Article 5(a)). A non-compete obligation is any ‘direct or indirect obligation causing the buyer not to manufacture, purchase, sell or resell goods or services which compete with the contract goods or services’. It is also any obligation ‘that require the buyer to purchase from the supplier or from another undertaking designated by the supplier more than 80% of the buyer’s total purchases during the previous year of the contract goods or services which compete with the contract goods or services and their substitutes’ (see paragraph 58 of the Guidelines and Article 1(b) of the Regulation). Non-compete obligations tacitly renewable beyond a period of five years are deemed to have been concluded for an indefinite duration. • Non-compete obligations imposed following the termination of the agreement (Article 5(b)). This clause refers to obligations imposed on a buyer, posttermination of the agreement, not to manufacture, purchase, sell or resell goods or services. • Obligations imposed on members of a selective distribution system not to sell the brands of particular competing suppliers (Article 5(c)).265 While it is permissible to impose on a selective distributor an obligation not to resell competing brands in general, Article 5(c) aims to prevent the exclusion of particular competitors. As the Guidelines explain, the objective of this is ‘to avoid a situation whereby a number of suppliers using the same selective distribution outlets prevent one specific competitor or certain specific competitors from using these outlets to distribute their products-foreclosure of a competing supplier which would be a form of collective boycott’.266
265
266
There is an interesting variation in the form of words used in the draft block exemption regulation. See paragraph 61 of the Guidelines.
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Withdrawal of the block exemption The benefit of the block exemption may be withdrawn in certain circumstances by the Commission or by the national authorities. Under the ‘old’ system of block exemptions, the possibility of withdrawal of the exemption by the Commission was provided by all the block exemption regulations for agreements that, although formally qualifying for exemption, had certain effects incompatible with Article 81(3) EC.267 Article 6 of the new Regulation also permits the Commission to withdraw the benefit of the exemption in these circumstances.268 Article 7 of the new Regulation, however, contains the novel feature of allowing national authorities to withdraw the benefit of the exemption in respect of agreements whose effects are felt in the territory of a Member State, or in part thereof, which has all the characteristics of a distinct geographical market. The Guidelines explain that the Commission has competence to withdraw the benefit of the block exemption for vertical agreements that cover a relevant geographical market wider than the territory of one Member State, whereas the national authorities normally have competence when that market covers the territory of one Member State or part thereof. 269 In the latter case, however, the Commission reserves the right to act in cases displaying a ‘particular Community interest’.270 Disapplication of the block exemption regulation Article 8 enables the Commission, by issuing a regulation, to declare the block exemption inapplicable where parallel networks of agreements, including similar vertical restraints, cover more than 50 per cent of a relevant market. The difference between the withdrawal procedure in Article 6 and the disapplication procedure in Article 8 is explained by the Guidelines. Withdrawal implies the adoption of a decision that brings an individual agreement within the scope of Article 81(1) EC. A regulation dissapplying the block exemption regulation merely removes, with reference to the restraints and the markets concerned, the application of the block exemption, thus restoring the full application of Articles 81(1) and (3) EC.271 267
268
269 270 271
See Article 6 of Regulation 1983/83 EEC on exclusive distribution agreements (see supra n. 207); Article 14 of Regulation 1984/83 on exclusive purchasing agreements (see supra n. 208); Article 8 of Regulation 4087/88 on franchise agreements (see supra n. 209); Article 8 of Regulation 1475/95 on motor-vehicle distribution and servicing agreements (see supra n. 210), and Article 7 of Regulation 240/96 on technology transfer agreements (see supra n. 211). Article 6 explains that this would be the case and ‘in particular where access to the relevant market is significantly restricted by the cumulative effect of parallel networks of agreements’. See paragraph 77 of the Guidelines. Ibid. See paragraph 81 of the Guidelines.
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Entry into force and transitional provisions Article 13 of the regulation provides that the regulation entered into force on 1 January 2000 and it began to apply on1 June 2000. It will expire on 31 May 2010. Transitional arrangements for agreements exempted under the ‘old’ system of block exemption regulations and in force on 31 May 2000 are covered by Article 12 of the Regulation. Under that provision, those agreements will continue to benefit from the exemption – even if they do not satisfy the conditions for exemption in Regulation 2790/99 – until 31 December 2001. How to apply the new block exemption regulation The new block exemption regulation may seem a daunting and difficult piece of legislation. Figures 2.7 and 2.8 describe the basic steps suggested for the application of the Regulation.272
2.4.7 The process of reform of the Commission’s policy on horizontal restraints In the final stages of its programme of reform of vertical restraints, the Commission also completed the reform of its policy on horizontal cooperation between undertakings. Thus, in April 2000, the Commission issued two draft block exemption regulations concerning respectively research and development agreements273 and specialisation agreements274 as well as a set of Draft Guidelines on the application of Article 81 EC to horizontal cooperation between undertakings.275 In November 2000, the new regulations on research and development agreements276 and on specialisation agreements277 were published, and the Guidelines followed shortly afterwards at the beginning of 2001.278 The scope of the Guidelines is wider than that of the two block exemption regulations. They are also concerned with agreements on joint production, joint purchasing, commercialisation, standardisation and the environment.279 The two new regulations reflect the same economics-based approach present in the new umbrella block exemption regulation on vertical restraints. Thus both regulations move away from the ‘old’ style of block exemption regulation that included lists of exempted and non-exempted
272 273 274 275 276 277 278 279
See infra pp. 66–7. OJ [2000] C 118/4. OJ [2000] C 118/10. OJ [2000] C 118/14. Regulation 2659/2000, supra n. 97. Regulation 2658/2000 supra n. 96. OJ [2001] C 3/2, [2001] 4 CMLR 819. See section 1.2, paragraph 10, of the Guidelines.
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Does the agreement fall within the scope of the block exemption? Is it a vertical agreement (Art. 2(1)(1))? • between two or more undertakings • undertakings operate at different economic levels • relates to the conditions of purchase, sale or resale of goods and services
▼
▼
YES
NO
▼
▼ Regulation does not apply
Does it contain clauses restrictive of competition (Article 2(1)(2))?
▼
YES
▼
▼ NO
▼ Regulation does not apply
Is the agreement excluded from the scope of the block exemption (Articles 2(2)(3)(4) and (5))?
▼
NO
▼ Is the market share of the supplier – or of the buyer in exclusive supply obligations – less than 30% of the relevant market? (Article 3)
▼
▼ YES
▼ Regulation does not apply
▼
YES
NO
▼
▼
Block exemption prima facie applies (See Figure 2.8)
▼
Figure 2.7 The application of Regulation 2790/99 (I)
Individual by the Commission: • negative clearance • individual exemption • prohibition
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Does the agreement include any black clauses?
▼
▼
YES
NO Block exemption applies
▼ What type of black clauses?
▼
▼
Hard-core restrictions (Article 4)
Other ‘black clauses’ (Article 5)
▼ The entire agreement excluded from the scope of the block exemption. Individual exemption unlikely.
▼ Deletion of black clauses. The rest of the agreement is not deprived of the benefit of the block exemption.
Figure 2.8 The application of Regulation 2790/99 (II)
clauses in favour of block exemptions for agreements which do not include hard-core restrictions and provided that the market share of the parties does not exceed 25 per cent and 20 per cent of the relevant market for research and development and specialisation agreements, respectively.280 The central idea is therefore that, below a certain market power, the pro-competitive effects of these agreements outweigh their anti-competitive effects.281
280
281
See Article 3 of the Regulation on research and development agreements and Articles 1, 2 and 3 of the Regulation on specialisation agreements. See the 5th recital to the Preamble to the Regulation on research and development agreements and the 3rd recital to the Preamble to the Regulation on specialisation agreements.
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2.5. The ‘rule of reason’ in EC competition law The so-called ‘rule of reason’ approach has its origins in US anti-trust law.282 In its White Paper on modernisation,283 the Commission defines this approach as one ‘in which the authorities or courts responsible for competition law balance the pro-competitive aspects of an agreement against its anti-competitive aspects in deciding whether to prohibit it’.284 In the American system, this means that, with the exception of a few types of agreement which are regarded as illegal per se, courts have in each case to assess the overall economic impact of an agreement in a particular market before deciding whether to prohibit it or not. The structure of Article 81 EC is such that any agreement or concerted practice that fulfils the conditions in Article 81(1) EC, namely effect on trade between the Member States and anti-competitive object or effect, is automatically caught by the prohibition laid down in that provision. If the agreement displays some beneficial effects, then it may be exempted under Article 81(3) EC. Were a ‘rule of reason’ approach to be applied, when the pro-competitive effects of an agreement outweigh the anticompetitive effects, the prohibition in Article 81(1) EC would be deemed not to have been breached. Proponents of the ‘rule of reason’ approach have traditionally identified two main advantages in its application to EC competition law.285 First, it would shift the emphasis from a formalistic approach to Article 81(1) EC to a balanced and economics-based approach. In other words, agreements that display some anti-competitive effects but which are mostly economically beneficial would not need to be prohibited and then exempted; they would not come under the prohibition in the first place. Secondly, it would have some procedural advantages. In the current system, only the Commission can grant exemptions. Two different scenarios may arise before national courts. On the one hand, an agreement may fall within the scope of a block exemption. On the other, the agreement may not fall within the scope of a block exemption and may require individual consideration. If an agreement falls within the scope of a block exemption,286 the national court can examine the compatibility of the agreement with the block exemption. The ‘new’ system of block exemptions only includes a list of ‘black clauses’ and therefore the national court can decide that the 282 283 284 285
286
See R. Whish and B. Sufrin, ‘Article 85 and the Rule of Reason’, [1987] 7 YEL 1. See n. supra 178. Ibid., at paragraph 56. See V. Korah, ‘The rise and fall of provisional validity – the need for a rule of reason in EEC antitrust’ [1981] Northwestern Journal of International Law and Business 320; M. Schechter, ‘The rule of reason in European competition law’ [1986] 2 LIEI 1. See supra sections 2.4.6 and 2.4.7.
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agreement benefits from the block exemption when it does not include any of the non-exempted clauses. In the ‘old‘ system, the national courts were much more restricted because agreements had to comply with the list of specifically exempted or ‘white clauses’ as well as not include any of the ‘black clauses’. If, on the other hand, an agreement does not fall within the scope of a block exemption regulation, the national court can, in principle, only decide whether an agreement is or is not in breach of Article 81(1) EC. If the agreement infringes that provision but it is, on the whole, economically beneficial, the national court may apply the prohibition in Article 81(1) EC or suspend proceedings pending a decision of the Commission on whether or not an individual exemption should be granted.287 The introduction of a ‘rule of reason’ approach would have the advantage of allowing national courts to balance the anti-competitive and procompetitive effects of an agreement and to conclude that the prohibition in Article 81(1) EC has not been infringed. Moreover, it would lighten the workload of the Commission, which is beset by large numbers of applications for exemptions. The European Court of Justice has never expressly accepted the American-style ‘rule of reason’ but in some cases, other than those concerning agreements with a clear anti-competitive object,288 it has engaged in a balancing exercise. This raises the question of whether the Court has in fact adopted a ‘rule of reason’ approach. These cases include Société Technique Minière v. Maschinenbau Ulm,289 where the Court considered an exclusive sales agreement. A German company granted a French company the exclusive right to sell certain machines used by public utilities in France and its overseas territories. One of the questions referred by the national court to the European Court was whether that exclusive right of sale was contrary to Article 81(1) EC. It is clear that the ‘exclusivity’ element inherent in such a right was anti-competitive, but the agreement also had some important pro-competitive effects. This was well reflected in the Opinion of the Advocate General: … in reality, it is often impossible for small undertakings to get a foot-hold in a foreign market without concentrating their sales capacity in the hands of a single dealer, especially when their products have to be assembled before being sold and when it appears necessary to run a repairs service and to maintain a stock of spare parts. In cases of this sort, a comparison with the situation which would prevail on the market without the exclusive dealership may lead to the 287
288
289
See further the principles set out by the Court in Delimitis (Case C-234/89 [1991] ECR I935, [1992] 5 CMLR 210), discussed infra Chapter 4, section 4.3.3. Thus agreements that fix prices, share markets or purport to grant absolute territorial protection would always be regarded as infringing the prohibition in Article 81(1) EC; see supra section 2.2.4. Case 56/65, supra n. 67.
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EC Competition Law and Policy conclusion that the absence of such an agreement leads directly to a decrease in competition, because it goes together with a reduction in what is offered.290
Similarly, the Court took the view that an exclusive sales agreement cannot automatically come under Article 81(1) EC and that it seemed to be ‘really necessary for the penetration of a new area by an undertaking’.291 In other words, Société Technique Minière would probably not have taken the risk of introducing a product in a new market unless it was guaranteed a certain measure of protection against competition – which was represented by the guarantee of exclusivity. Another example frequently invoked is the decision of the Court in Metro v. Commission,292 a leading case on selective distribution agreements. In that case, Metro, a German wholesaler of electrical goods, was refused access to the distribution system operated by SABA. Metro complained to the Commission that SABA’s distribution system was in breach of Article 81(1) EC. The Commission concluded that some aspects of the distribution system did not come under Article 81(1) EC, whereas other aspects did fall within that prohibition, but benefited from an exemption under Article 81(3) EC. Metro challenged the Commission’s decision before the European Court. The Court agreed with the Commission that in the sector covering the production of high quality and technically advanced consumer durables, selective distribution systems were generally compatible with Article 81(1) EC. This compatibility was presumed where resellers were chosen on the basis of objective criteria of a qualitative nature relating to the technical qualifications of the reseller and his staff and the suitability of his trading premises and that such conditions are laid down uniformly for all potential resellers and are not applied in a discriminatory fashion.293
This approach was reiterated when the Court considered in detail the clauses in the system of selective distribution. For example, an obligation imposed upon a non-specialist wholesaler to set up a special department for electronic equipment fell outside the prohibition in Article 81(1) EC because it was necessary to ensure that the goods were sold under appropriate conditions.294 On the other hand, an obligation imposed on these wholesalers to achieve a turnover comparable to that of a specialist wholesaler was not a qualitative criterion inherent in a system of selective distribution and came, in principle, under Article 81(1) EC.295 290 291 292 293 294 295
Ibid., at p. 257. Ibid., at p. 250. Case 26/76 [1977] ECR 1875, [1978] 2 CMLR 1. Ibid., at paragraph 20 of the judgment. Ibid., at paragraph 37 of the judgment. Ibid.
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Finally, the decision of the Court in Pronuptia v. Schillgalis,296 has also been regarded as a fitting example of a similar balancing exercise by the Court. The case concerned a franchising agreement concluded between Pronuptia, a French manufacturer of wedding dresses, and one of its German franchisees. Following a dispute about the payment of arrears of royalties, the franchisee claimed before the national court that the franchise agreement was contrary to Article 81(1) EC. Following a preliminary reference by the national court, the European Court had the opportunity of examining in detail the compatibility of certain clauses commonly found in franchise agreements with Article 81(1) EC. Again, the Court took the view that it could not be said that franchise agreements fall automatically under the prohibition in Article 81(1) EC.297 The Court first defined a distribution franchise agreement as one where ‘an undertaking which has established itself as a distributor in a given market and thus developed certain methods grants independent traders, for a fee, the right to establish themselves in other markets using its business name and the business methods which have made it successful’.298 It followed from this that any franchisor would want to take precautions: first, to ensure that its know-how does not benefit competitors and secondly, to maintain the identity and reputation of the network.299 Those clauses which, although they were potentially restrictive of competition, were necessary to protect those two objectives and were held to be compatible with Article 81(1) EC. Thus the Court took the view that a prohibition on the franchisee’s opening a shop of the same or a similar nature in an area where it might compete with a member of the franchise network was necessary to protect the first objective. Likewise, an obligation imposed on the franchisee to sell the contract goods only in premises laid out and decorated according to the franchisor’s instructions was essential to safeguard the second objective. Conversely, a prohibition on the franchisee’s opening a second shop in order to sell the contract goods outside their own territory came under Article 81(1) EC and should be assessed within the framework of Article 81(3) EC, as it constituted an attempt to secure territorial protection. Do these cases reflect the acceptance by the Court of a ‘rule of reason’ approach? Some commentators have cogently argued that the adoption of this terminology is not without its dangers. In particular, they have argued that the profound differences between EC and US anti-trust law and the inherent risk of increasing uncertainty among the business community counsel against the adoption of the expression.300 Moreover, it is suggested 296 297 298 299 300
Case 161/84 [1986] ECR 353, [1986] 1 CMLR 414. Ibid., at paragraph 14 of the judgment. Ibid., at paragraph 15 of the judgment. Ibid., at paragraphs 16 and 17 of the judgment. See Whish and Sufrin, op. cit., supra n. 282, at pp. 36–7.
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that a widespread application of the ‘rule of reason’ runs counter to a literal interpretation of Article 81EC, because it would render the third paragraph of that provision superfluous. As Whish comments, ‘the fact that the ECJ has handed down reasonable judgments does not mean that it has adopted the rule of reason’.301 This view is confirmed by more recent decisions of the Community Courts which show that it is not clear that the principle applies in EC competition law. Thus in Montecatini v. Commission,302 the Commission fined Montecatini for taking part in a Community-wide polypropylene cartel. The company had argued before the Court of First Instance, which first considered the action for the annulment of the Commission’s decision, that a balancing exercise should have been carried out between the anti-competitive and pro-competitive effects of the agreement. The Court of First Instance took the view, confirmed by the European Court, that even if the rule of reason applied in EC competition law, it would not operate in a situation like the one at issue, i.e. an agreement to share markets and fix prices, which is contrary per se to Article 81(1) EC.303 In its decision in Métropole v. Commission,304 the Court of First Instance went further and stated that the case law of the Community judicature cannot be interpreted as establishing a ‘rule of reason’ approach in EC Competition law. It explained that judgments normally considered as examples of such an approach could be construed as an attempt by the Court to prevent a rigid application of Article 81(1) EC to any agreement that would restrict freedom of action of one or more parties to an agreement.305 This, however, would not mean that ‘it is necessary to weigh the pro and anticompetitive effects of an agreement when determining whether the prohibition laid down in Article 81(1) EC applies’.306 Be that as it may, the debate surrounding the ‘rule of reason’ is likely to be mainly of academic interest if the reforms suggested by the Commission in its White Paper are carried through. The introduction of a system of directly applicable exception would mean that national courts would be able to apply the third paragraph of Article 81 EC and to decide that an agreement falls within the prohibition in Article 81(1) EC but which satisfies the conditions in Article 81(3) is lawful from the time it is concluded, without the need for any prior decision from the Commission. As a result, the procedural advantages promoted by the advocates of the
301 302 303
304 305 306
See Whish, op. cit., supra n. 45, at p. 209. Case C-235/91P [2000] 4 CMLR 691. See Case T-14/89 Montecatini v. Commission [1992] ECR II-2409, at paragraph 265 of the judgment, and Case C-235/91P, supra n. 302, at paragraph 133 of the judgment. Case T-112/99, Judgment of 18 September 2001, not yet reported. Ibid. at paragraph 76 of the judgment. Ibid. at paragrah 77 of the judgment.
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‘rule of reason’ approach, would not longer be pertinent. It must be emphasised, however, that the introduction of a system of directly applicable exception does not amount to ultimate acceptance of the ‘rule of reason’ approach. Important differences exist between the two. In its White Paper on Modernisation, the Commission considered as one way of overcoming the significant procedural problems associated with a centralised system of exemptions the introduction of a ‘rule of reason’ approach in the interpretation of Article 81(1) EC. Although the Commission recognised that it had adopted a ‘rule of reason’ approach ‘to a limited extent’ and that the European Court had endorsed the approach in some cases, it rejected this option on three grounds. First, it would have the potential to make Article 81(3) EC redundant, when this could only be the result of an amendment of the EC Treaty.307 Secondly, the process of modernisation of competition law could not be made contingent on developments upheld by the Community judicature.308 Thirdly, there are the dangers of diverting the purpose of Article 81(3) EC, which is ‘to provide a legal framework for assessment of restrictive practices and not to allow the application of the competition rules to be set aside because of political considerations’.309
307 308 309
See paragraph 57 of the White Paper (op. cit., supra n. 178). Ibid. Ibid.
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3
Abuses of dominant position by one or more undertakings: Article 82 EC
3.1 Introduction Article 82 EC covers abuses of dominant position by one or more undertakings. It reads as follows: Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common 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 82 EC benefits from a simpler structure than Article 81 EC. It lays down in one paragraph a prohibition on abuses of dominant position which affect trade between Member States and a list of examples of abusive practices. Unlike Article 81 EC, it makes no provision for exemption. The aim of Article 82 EC is clear: it aims to control the activities of firms whose economic strength makes them immune from the influence of competitive forces in a given market. It covers the activities of monopolists (dominant sellers), monopsonists (dominant buyers) and also situations of joint dominance.
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3.2 The prohibition on abuses of dominant position by one or more undertakings The prohibition in Article 82 EC includes three elements. First, one or more undertakings need to hold a position of dominance within the Common Market or in a substantial part of it. Second, the undertaking or undertakings must have abused that position of dominance. Third, the abuse must have an effect on intra-Community trade. These elements are cumulative. Dominance itself is not prohibited, only the abuse of that dominance.1 Likewise, abusive practices by non-dominant companies do not come within the scope of Article 82 EC.2 Finally, if the abuse of dominant position has no effect on intra-Community trade, Article 82 EC will not apply. These elements are set out in Figure 3.1.3
3.2.1 Dominance within the Common Market or a substantial part of it In Continental Can,4 the Commission implicitly, and the Court explicitly, referred to the fact that dominance does not exist in the abstract, but in relation to a particular market.5 Therefore, the first step to determine the existence of a position of dominance is the identification of the relevant market. That market, as the Court held in United Brands v. Commission,6 needs to be defined both in its product and in its geographical dimensions.7 The relevant market, the test of dominance and whether 1
2
3 4 5
6 7
In Continental Can (Case 6/72 Europeanballage Corporation and Continental Can Co. Inc. v. Commission [1973] ECR 215, [1973] CMLR 199), the Court held that the exploitation of a dominant position must be abusive to come within the prohibition in Article 82 EC (at paragraph 26 of the judgment). Likewise, in Michelin v. Commission (Case 322/81 [1983] ECR 3461, [1985] 1 CMLR 282), the Court held that ‘a finding that an undertaking has a dominant position is not in itself a recrimination but simply means that, irrespective of the reasons for which it has such a dominant position, the undertaking concerned has a special responsibility not to allow its conduct to impair genuine undistorted competition on the Common Market’ (at paragraph 57 of the judgment). Case 247/86 Alsatel v. Novasam ([1988] ECR 5987, [1990] 4 CMLR 434, at paragraph 23 of the judgment). See infra p. 76. See supra n. 1. See Case 6/72, supra n. 1, at paragraph 32 of the judgment. See also United Brands v. Commission (Case 27/76 [1978] ECR 207, [1978] 1 CMLR 429, at paragraph 10 of the judgment) and L’Oréal v. PVBA De Nieuwe (Case 31/80 [1980] ECR 3775, [1981] 2 CMLR 235, at paragraph 25 of the judgment). Case 27/76, supra n. 5, at paragraph 10 of the judgment. In its 1997 Notice on market definition, the Commission explained that: ‘Market definition is a tool to identify and define the boundaries of competition between firms. It serves to establish the framework within which competition policy is applied by the Commission … The objective of defining a market in both its product and geographic
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Step 1: Dominance within the Common Market or a substantial part of it (a) Identification of the relevant market: • Relevant product market: Demand side substitutability: – – – – –
cross-elasticity of demand physical characteristics price intended use consumer preference, etc.
Supply side substitutability • Relevant geographical market – Test of dominance (market share, barriers of entry, legal provisions, superior technology, vertical integration, etc.) – Within the Common Market or a substantial part of it (may include national or even regional markets)
Step 2: Abuse
Two different types of abuse: exploitative and anti-competitive abuse
Step 3: Effect on inter-state trade
Broad test (as in Article 81 EC)
Figure 3.1 Basic steps in the application of Article 82 EC: abuse of dominant position
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dominance has been exerted within the Common Market or a substantial part of it will now be considered in turn. The relevant product market In Continental Can,8 the Court established that the notion of interchangeability was at the core of the definition of the relevant product market.9 If two products are interchangeable, it means that they belong to the same relevant market. This is clearly illustrated in United Brands v. Commission.10 In that case, United Brands, an American company and a main operator in the world banana market, challenged a Commission decision that had found the company to be in breach of Article 82 EC on account of several abusive practices. These included discriminatory pricing conditions, unfairly high pricing and refusal to supply to one of its Danish distributors. The applicant contended that bananas were part of the market of fresh fruit because they could be ‘reasonably interchangeable’11 with other kinds of fresh fruit such as apples, oranges, kiwis, strawberries, etc. from the point of view of the consumers. The Commission, however, argued that bananas formed a market on their own in that they were only to a limited extent interchangeable with other products. In particular, it referred to the fact that the prices and available quantities of other fresh fruit had little effect on the prices and availability of bananas even during the summer months when seasonal fruits were plentiful. Furthermore, bananas had special characteristics that made them a very important part of the diet of the very young, the sick and the very old. As a result, the choice of bananas was a matter of consumer preference and consumers would not accept other fruits as a substitute.12 The tension illustrated in the United Brands proceedings has appeared in many other cases.13 Undertakings accused of abusing their dominant
8 9
10 11 12 13
dimensions is to identify those actual competitors of the undertakings involved that are capable of constraining those undertakings’ behaviour and of preventing them from behaving independently from effective competitive pressure. It is from this perspective that the market definition makes it possible inter alia to calculate market shares that would convey meaningful information regarding market power for the purposes of assessing dominance … ’ (at paragraph 2 of the Notice). Case 6/72, supra n. 1. Ibid., at paragraph 32 of the judgment. The Commission also adopted this approach in its definition of the relevant products market as ‘those products and/or services which are regarded as interchangeable or substitutable by the consumer by reason of the products’ characteristics, price and intended use’ (paragraph 7 of the Commission Notice on Market definition, supra n. 7). Case 27/76, supra n. 5. Case 27/76, supra n. 5 at p. 224. See the Commission Decision (OJ [1976] L 95/1, [1976] 1 CMLR D28) at paragraph 77. See, inter alia, Case 22/78 Hugin v. Commission [1979] ECR 1869, [1979] 3 CMLR 345, at paragraph 4 of the judgment; Case 85/76 Hoffmann-La Roche v. Commission [1979] ECR
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position have consistently argued for market definitions as broad as possible, whereas the Commission has been predisposed to define the market much more narrowly.14 The reason for this is clear: the wider the market, the more difficult it is to show dominance. In United Brands, the applicant held a position of dominance in the market of bananas, but it would have been much more difficult to show dominance in the wider market of fresh fruits. The Court confirmed the test of interchangeability – or substitutability – as being of the essence in the definition of the relevant product market and held that: … For the banana to be regarded as forming a market which is sufficiently differentiated from other fruit markets it must be possible for it to be singled out by such special features distinguishing it from other fruits that is only to a limited extent interchangeable with them and is only exposed to their competition in a way that is hardly perceptible.15
It then agreed with the Commission that bananas belonged to a market that was sufficiently distinct from the other fresh fruit markets and it held: … a very large number of consumers having a constant need for bananas are not noticeably or even appreciably enticed away from the consumption of this product by the arrival of other fresh fruit on the market and that even the
14
15
461, [1979] 3 CMLR 211, at paragraph 24 of the judgment, and Case T-30/89 Hilti v. Commission [1991] ECR II-1439, [1992] 4 CMLR 16, at paragraph 48 of the judgment. In some cases, the Commission adopted very narrow market definitions which were systematically upheld by the Court. In General Motors (Commission Decision 75/75/EEC, OJ [1975] L 29/14, [1975] 1 CMLR D20), General Motors Continental was, according to Belgian law, the only agent authorised to issue certificates of conformity with Belgian regulations for Opel/Vauxhall cars imported into Belgium by independent parties. The relevant market was defined by the Commission not as the market for the issue of conformity certificates for all motor vehicles but as the market of conformity certificates for Opel/Vauxhall vehicles imported into Belgium by third parties (see paragraphs 11 and 26 of the decision and also Case 26/75 General Motors v. Commission [1975] ECR 1367, [1976] 1 CMLR 95, at paragraphs 7–9 of the judgment). Similarly, in Hugin v. Commission (Case 22/78, supra n. 13), the relevant market was held to be the market for spare parts for Hugin’s cash register machines instead of the market of cash registers as a whole, as maintained by the applicant (at paragraph 8 of the judgment). The Court first decided that there was a specific market for spare parts – and more particularly for the spare parts manufactured by the applicant – mainly because Hugin’s spare parts were not interchangeable with other spare parts and because independent repairers needed them to carry out their business. See also Deutsche Bahn v. Commission (Case T-229/94, [1997] ECR II-1689, [1998] 4 CMLR 220), where the Court of First Instance upheld the Commission’s view that the rail services market was a distinct market from the market of rail transport in general (at paragraphs 54–6 of the judgment). Case 27/76, supra n. 5 at paragraph 22 of the judgment.
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seasonal peak periods only affect it for a limited period of time and to a very limited extent from the point of view of substitutability.16
In United Brands,17 the Court and the Commission focused on demand elasticity to define the relevant product market,18 an approach that has been routinely applied in the Court’s case law subsequently. But how do we measure demand substitutability? Several elements have proved relevant. First, the physical characteristics and intended uses of the products in question are of crucial importance. Thus, in United Brands,19 both the Commission and the Court referred to the fact that bananas had some physical characteristics that set them apart from other kinds of fruits, with which they were not interchangeable in the eyes of the consumers.20 If two different products can be put to the same use, the implication may be that they belong to the same relevant market. Conversely, if the same product can be used in two wholly different ways, that may indicate that the same product belongs to two different markets and that in each one of these markets, it will compete with a different range of potential substitutes. In Hoffmann-La Roche v. Commission,21 the Commission found that HoffmannLa Roche, a vitamin manufacturer, was dominant in the markets of seven groups of vitamins (A, B2, B3, B6, C, E and H) and that it had abused its position of dominance. The Commission took the view that each of the groups of vitamins constituted a separate and self-contained market, but Hoffmann-La Roche considered that the vitamin groups C and E belonged to a much wider market because they were also sold for other uses (antioxidants, fermentation agents and additives). The Court held that it was not evident that these vitamins and their substitutes – when put to technological uses – formed one single market.22 For that to happen, it would be necessary to demonstrate that there was a sufficient degree of 16 17 18
19 20
21 22
Ibid., at paragraph 34 of the judgment. Case 27/76, supra n. 5. In its Notice on market definition (see supra n. 7), the Commission defined demand substitutability as follows: ‘the question to be answered is whether the parties’ customers would switch to readily available substitutes or to suppliers located elsewhere in response to a hypothetical small (in the range of 5 to 10 per cent) but permanent relative price increase in the products and areas being considered. If substitution were enough to make the price increase unprofitable because of the resulting loss of sales, additional substitutes and areas are included in the relevant market’ (at paragraph 17 of the Notice). Case 27/76, supra n. 5. See the Decision of the Commission (supra n. 12, at paragraph 77) and the Court’s judgment at paragraph 31, where it held that: ‘The banana has certain characteristics, appearance, taste, softness, seedlessness, easy handling, a constant level of production which enable it to satisfy the constant need of an important section of the population consisting of the very young, the old and the sick.’ Case 85/76, supra n. 13. Ibid., at paragraph 28 of the judgment.
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interchangeability between them.23 In the case there was no evidence that the products that could substitute vitamins of the groups C and E in their use as antioxidants, fermentation agents and additives could also be used as vitamins. There was, therefore, no cross-elasticity between the two in terms of that specific use. That case was interestingly distinguished in TetraPak v. Commission (TetraPak II).24 In that case, TetraPak, a company specialising in the manufacture of cartons (for liquid food and in particular for milk) and of carton-filling machines, both in the aseptic and non-aseptic packaging sectors, was found in breach of Article 82 EC. The Commission defined four relevant markets in the packaging of liquid food: the market in machinery for aseptic packaging, the corresponding market for cartons, the market in machinery for non-aseptic packaging and the corresponding market for cartons. The applicant argued, inter alia, that these markets should be further subdivided in both the aseptic and non-aseptic sectors, depending on whether the cartons or machinery were used for the packaging of milk or other liquid food products such as fruit juices. The Court upheld the findings of the Commission and found that in both the aseptic and non-aseptic sectors, the packaging machinery and the cartons shared the same characteristics and satisfied identical economic needs whether they were used for packaging milk or other products. Therefore, and unlike the situation in Hoffmann-La Roche,25 it could not be said that the same product could be used in two wholly different ways and, hence, that two different sub-markets should be defined within each of the four markets identified by the Commission.26 Secondly, the Commission and the Court have considered other factors in order to measure cross-elasticity of demand such as price. For example in TetraPak (II),27 the Court took the view that TetraPak’s machinery and cartons of the same type were uniformly priced whether they were intended for packaging milk or other products, which indicated that they belonged to a single product market.28 Consumer preference is another important element, as illustrated by the decision of the Commission in TetraPak (I).29 In that case, the Commission explained that different types of milk (fresh, UHT and sterilised), although technically adequate substitutes for one another, were not regarded by consumers as interchangeable because they tasted different. There was therefore limited cross-elasticity between the various types of milk. 30 Finally, the different 23 24 25 26 27 28
29 30
Ibid. Case T-83/91 [1994] ECR II-755. Case 85/76, supra n. 21. Case T-83/91, supra n. 24 at paragraph 64 of the judgment. Case T-83/91, supra n. 24. Ibid., at paragraph 64 of the judgment. See also Hoffmann-La Roche (Case 85/76, supra n. 21, at paragraph 20 of the judgment). See Decision 88/501 of the Commission (OJ [1988] L 272/27, [1990] 4 CMLR 47. Ibid., at paragraph 32 of the Decision.
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nature of the distribution channels may also determine the lack of crosselasticity in the demand for two products. For example, in Michelin v. Commission,31 the Court explained that the sale of heavy-vehicle tyres required a specialised distribution network, as buyers expected advice and long-term services adapted to their needs, whereas buyers of car or van tyres did not require such specialised services. This was one of the factors used by the Court to confirm the Commission’s conclusion that the two types of tyre belonged to different markets.32 Although, as highlighted by the Commission’s Notice on market definition,33 demand substitution is the most important factor in the determination of the product market,34 there is another competitive constraint that is significant in the definition of the relevant market: supply substitution.35 If there is high cross-elasticity in supply between two products – that is, if the producer of one of them can easily adapt its production plant to produce the other – the implication may be that the two products belong to the same relevant market.36 In Michelin v. Commission,37 the Court upheld the Commission’s contention that there was no cross-elasticity of supply between tyres for heavy vehicles and car tyres: … The fact that time and considerable investment are required in order to modify production plant for the manufacture of light vehicle tyres or vice-versa means that there is no discernible relationship between the two categories of tyres enabling production to be adapted to demand on the market. Moreover, that was why, in 1977, when the supply of tyres for heavy vehicles was insufficient, Michelin NV decided to grant an extra bonus instead of using surplus production capacity for car tyres to meet demand.38
31 32 33 34
35 36
37 38
Case 322/81, supra n. 1. Ibid., at paragraph 40 of the judgment. See supra n. 7. The Commission explained that ‘demand substitution constitutes the most immediate and effective disciplinary force on the suppliers of a given product in particular in relation to their pricing decisions. A firm or a group of firms cannot have a significant impact on the prevailing conditions of sale, such as prices, if its customers are in a position to switch easily to available substitute products or to suppliers located elsewhere’ (ibid., at paragraph 13 of the Notice). Ibid., at paragraphs 13 and 14 of the Notice. In the Notice (supra n. 7) the Commission explains that supply substitution means that ‘suppliers are able to switch production to the relevant products and market them in the short term without incurring significant additional costs or risks in response to small and permanent changes in relative prices’ (at paragraph 20). Case 322/81, supra n. 1. Case 322/81, supra n. 1, at paragraph 41 of the judgment. See also the Decision of the Commission in TetraPak (I) (supra n. 29, at paragraphs 30 and 36–7 of the decision) and the Court’s judgment in Continental Can (Case 6/72, supra n. 1, at paragraphs 33–6 of the judgment).
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In addition to cross-elasticity in demand and supply, other elements have proved relevant in the definition of the product market. For example, in Hilti v. Commission,39 the Commission took the view that Hilti had abused its position of dominance in the market for cartridge strips and nails compatible for use with its own-branded nail guns. The Court agreed with the Commission in that there were three separate markets of nail guns, cartridge strips and nails compatible with Hilti’s tools, contrary to the applicant’s suggestion that there was one single market for all three products. One of the elements used by the Court to emphasise the separate nature of these three markets was the fact that there were specialised independent producers making nails for use in nail guns and even some who just made nails specifically designed for Hilti’s tools. There was therefore a specific market for nails compatible with Hilti’s tools.40 The relevant geographic market In United Brands v. Commission, the Court defined the geographic market as a ‘clearly defined geographic area where a product is marketed and where the conditions of competition are sufficiently homogeneous for the effect of the economic power of the undertaking to be evaluated’.41 This definition has been adopted by the Commission in its Notice on market definition.42 In United Brands,43 and although United Brands sold in all Member States of the European Community (nine at the time), the Commission and the Court excluded the French, British and Italian markets from the definition of the geographic market, which only encompassed the remaining six Member States. This was explained by the fact that in those three Member States, United Brands’ bananas did not compete on equal terms with other bananas (as they did in the other six Member States) given the existence of preferential systems or special circumstances. Thus, in France there was a preferential system for bananas originating in certain overseas departments and countries historically linked with France, such as the Ivory Coast, Madagascar and Cameroon. The same was true in the United Kingdom for bananas originating in certain Commonwealth countries. In Italy, following the abolition of the state monopoly responsible for marketing bananas, a system of quota restrictions and of imports supervision had been introduced.44 39 40 41 42
43 44
Case T-30/89, supra n. 13. Ibid., at paragraph 67 of the judgment. Case 27/76, supra n. 5., at paragraph 11 of the judgment. The geographic market is defined as ‘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 areas’ (see the Commission’s Notice on market definition, supra n. 7, at paragraph 8). Case 27/76, supra n. 5. Ibid., at paragraphs 49–51 of the judgment.
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There is evidence both in the Commission’s decisions and in the case law of the Court of the kind of factors that are relevant to the definition of the geographic market. For example, and as seen above in United Brands,45 specific commercial policies followed by Member States may have an influence in the delimitation of the geographic market. Likewise, transport costs are significant. Where the cost of transporting a product is very high in relation to its price, this will reflect the existence of economic barriers to the importation of the product and will limit the market geographically, generally on a national46 or even smaller territorial scale.47 In Hilti v. Commission,48 the Commission took the view that the substantial price differences for Hilti’s products between the Member States could not be explained on the basis of transport costs, as these were low, and concluded that the relevant geographical market was the Community as a whole. Similarly, in TetraPak (II),49 the geographic market was also the Community as a whole, due to the low cost of transporting cartons and machines, which meant they could easily and rapidly be traded between states.50 In some cases, consumer preference for local sources offering security in supply has been shown to contribute to the separation of markets, generally along national lines.51 Thus, in Michelin v. Commission,52 the fact that Dutch dealers obtained their supplies only from suppliers operating in the Netherlands confirmed the Commission’s view that the relevant geographical market was the national one, rather than a much wider one – as the applicants claimed.53 Finally, in cases where a market is subject to a state monopoly, the relevant geographical market tends to be national, even if private firms are authorised to provide some of the relevant services and hold large market shares in some regional sub-markets.54 In the Notice on market definition, the Commission referred to the types of evidence used to delimit the relevant geographical market. These include evidence on changes in prices between different areas, basic demand characteristics, views of customers and competitors, examination 45 46
47
48 49 50 51
52 53 54
Case 27/76, supra n. 5. See the British Plasterboard Decision (Commission Decision 89/22/EEC, OJ [1989] L 10/ 50, [1990] 4 CMLR 464, at paragraphs 111 to 113), where the high costs of transporting plasterboard determined the existence of two separate markets: the Irish and the British. Thus in the British Sugar Decision (Commission Decision 88/518/EEC, OJ [1988] L 284/ 41, [1990] 4 CMLR 196, at paragraphs 44–8 of the Decision), the high costs of transporting sugar meant that the relevant geographic market was limited to mainland Britain (excluding Northern Ireland). Case T-30/89, supra n. 13. Case T-83/91, supra n. 24. Ibid., at paragraph 94 of the judgment. See Re Soda Ash (Commission Decision 91/297/EEC, OJ [1991] L 152/1, [1994] 4 CMLR 454, at paragraph 42 of the decision). Case 322/81, supra n. 1. Ibid., at paragraph 26 of the judgment. Case 247/86 Alsatel v. Novasam (supra n. 2).
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of customers’ current geographical pattern of purchases and the existence of various barriers to entry.55 Dominance within the Common Market or a substantial part of it There are two issues that need to be considered under this heading: the concept of dominance and the fact that it needs to be held within the Common Market or a substantial part of it. The notion of a dominant position Article 82 EC does not define what constitutes a dominant position and again it fell to the Commission and the European Court to elaborate that term. In its decision in Continental Can,56 the Commission explained that undertakings are in a dominant position ‘when they have the power to behave independently, which puts them in a position to act without taking into account their competitors, purchasers or suppliers’.57 In similar terms, the Court held in United Brands v. Commission,58 that a dominant position refers 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’.59 The gist of these definitions seems to be, therefore, that a dominant undertaking enjoys such economic power that it is immune from any competitive pressures. The Commission and the Court have also set out the main indicators of market power. The first and obvious one is market share. If an undertaking has a very large market share in a certain market, it is likely that it will hold a position of dominance in that market.60 Thus, in Hoffmann-La Roche,61 the Court held that ‘very large market shares are in themselves, and save in exceptional circumstances, evidence of the existence of a dominant 55 56 57 58 59 60
61
See the Commission’s Notice on market definition (supra n. 7) at paragraphs 44 to 52. See supra n. 1. Ibid., at paragraph II.B.3 of the Decision. Case 27/76, supra n. 5. Ibid., at paragraph 65 of the judgment. In Continental Can (see the Commission Decision, O.J. [1972] L 7/25, [1972] CMLR D11), the Commission took the view that the subsidiary of Continental Can in Germany had a position of dominance in each one of the three product markets defined by the Commission on the basis of the large market shares (80 per cent, between 80 and 90 per cent and between 50 and 55 per cent) held by the latter in those markets (see paragraphs II.B.5, 6 and 7 of the Decision). The Court did not consider this issue because it annulled the Commission’s decision on grounds of lack of appropriate reasoning in the definition of the relevant product market. Likewise, in Re Irish Sugar (Commission Decision 97/624, OJ [1997] L 258/1, [1997] 5 CMLR 666), the Commission held that a firm holding 90 per cent of the overall granulated sugar market enjoyed a position of dominance in that market. Case 85/76, supra n. 21.
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position [emphasis added]’.62 The Court has been mindful, however, to emphasise that a large market share does not per se indicate that the undertaking is dominant. For example, in United Brands v. Commission, the Court explained that the fact that United Brands had a market share between 40 and 45 per cent of the market for bananas did not, on its own, determine that the company was dominant.63 In particular, the Court referred to the fact that United Brands’ position had to be considered in the light of the strength and number of its competitors.64 In other words, if the rest of the market looked very fragmented, i.e. with many small competitors holding very small market shares, United Brands would be dominant. If, however, there had been just one competitor with a large market share, United Brands would not have been dominant. On the facts of the case, United Brands had a market share several times greater than its nearest competitor and was, therefore, dominant. The important, but not conclusive, character of large market shares has been repeatedly underlined by the Court in numerous cases. A particularly clear statement is found in the preliminary ruling of the Court in Gøttrup-Klim,65 where the Court held, in reference to an undertaking that had a market share of 36 per cent of the Danish fertiliser market and 32 per cent of the market in plant protection products: It is true that in certain cases, the fact that an undertaking holds a large market share may be considered a strong indication of the existence of a dominant position … While an undertaking which holds market shares of that size, may, depending on the strength and number of its competitors, be considered to be in a dominant position, those market shares cannot on their own constitute conclusive evidence of the existence of a dominant position.66
In addition to the existence of a large market share, there are other factors which are relevant to a finding of a position of dominance and to which the Commission and the Court have frequently alluded. Thus, the size of an undertaking is an important indicator. In Hoffmann-La Roche v. Commission,67 the Court took into account the fact that Hoffmann-La Roche was the world’s largest vitamin manufacturer, with a turnover that 62
63 64 65 66
Ibid., at paragraph 41 of the judgment. See also the judgment of the Court of First Instance in Hilti v. Commission (Case T-30/89, supra n. 13), where it was held that a market share between 70 and 80 per cent was itself a clear indication of dominance in the market (at paragraph 92 of the judgment). In some cases, as in Hoffman-La Roche v. Commission (supra) and in Compagnie Maritime Belge v. Commission (Joined Cases C-395/96P and C396/96P [2000] 4 CMLR 1076), the Court added a temporal dimension and explained that the very large market share needs to be held for some time for the undertaking to be dominant. Case 27/76, supra n. 5, at paragraphs 109 and 110 of the judgment. Ibid. Case C-250/92 [1994] ECR I-5641, [1996] 4 CMLR 191. Ibid., at paragraph 48 of the judgment.
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exceeded that of all other vitamin manufacturers, and that it was head of the largest pharmaceutical group in the world.68 Similarly, in Michelin v. Commission,69 the Court referred to the fact that Michelin had a clear lead in investment and research over its competitors.70 Three other factors closely related to the size and resources of an undertaking are the quality of the service network, the degree of vertical integration and the technological lead of the undertaking. A clear example of the first is found in the judgment in Michelin v. Commission,71 where the Court underlined the undisputed superiority of Michelin’s network in terms of efficiency and quality of service as an indicator of dominance.72 In United Brands v. Commission,73 the Court explained in detail the importance of the degree of vertical integration. Thus, the fact that United Brands was vertically integrated to a high degree was relevant to the finding of their position of dominance. In particular, it meant that the company knew it was able to transport regularly, whatever the prevalent market situation, at least two- thirds of their average volume of sales of bananas, which in turn guaranteed it commercial stability and well-being.74 Finally, the technological advantages enjoyed by an undertaking are important and often take the form of intellectual property rights. Thus, in its decision in Continental Can, the Commission explained that the technological lead of Continental Can over its competitors was ensured by the patents and technical know-how it held.75 Likewise, in its decision in TetraPak (I),76 the Commission took the view that the large market share held by TetraPak together with its acquisition of an exclusive combined patent and know-how licence indicated a position of dominance. The Commission and the Court have also referred to barriers to entry as an indicator of dominance. The Commission mentioned them expressly in its XXIVth Report on Competition Policy, the main question being ‘whether producers outside the product or geographic market could make a timely and significant entry so as to create an effective counterweight to incumbents already operating on the market.77 This implies a very wide construction of the term, but unfortunately not a precise definition of it.78 67 68 69 70 71 72 73 74
75 76 77 78
Case 85/76, supra n. 21. Ibid., at paragraph 47 of the judgment. Case 322/81, supra n. 1. Ibid., at paragraph 55 of the judgment. Case 322/81, supra n. 1. Ibid., at paragraph 58 of the judgment. Case 27/76, supra n. 5. Case 27/76, supra n. 5, at paragraphs 70–81 of the judgment. See also the Decision of the Commission in Continental Can (supra n. 60) at paragraph II.B.9 of the decision. See supra n. 60, at paragraph II.B.10 of the decision. See supra n. 29. See XXIVth Report on Competition Policy (1994) at point 203. The use of barriers to entry as an indicator of dominance has been controversial. Thus some academic writers have warned of the risks of attacking efficiency in using this
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Implicit references to barriers to entry are found both in Commission79 and European Court80 decisions. Examples of such barriers include the existence of a high initial cost of establishment in a market. In the British Plasterboard Decision,81 the Commission concluded that, at the time, the impact of potential competition on the plasterboard market was limited due, in particular, to the high cost of establishing new plasterboard production and sales and technical networks. In the same Decision, the Commission underlined that financial risk could also operate as an entry barrier. Thus a potential new competitor in the plasterboard market would have to develop mines of gypsum, the raw material needed to manufacture plasterboard, or to accept the cost disadvantage of importing gypsum.82 Statutory monopolies and other regulatory barriers also have a crucial impact on potential competition. In General Motors,83 General Motors Continental was the sole agent authorised by Belgian law to issue certificates of conformity for imported Opel/Vauxhall vehicles. This fact alone meant that General Motors Continental held a position of dominance.84 Similarly, in Irish Sugar,85 Irish sugar was held to be dominant not only because it held over 90 per cent of the total granulated sugar market in Ireland but also because it was annually allocated the entire Community sugar quota for Ireland.86 Finally, the position of dominance may be held by a seller
79
80
81 82
83 84
85 86
concept to find dominance (see R. H. Bork, The Antitrust Paradox; A Policy at War with Itself (New York, 1978, reprinted with a new introduction and epilogue, 1993), at pp. 310–11). Others have criticised the Commission and the Court for not clarifying the notion of barriers to entry and for focusing on costs of entry rather than on real economic barriers (See S. Turnbull, ‘Barriers to entry, Article 86 EC and the abuse of a dominant position: an economic critique of European Community competition law’, [1996] 2 ECLR 96 at 97). See the Commission’s decisions in Re Soda Ash (supra n. 51). Thus in Decision 91/299 (Solvay), the Commission, inter alia, referred to the ‘improbability of any new producer of synthetic ash entering the market and setting up manufacturing facilities in the Community’ (at paragraph 45) as one of the factors used to assess the market power of Solvay. See also Decision 91/300 (ICI) at paragraph 48. See Case 85/76 Hoffmann-La Roche (supra n. 21) at paragraph 48 of the judgment, where the Court considered the absence of potential competition as a relevant element in assessing Hoffmann-La Roche’s dominant position. Supra n. 46, at paragraph 120. Ibid. Interestingly enough, the situation in the plasterboard market was soon to change and within two years the market share of British Gypsum had dropped from 96 per cent to 65 per cent and two new competitors, Knauf and Large, had penetrated the market (see XXIInd Report on Competition Policy, (1992) Annex III, p. 423). Commission Decision 75/75/EEC, supra n. 14. Ibid., at paragraph 11 of the Decision. See also Case T-229/94 Deutsche Bahn v. Commission (supra n. 14) at paragraphs 56–7 of the judgment. See supra n. 60. Ibid., at paragraph 104 of the Decision. See also the Decision of the Commission in British Midland Airways v. Aer Lingus (Decision 92/213/EEC, OJ [1992] L 96/34, [1993] 4 CMLR 596), at paragraph 19 of the decision.
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(monopolist),87 by a buyer (monopsonist)88 or jointly by one or more undertakings (collective or joint dominance).89 ‘Within the Common Market or a substantial part of it’ Article 82 EC provides that the position of dominance needs to be held throughout the Common Market or a ‘substantial part of it’. No market share percentages have been laid down to determine what constitutes a substantial part of the Common Market, but both the Commission and the Court have followed a generous interpretation of this condition. Thus, national markets have been held to constitute a substantial part of the Common Market. In Michelin v. Commission,90 the Dutch market was a substantial part of the Common Market.91 There is also evidence that regional markets can fulfil this requirement. Thus, in Suiker Unie,92 the Court upheld the Commission’s findings that the southern part of Germany was a substantial part of the Common Market. In deciding so, consideration was given not only to the dimensions of the territory itself but also to other factors. Thus the facts that two of the largest Community producers of sugar had their main place of business in the area and that there were a large number of consumers in the region in relation to the Community as a whole proved to be relevant considerations.93
3.2.2 Abuse A dominant company needs to abuse its position of economic strength to come under Article 82 EC. Two main issues need to be considered: the concept of abuse and the different examples of abuse. The concept of abuse In Hoffmann-La Roche,94 the Court defined abuse as follows: The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure 87
88
89 90 91 92
93 94
The overwhelming majority of cases under Article 82 EC concern dominant sellers. See infra section 3.2.2. See Re UK Small Mines (XXIst Report on Competition Policy (1991) at paragraph 107), where the Commission found two UK electricity companies, National Power and PowerGen, dominant purchasers of electricity generating coal. For a detailed consideration of collective dominance, see infra section 3.2.4. Case 322/81, supra n. 1. Ibid., at paragraph 28 of the judgment. Cases 40–48/73, 50/73, 54–56/73, 111/73, 113–114/73 [1975] ECR 1663, [1976] 1 CMLR 295. Ibid., at paragraphs 441–9 of the decision. Case 85/76, supra n. 21.
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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.95
This definition has not been widely used in the case law. The Court has preferred instead to consider forms of abuse on a case-to-case basis. Examples of abuse Article 82 EC provides a list of examples of abusive conducts, which, as the Court emphasised in Continental Can, is non-exhaustive.96 In the same decision, the Court also referred implicitly to two different types of abuse: exploitative abuse and anti-competitive abuse.97 Exploitative abuse is characterised by the direct prejudice caused to consumers, e.g. the imposition of unreasonably high prices by a dominant company. Anticompetitive abuse, by contrast, is directed at competitors and the prejudice to the consumer is indirect. For example, if a dominant company drastically lowers its prices in order to drive a new competitor out of the market, that reduction in prices may temporarily benefit the consumer. In the long run, however, and once the competitor has been ousted from the market, the dominant company is likely to raise its prices again and hence harm consumers’ interests. The examples of abuse listed in Article 82 EC and some of those that have been added by the case law of the Court will be considered in turn. Article 82(1)(a): imposition of unfair purchase or selling prices or other unfair trading conditions In General Motors98 and in United Brands,99 the Court confirmed that the imposition by a dominant company of a price that is excessive in relation to the economic value of the service or goods provided could be abusive. In practice, however, it is difficult to prove that the price of a product is unfair, and the fact that it is considerably higher when compared to that of competing products is not sufficient. In particular, not only are there considerable difficulties in working out production costs and indirect costs, but it is also necessary to explore whether there is an objective justification for such high prices.100 In both these cases, the European Court annulled 95 96 97 98 99 100
Ibid., at paragraph 91 of the judgment. Case 6/72 (supra n. 1), at paragraph 26 of the judgment. Ibid. Case 26/75 (supra n. 14), at paragraphs 11–24 of the judgment. Case 27/76 (supra n. 5), at paragraphs 248–9 of the judgment. See Case 27/76 (supra n. 5), at paragraphs 253–4 of the judgment.
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the respective Commission decisions, finding the companies in breach of Article 82 EC on account of their charging excessive prices: in the first case, and even though the company had an administrative monopoly, because the excessive prices were temporary and objectively justified,101 and in the second because the Commission failed to prove that the price – even though it was high – was unfair.102 The imposition of unfair trading conditions is another example of abuse. In BRT v. SABAM (II),103 a Belgian association for the management of copyright included in its standard form contracts with its members a clause providing for the compulsory assignment of all copyright, both present and future, in its favour. Furthermore, the clause gave the association the right to retain those rights for five years following the member’s withdrawal from the association. The national court had ascertained that the association had a dominant position in a substantial part of the Common Market and asked the Court to rule whether the clause mentioned was abusive. The Court acknowledged that an association formed for the protection of copyright would need to enjoy a position based on the assignment of rights in its favour in order to safeguard those rights effectively. If, however, the association imposed obligations on its members that went beyond what was necessary to achieve that objective and encroached unfairly on a member’s freedom to exercise its copyright, then those obligations would be unfair and therefore abusive.104 The Court indicated that the clause at issue could be an unfair trading condition, although it was, of course, left to the national court to apply the Court’s ruling to the facts of the case.105 In United Brands,106 the clause inserted by United Brands in its general conditions of sale, forbidding its distributors to resell bananas while still green to foreign dealers, was held to be abusive. The Commission had taken the view, upheld by the Court, that this obligation had an effect akin to a prohibition on exports because it made any trade in green bananas almost impossible. Moreover, the effect of the clause was further enhanced 101
102
103 104 105 106
Thus the Court accepted that the applicant had given ‘an adequate explanation’ of the circumstances in which high prices had been charged. The Court also took into account that, following complaints, the applicant had brought its prices into line with the real economic cost of the operation and had reimbursed complainants even before the Commission’s intervention (see Case 27/76 (supra n. 5) at paragraphs 20–3 of the judgment). See also Case C-323/93 Centre d’insémination de la Crespelle v. Coopérative de la Mayenne ([1994] ECR I-5077) at paragraphs 25–7 of the judgment. See Case 27/76 (supra n. 5) at paragraphs 248-67 of the judgment. For a case where the Court upheld claims that high prices were abusive, see British Leyland v. Commission (Case 226/84 [1986] ECR 3263, [1987] 1 CMLR 185, at paragraphs 27–30 of the judgment). Case 127/73 [1974] ECR 313, [1974] 2 CMLR 238. Ibid., at paragraphs 10–11. Ibid., at paragraphs 12–13. Case 27/76 (supra n. 5).
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by the fact that United Brands traditionally supplied its distributors with smaller quantities of bananas than those ordered, hence tightening its economic hold over them and preventing them from developing a competitive response to United Brands’ tactics deterring export in the Community market.107 Likewise, in Ahmed Saeed108 the Court held that the imposition by a dominant airline on other small airlines of a single tariff for a given route could be abusive if it arose as a result of the attempt of a dominant company to eliminate any price competition rather than from the policy of the aeronautical authorities.109 Article 82(1)(b): limiting production, markets or technical development to the prejudice of consumers Several cases illustrate that the unjustified limitation of production, markets or technical development by a dominant company can also be abusive.110 The recent decision of the Commission in Re The 1998 Football World Cup111 constitutes a clear example of this form of abuse. The Comité Français d’organisation de la Coupe du monde de football 1998 (CFO) was one of the official ticket distributors for the 1998 World Cup. CFO only sold ‘blind tickets’ (i.e. those for matches where the identities of the participating teams were unknown at the time of purchase) directly to consumers who were able to provide a postal address in France. The Commission took the view that such practice discriminated against the general public outside France and resulted in a limitation of the market for ticket sales to the prejudice of that public, which was contrary to Article 82(b) EC.112 The Commission, moreover, rejected CFO’s attempt to justify objectively the discrimination on security grounds. Article 82(1)(c): applying dissimilar conditions to equivalent transactions with other trading parties. This example of abuse in Article 82 EC has produced an abundant body of case law and has been used to define a panoply of abusive practices. In trying to understand the approach of the Commission and of the Court in this field, it is essential to bear in mind that one of the main aims of EC competition law is to uphold the single market ideal of the Treaty.113 The principle of non-discrimination lies at the core of the internal market and breaches of that principle have met with the robust disapproval of the European Court in its case law on the four freedoms. This approach has 107 108 109 110 111 112 113
Ibid., at paragraphs 155–61 of the judgment. Case 66/86 [1989] ECR 803, [1990] 4 CMLR 102. Ibid., at paragraph 44 of the judgment. See Case C-41/90 Höfner [1991] ECR I-1979 and Case C-179/90 Merci [1991] ECR I-5889. Commission Decision 2000/12/EC OJ [2000] L 5/55 [2000] 4 CMLR 963. Ibid., at paragraph 91 of the decision. See supra Chapter 1, section 1.5.
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also decisively influenced the decisions of the Commission and of the Court on discriminatory practices under Article 82(1)(c) EC, just as it penetrated the case law of the Court under Article 81(1)(d) EC.114 First and foremost, discrimination on grounds of nationality carried out by a dominant company is regarded as abusive. In GEMA,115 the German music performing rights society was found by the Commission to have abused its position of dominance by discriminating against non-German nationals, who in practice could not become members of the society. Likewise, in another copyright case, GVL v. Commission,116 the Court upheld a Commission decision that the refusal of a German performer’s rights collecting society to allow non-German artists not resident in Germany to benefit from rights of secondary exploitation was abusive.117 Second, discriminatory pricing also comes under Article 82 EC. The leading case in this area is United Brands.118 The facts of this case have been set out above.119 The Court confirmed the Commission’s view that, by charging different prices to its ripeners/distributors in the various Member States without an objective justification, United Brands had abused its position of dominance.120 The reasoning of the Court was sharply criticised as being economically flawed.121 In particular, it was argued that it has not been demonstrated that discriminatory pricing reduces efficiency and that such practice is per se undesirable from an economic perspective.122 There is evidence in the judgment that the Court considered the discriminatory pricing by United Brands in conjunction with its ban on the export of green bananas123 and its practice of supplying distributors with lower quantities of bananas than those ordered.124 The Court then held that the combination of the resale restrictions and discriminatory pricing led to a rigid partitioning of the national markets. It seems, therefore, as the Court’s critics have already suggested, that the issue of market integration promoted by the Treaty might have underpinned the judgment. The Court of First Instance has applied the same reasoning in TetraPak (II ),125 where the different prices charged by 114 115 116 117 118 119 120 121
122 123 124 125
See Chapter 2, section 2.2.4. Commission Decision 71/224/EEC, OJ [1971] L 134/15, [1971] CMLR D35. Case 7/82 [1983] ECR 483, [1983] 3 CMLR 645. See also the Decision of the Commission on Re The 1998 Football World Cup (supra n. 111). Case 27/76, supra n. 5. See supra nn. 10–12 and accompanying text. Case 27/76, supra n. 5 at paragraphs 227–31 of the judgment. See W. Bishop, ‘Price discrimination under Article 86: political economy in the European Court’, [1981] 44 CMLRev 282; M. Siragusa, ‘The application of Article 86 to the pricing policy of dominant companies: discriminatory and unfair prices’ [1979] 16 CMLRev 179. See Bishop, op. cit., supra n. 121, at p. 287. See supra nn. 106–107 and accompanying text. Case 27/76, at paragraphs 155–61 of the judgment. See Case T-83/91, supra n. 24.
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TetraPak in the various Member States were held to be abusive,126 and more recently in its decision in Aéroports de Paris v. Commission.127 Other overtly discriminatory practices, such as the discriminatory allocation of products during supply shortages, have received similar treatment from the Court. Thus, in BPB v. Commission,128 BPB, a dominant company in the plasterboard market, and its British subsidiary granted priority deliveries to customers who obtained supplies exclusively from them, to the detriment of customers who imported supplies of plasterboard produced by some of BPB’s competitors. The Court acknowledged that it would be legitimate for a dominant company, in times of shortage, to lay down criteria for according priority in meeting orders. Those criteria, however, had to be objective and nondiscriminatory, conditions not fulfilled in that case.129 The Court expressly mentioned that such discrimination was anti-competitive because it had an exclusionary effect.130 When considering the effect that such practices had on intra-Community trade, the Court held that they had the effect of isolating the United Kingdom market by hindering imports of plasterboard.131 The Court has also used discrimination as the basis for a range of abusive practices not expressly mentioned in Article 82 EC. The typical example is the grant of certain types of discounts (or rebates) by a dominant company. In the Sugar cartel case,132 the Court upheld the Commission’s view that the rebates offered by a dominant company to customers who agreed not to buy supplies from other sources was abusive. In the Court’s view, the effect of this system was that ‘different prices were charged to two economic operators that bought the same amount of sugar from the dominant company if one of them purchased from another producer as well’.133 As a result, dissimilar conditions were applied to equivalent transactions in the sense of Article 82(c) EC. This treatment of rebates, normally known as loyalty – or fidelity – rebates, was further confirmed and explained in Hoffmann-La Roche v. Commission.134 In 126
127 128 129 130 131 132 133 134
Ibid., at paragraphs 160–70 and 207–9 of the judgment. See also Case 395/87 Ministère Public v. Jean-Louis Tournier [1988] ECR 2521, [1991] 4 CMLR 248, where the Court took the view that the charging of different royalties to discotheques in the various Member States by a dominant copyright management society was abusive, in the absence of any objective justification for such unequal treatment Case T-128/98, [2000] ECR II-3929. Case T-65/89 [1993] ECR II-389, [1993] 5 CMLR 32. Ibid., at paragraph 94 of the judgment. Ibid. Ibid., at paragraph 135 of the judgment. Cases 40–48/73, etc. [1975] ECR 1663, [1976] 1 CMLR 295. Ibid., at paragraph 522 of the judgment. Case 85/76, supra n. 21. In Coca-Cola, the Commission investigated the activities of this company in the Italian market. In particular, the company offered loyalty rebates to its
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that case, the Court took the view that fidelity rebates are abusive for three reasons. First, they are abusive because they are not based on an economic transaction but are intended to deprive the customer of the choice of other sources of supply and therefore they deny to other producers access to the market.135 By way of contrast, quantity discounts are economically justified and therefore fall outside the scope of Article 82 EC.136 Secondly, they are abusive because they are discriminatory, in that their effect is to apply dissimilar conditions to equivalent transactions. As a result, a different price is paid depending on whether or not the customer agrees to buy exclusively from the dominant supplier.137 Thirdly, they are abusive because they distort competition by strengthening the position of dominance of the supplier.138 This principle was applied equally to fixed rebates as well as those on a sliding scale that increased progressively as the percentage of the purchases increased.139 In a later case, the Court considered a different type of rebate, so-called target discounts, which are those given to customers that meet specified sales targets. The Court considered these in Michelin v. Commission,140 after the Commission, having been alerted to the system of target discounts and bonuses offered by Michelin, concluded that they were abusive. As seen above, Michelin was found to be dominant in the market of replacement tyres for heavy vehicles in the Netherlands.141 The Court started by distinguishing the system of discounts operated by Michelin from the ones at issue in Hoffmann-La Roche.142 In particular, those imposed by
135 136
137 138 139
140 141 142
Italian distributors on condition that the latter undertook not to sell cola flavoured drinks other than ‘Coca-Cola’. The Commission took the view that such discounts infringed Article 82 EC and had the effect of preventing access to the market for competing producers. The investigation was terminated by the Commission without a formal decision, following the undertaking given by Coca-Cola to amend its distribution agreements in order not to include the clauses concerning the discounts (see, XIXth Report of Competition Policy at paragraph 50). Ibid., at paragraph 90 of the judgment. See the Decision of the Commission in Re Irish Sugar, OJ [1997] L 285/1, [1997] 5 CMLR 666, where the Commission explained that quantity discounts are allowed in reference to individual orders because they reflect the cost saving achieved by the supplier (at paragraph 153 of the decision). See Case 85/76, supra n. 21 at paragraph 90 of the judgment. Ibid. See paragraphs 92–101 of the judgment. Hoffmann-La Roche tried to argue that the latter category of discounts were quantity related and therefore should escape the application of Article 82 EC. The Court, however, dismissed this argument and held that, unlike quantity discounts, they were ‘not dependent on quantities fixed objectively and applicable to all possible purchasers but on estimates made, from case to case, for each customer according to the latter’s presumed capacity of absorption, the objective which it is sought to attain being not the maximum quantity but the maximum requirements’ (see paragraph 100 of the judgment). Case 322/81, supra no. 1. See supra n. 71 and accompanying text. See Case 85/76, supra n. 21.
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Michelin did not require dealers to enter into any exclusive dealing agreements or to obtain a specific proportion of their supplies from the dominant company. The Court then considered that target discounts were abusive mainly because they bound the dealers to the dominant company. This was achieved mainly through the pressure inherent in reaching the purchase threshold, which had the effect of discouraging them from buying supplies from Michelin’s competitors, especially when the latter could not match Michelin’s discounts. The discounts were therefore loyalty related rather than cost-saving related.143 Interestingly, however, the Court annulled the Commission’s decision in so far as it declared that such rebates were discriminatory and therefore amounted to the application of dissimilar conditions to equivalent transactions within the meaning of Article 82(1)(c). The Court explained that although the system involved the application of different rates to different dealers, the discounts depended on the dealers’ turnover in sales of Michelin’s tyres in general and not on the number of heavy-vehicle tyres purchased by the dealers.144 The Commission, in its recent decision in Virgin/British Airways,145 considered the legality of the commission schemes operated by British Airways. British Airways offered a performance reward scheme to travel agents where the percentage commission paid to the agent increased every time that a threshold sales target had been met or was exceeded by reference to the previous year’s sales. The Commission, after deciding that British Airways was dominant in air travel agency services in the United Kingdom, equated its commission system to the system of target rebates in Michelin and took the view that it was abusive because it was based on loyalty rather than on efficiency and it had the effect of harming BA’s competitors. This was the case, even though BA competitors had been able to gain market share from BA since the liberalisation of the United Kingdom transport market.146 Furthermore, the Commission took the view that the system was discriminatory. The Commission explained that two travel agents selling exactly the same number of tickets could receive different commission, depending on whether or not they had exceeded their previous year’s sales.147 Looking at the approach of the Court to discounts, it appears more than ever that a dominant company has a ‘special responsibility’, in the sense underlined in Michelin, not to impair or distort competition.148 Thus, while loyalty and target discounts or increased commissions can be used 143 144 145 146 147 148
Case 322/81, supra n. 1, at paragraphs 81–6 of the judgment. Ibid., at paragraphs 87–91 of the judgment. OJ [2000] L 30/1. Ibid., at paragraphs 97–107 of the decision. Ibid., at paragraphs 108–9 of the decision. See supra n. 1.
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legitimately as part of normal business activities by non-dominant companies, they will come within the scope of Article 82 EC when offered by a dominant company. The economic power held by the dominant company has the effect of enhancing the exclusionary effect of this type of practice and can effectively result in a substantial hindrance to market access, which not only produces a distortion of competition but also is inimical to internal market principles.149 Article 82(1)(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 This abusive practice, otherwise known as ‘tying’, involves the dominant company forcing its customers to buy additional goods or services from them. In Hilti,150 the Commission took the view that the company had abused its position of dominance by making the sale of its cartridge strips conditional upon customers buying also their nails from them. The reason was twofold. First, consumers were restricted in their choice of sources of supply and, second, this clause had the effect of foreclosing the market to other nail manufacturers.151 When the decision was challenged before the Court of First Instance,152 Hilti tried to justify its tying clause objectively on safety grounds, alleging that it was unsafe to use their guns with any other type of nails and sought to demonstrate this point on the basis of expert opinion.153 The Court, however, rejected this argument on the basis that, if safety were a real concern for Hilti, it ought to have relied on the relevant legislation on the sale of dangerous products in the United Kingdom and applied to the pertinent enforcement authorities rather than take steps on its own initiative to eliminate products which were supposedly dangerous. In TetraPak (II),154 where TetraPak sold packaging machines on condition that only TetraPak cartons were used on them, the Court of First Instance confirmed the Commission’s view that this practice fell within the scope of Article 82(1)(d) EC. The applicants tried to objectively justify this clause, taking a literal view of Article 82(1)(d) EC by arguing that the system of tied sales was objectively justified on considerations of commercial usage and the protection of public health. In relation to the commercial usage, the Court interpreted Article 82 EC teleologically. It decided, on the facts of the case, not only that the tied sales were not justified on grounds of commercial usage but that, even if these sales had 149 150
151 152 153 154
On the single market objective of EC competition law, see Chapter 1, section 1.5. Commission Decision 88/138/EEC, OJ [1988] L 65/19, [1989] 4 CMLR 677. For a description of the background of that decision, see supra nn. 39–40 and accompanying text. Ibid., at paragraph 75 of the decision. Case T-30/89 [1991] ECR II-1439, [1992] 4 CMLR 16. Ibid., at paragraphs 102–7 of the judgment. Case T-83/91, supra n. 24.
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been in accordance with commercial usage, that fact alone would not justify a system of tied sales by a dominant company.155 This view was expressly upheld by the European Court on appeal.156 The attempt to justify the system on grounds of public health and consumer protection also failed, mainly because it ran contrary to the principle of proportionality. There were other less stringent means to achieve the objective such as informing customers of the technical specifications that cartons should meet when used on TetraPak machines.157 In this respect, the judgment bears a close resemblance to the case law of the Court on the four freedoms that underpin the Common Market.158
Other forms of abuse The Court has repeatedly emphasised that the notion of abuse is a flexible notion and that the list of examples in Article 82 EC is non-exhaustive.159 The case law of the Court has therefore encompassed practices which, although not mentioned in Article 82 EC, distort or eliminate competition or exploit consumers. Three practices merit particular attention:160 first, predatory pricing, secondly, refusals to supply and to grant access to essential facilities and thirdly, the controversial use of dominance in one market to carry out abuses in a related or ancillary market. The pricing practices listed in Article 82(1)(a) and(c) EC refer mainly to the behaviour of a dominant company directly in relation to customers. 155 156
157 158
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Ibid., at paragraph 137 of the judgment. Case C-333/94P TetraPak International v. Commission [1996] ECR I-5951, [1997] 4 CMLR 662, at paragraph 37 of the judgment, where the Court held: ‘It must, moreover, be stressed that the list of abusive practices set out in the second paragraph of Article 86 [now 82] of the Treaty is not exhaustive. Consequently, even where tied sales of two products are in accordance with commercial usage or there is a natural link between the two products in question, such sales may still constitute abuse within the meaning of Article 86 [now 82] unless they are objectively justified.’ Case T-83/91, supra n. 24, at paragraph 139 of the judgment. See, for example, in the framework of free movement of goods, the decision of the Court in Commission v. United Kingdom (Newcastle disease) (Case 40/82 [1982] ECR 2793, [1982] 3 CMLR 497), where the United Kingdom had banned the importation of poultry from other Member States except Denmark and Ireland. The United Kingdom authorities argued that the ban was justified on grounds of protection public health, i.e. in particular the prevention of the spread of Newcastle. The Court took the view that a total ban was far too disproportionate a measure and that there were less stringent measures that could be used to achieve the same result (see paragraphs 40–1 of the judgment). See Case C-333/94P, supra n. 156. at paragraph 37 of the judgment. But there are other forms of abuse that have been recognised by the case law. A recent example is the decision of the Court of First Instance in ITT Promedia v. Commission (Case T-111/96 [1998] ECR II-2937, [1998] 5 CMLR 491), where the Court decided that a dominant company would be in breach of Article 82 EC if it started legal proceedings not with the intention of asserting its rights but as a means of harassing the opposing party.
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Predatory pricing is a form of abuse whereby the dominant company reduces its prices drastically, with the aim of driving a competitor out of the market. Although this may appear to be beneficial to consumers, this is only the case in the short term. In most cases, the intention of the dominant undertaking is to raise its prices again, and enjoy monopoly profits as soon as the competitor has been eliminated. This form of abuse is particularly damaging not only because it aims to eliminate of competition but also because it hinders market access and encourages market partitioning, in direct opposition to the market integration objective of the Treaty. The leading case on predatory pricing is AKZO.161 AKZO, a large Dutch company with subsidiaries throughout the Common Market, produced, inter alia, a chemical called benzoyl peroxide that could be used in the manufacture of plastics and also as a bleaching agent for flour. ESC, a small UK-based company, traditionally produced flour additives based on benzoyl peroxide, which it bought from AKZO. From 1977, it began to produce benzoyl peroxide itself with remarkable success and at a price lower than that charged by AKZO. Two years later, ECS decided to sell benzoyl peroxide to plastic manufacturers and managed to attract some of AKZO’s erstwhile customers. At a meeting between the two companies, AKZO’s managers threatened ECS that they would reduce their prices for flour additives even below cost if ECS did not withdraw from the plastic sector. ECSC obtained a temporary injunction from the High Court to prevent AKZO implementing these threats, but AKZO later carried them out and approached ECS’s customers in the flour sector, offering them substantially lower prices over a prolonged period of time, as well as a whole range of incentives to entice them away from ECS, with the ultimate aim of driving this company out of the plastic sector. The Court took the view that there would not be an abuse if, by lowering its prices, an undertaking aimed to attain an optimum selling price and a positive coverage margin. So when do low prices become predatory? The Court adopted cost-related criteria and took the view that if prices fall below average variable costs162 they must be regarded as abusive because a ‘dominant undertaking has no interest in applying these prices except that of eliminating competitors’.163 The Court went on to say that if prices were above average variable costs but below average total costs164 the prices must also be regarded as abusive if they are part of a plan by the dominant
161 162
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Case C-62/86 [1991] ECR I-3359, [1993] 5 CMLR 215. Variable costs are those that vary according to the quantities produced. By contrast fixed costs are those that do not change. Average variable cost results from the addition of all the variable costs divided by the number of units of output. Case C-62/86, supra n. 161, at paragraph 71 of the judgment. Average total cost is the sum of the total fixed and variable costs divided by the number of units of output.
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undertaking to drive a competitor out of the market.165 The AKZO criteria were confirmed in TetraPak (II).166 Another common form of abuse is the refusal to supply by a dominant company. One of the very early cases in this field was Commercial Solvents v. Commission.167 In that case, Commercial Solvents, an American company, made two products used for the manufacture of a drug to cure tuberculosis. Its Italian subsidiary refused to supply one of these products to Zoja, a long-standing customer that manufactured the anti-tuberculosis drug. This refusal to supply took place shortly after Commercial Solvents’ Italian subsidiary itself started manufacturing the same drug in competition with Zoja. Following a complaint from Zoja, the Commission found Commercial Solvents in breach of Article 82 EC. The Court upheld that Decision and based its reasoning on the evidence that Zoja was a longstanding customer and that Commercial Solvents intention after it had decided to vertically integrate, had been to drive Zoja out of the market and to fill that gap in the market itself.168 In United Brands,169 the Court considered again a refusal to supply and emphasised the significance of refusing to supply a long-standing customer. In this case, United Brands refused to supply Olesen, one of its Danish wholesalers, on the grounds that it engaged in an advertising campaign to promote a brand of competing bananas. The Court took the view that a dominant company ‘cannot stop supplying a long-standing customer who abides by regular commercial practice if the orders placed by this customer are in no way out of the ordinary’.170 What makes a refusal to supply to a long-standing customer more reprehensible is the fact that the latter relies on the dominant company for the continuity of supplies and is, in a sense, 165 166
167 168
169 170
Case C-62/86, supra n. 161, at paragraph 72 of the judgment. Case C-333/94P, supra n. 156. Recent case law has established that selective price cutting may also be abusive, even if the prices do not fall below cost, if there is an intention on the part of the dominant company to eliminate a competitor. The Court held in Compagnie Maritime Belge (Cases C-395 and C-396/96P [2000] 4 CMLR 1076) that if a ‘dominant company selectively cuts its prices in order deliberately to match those of a competitor, it derives a dual benefit. First, it eliminates the principal, and possibly the only, means of competition open to the competing undertaking. Secondly, it can continue to require its users to pay higher prices for the services which are not threatened by that competition’ (at paragraph 117 of the judgment). Cases 6–7/73 [1974] ECR 223, [1974] 1 CMLR 309. Ibid., at paragraph 25 of the judgment, where the Court held: ‘However, an undertaking being in a dominant position as regards the production of raw material and therefore able to control the supply to manufacturers of derivatives cannot, just because it decides to start manufacturing these derivatives (in competition with its former customers), act in such a way as to eliminate their competition which, in the case in question, would have amounted to eliminating one of the principal manufacturers of ethambutol in the Common Market.’ Case 27/76, supra n. 5. Ibid., at paragraph 182 of the judgment.
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dependent on it.171 United Brands made an attempt to justify objectively their refusal to supply on the grounds of protecting their commercial interests. While the Court accepted that it should be possible for United Brands to take steps to protect these, the refusal to supply was too disproportionate a response and hence it was abusive.172 Would a refusal to supply a casual customer be considered abusive? In 1977, BP was found to be in breach of Article 82 EC by the Commission because it reduced substantially, and proportionately to a greater extent than in relation to other traditional customers, its supplies of oil to one of its casual Dutch customers.173 The cutback in supplies took place in 1973, at the height of the world-wide oil crisis. The Court annulled the Commission’s Decision and found that in time of shortage of supplies, it could not be expected that a dominant company would apply an identical rate of reduction to casual customers than to erstwhile customers.174 It was, therefore, legitimate for the company to set a system of priorities in meeting orders and to apply a different rate of reduction to casual customers. Later case law has emphasised that these criteria for according priority should be objective and non-discriminatory.175 There are, thus, two fundamental differences between the judgment of the Court in this case and in Commercial Solvents. In BP, not only was the victim of the refusal to supply a casual customer, but there was also an objective justification for the refusal to supply, namely the shortage of petroleum products. If there had been no objective justification for the refusal to supply, it seems likely that BP would have been found guilty of abuse even if the customer was a casual one, as the Magill cases demonstrate.176 The extent to which a refusal to supply should constitute an act of abuse is of particular importance to intellectual property cases, where the owner of an intellectual property right (i.e. holder of a patent, an industrial design right or a copyright) refuses to issue a licence or otherwise to give access to the items protected by intellectual property. This is because the holder of an intellectual property right can always be considered to be a monopolist, or quasi-monopolist, whose monopoly is, moreover, pro171
172 173 174 175
176
The Advocate General explained that ‘refusal to sell to a long-standing customer, who cannot make any call upon suppliers other than the one with whom he has regular dealings, is an abuse prohibited by Article 86 [now 82] in so far as it may affect trade between Member States, and this occurs if a ripener/distributor may very well disappear from the market and the pattern of the supply of bananas may be appreciably modified in a substantial part of the Common Market’ (Case 27/76, supra n. 5, at p. 334 (ECR) and p. 466 [CMLR]). Ibid., at paragraphs 190–3 of the judgment. Commission Decision 77/327/EEC, OJ [1977] L 117/1, [1977] 2 CMLR D1. Case 77/77 BP v. Commission [1978] ECR 1513, [1978] 3 CMLR 174. See BPB v. Commission (Case T-65/89, supra n. 128) at paragraph 94 of the judgment, and supra nn. 128–131 and accompanying text. See infra nn. 180–189 and accompanying text.
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tected by law. If that dominance extends to a substantial part of the Common Market, the holder of the right will enjoy a position of dominance within the meaning of Article 82 EC.177 In its early case law, the Court held that a refusal to license is not abusive per se, although the concurrence of certain circumstances, might make it so. For example, in Volvo v. Veng178 the Court took the view that the refusal of a car manufacturer to license a third party to manufacture its car parts was not abusive per se, but there were certain circumstances that could render that refusal abusive, such as the arbitrary refusal to supply spare parts or the charging of unreasonably high prices for these spare parts.179 In RTE and ITP v. Commission,180 otherwise known as the Magill cases, three television companies were found to be in breach of Article 82 EC for refusing to supply to an Irish company (Magill) information, which was protected by copyright, on the programmes they would be showing on their respective channels. The three television companies traditionally produced their own separate listings of the programmes that they would be showing on their respective channels, but Magill wanted to produce a combined guide that would give information on the programmes that would be shown on all three channels. This comprehensive guide, would, of course, be most attractive from the consumer’s point of view. Why was the refusal to supply labelled as abusive? The Court took the Volvo v. Veng judgment as a starting point and confirmed that there were circumstances in the case that rendered the refusal abusive. In particular, three circumstances were held to be crucial in this determination. First was the fact that the TV companies were, by their actions, preventing the emergence of a product, for which there was ‘a potential consumer demand’.181 Second was the absence of an objective justification for the refusal to supply.182 Third – and here the Court referred back to the Commercial Solvents judgment – and it explained that the companies, which had statutory monopolies in television broadcasting in Ireland and the United Kingdom, were trying to maintain their stronghold over the secondary market of television guides.183 In other words, in line with Commercial Solvents, the ultimate aim of the companies was to exclude competition in the market for television guides. Does the judgment of the Court in Magill represent an intolerable intrusion on the rights of intellectual property rights holders or just a consistent development of the case law? It would seem that the latter view 177
178 179 180 181 182 183
As the Court indicated in Deutsche Grammophon (Case 78/70 [1971] 1 CMLR 631, only if this dominance extended to a ‘substantial part of the Common Market’ would the undertaking have a dominant position within the meaning of Article 82 EC. Case 238/87 [1988] ECR 6211, [1989] 4 CMLR 122. Ibid., at paragraph 9 of the judgment. Cases C-241/91P, etc. [1995] ECR I-797, [1995] 4 CMLR 718. Ibid., at paragraph 54 of the judgment. Ibid., at paragraph 55 of the judgment. Ibid., at paragraph 56 of the judgment.
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is a more balanced one. The interface between intellectual property rights and the Treaty provisions, in particular those for the free movement of goods and competition, has never been smooth. The reason is simple and well-known. Intellectual property rights have some inherent qualities such as territoriality and exclusivity, which are inconsistent with the single market objective of the Treaty. As a result, and in the absence of Treaty guidance on how to address this conflict, the Court reached a compromise by distinguishing between the existence of an intellectual property right and the exercise of such a right. While the existence of the right is unaffected by the Treaty provisions, the exercise of the right may be limited if it contravenes the principles underlying either the provisions on free movement of goods or those on competition.184 This aspect of the case is reflected in the judgment of the Court of First Instance, rather than in the judgment of the Court, which is couched more in terms of a mere refusal to supply. Thus, the Court of First Instance emphasised that the exclusive right to reproduce the protected work is part of the essence or subject matter of copyright, and as such, it is unaffected by Article 82 EC.185 If, however, that right were exercised in an abusive way, then Article 82 EC would apply.186 In a later case, Tiercé Ladbrooke,187 the Court of First Instance took the view that a refusal of French race-course societies to license Ladbrooke to show television broadcasts of French horse races in Belgium was not abusive. What is more, it helpfully distinguished this case from Magill, by explaining that the effect of the refusal to supply was not to prevent the entrance of Ladbrooke into the market as Ladbrooke already had the largest share of the betting market within which the product (sound and pictures) was offered.188 As the French race-course societies were not exploiting their intellectual property rights in the Belgian market, it could not be said that the refusal to license led to a restriction on competition in the sense present in Magill.189 The Magill cases sparked the debate on whether the Court was prepared to uphold the doctrine of essential facilities in EC competition law. In the words of the Commission, which seemed keen to apply this doctrine in the
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186 187 188 189
See Case 24/67 Parke, Davis v. Centrafarm [1968] ECR 55, [1968] CMLR 47, at paragraph 6 of the judgment and, more clearly, Case 40/70 Serena v. Eda [1971] ECR 69, [1971] CMLR 260, where the Court held that ‘… even if the rights recognised by the legislation of a Member State on the subject of industrial and commercial property are not affected, so far as their existence is concerned, by Articles 85 and 86 EC of the Treaty, their exercise may still fall under the prohibitions imposed by those provisions [emphasis added]’. See Cases T-69/70/89, etc. RTE v. Commission [1991] ECR II-485, [1991] 4 CMLR 586, at paragraphs 70–1 of the judgment. Ibid. Case T-504/93 [1997] ECR II-923, [1997] 5 CMLR 309. Ibid., at paragraph 130 of the judgment. Ibid.
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early 1990s,190 an ‘essential facility’ is ‘a facility or infrastructure without access to which competitors cannot provide services to their customers’.191 According to the doctrine, a dominant undertaking that owns or controls such a facility and refuses, without an objective justification, to make it available to competitors – or makes it available in discriminatory terms – abuses its position of dominance. Could it be said that the programme listings of the television companies known only to them was an essential facility and therefore that it should have been made available to Magill? This approach, however desirable from the point of view of competitors, has the potential to threaten incentives for investment and research and development by large firms and may, in the long run, have a negative effect on competition. The important decision of the European Court in Oscar Bronner v. Mediaprint192 has shed light on this point and has established clear limits to the application of the doctrine to EC competition law. Bronner, a small publisher in the Austrian daily newspaper market, brought an action before the national courts against Mediaprint, a company with a very large share of that market. It claimed that Mediaprint’s refusal to grant it access to its system of home-delivery of newspapers was contrary to Article 82 EC. The main argument was, therefore, that the system of home-delivery of newspapers operated by Mediaprint was an ‘essential facility’ that should be made available to competitors. The Court held that the refusal to admit Bronner to the Mediaprint delivery network was not abusive and distinguished this case from Magill on two counts: first, because alternative methods of distribution of newspapers were available to Bronner, whereas Magill could only penetrate the market for television guides if it had the information held by the television companies; second, because it was not impossible for Bronner to set up its own home-delivery system scheme, whereas it was impossible for Magill to have access to the information by way of a normal process of investment and research. The Bronner decision therefore elucidates the limited extent to which the doctrine of essential facilities applies in the context of Article 82 EC. Thus, only if a facility owned by a dominant company is indispensable to and impossible to replicate by a competitor would a refusal to grant access constitute an abuse.193 Finally, a controversial development in the case law has been the possible application of Article 82 EC to companies that, dominant in one 190
191 192 193
See Commission Decision in B&I Line plc v. Sealink Harbours [1992] 5 CMLR 255 and in Sea Containers v. Stena Sealink (Decision 94/19/EC OJ [1994] L 15/8, [1995] 4 CMLR 84). See B&I Line plc v. Sealink Harbours, supra n. 190, at paragraph 41 of the decision. Case C-7/97 [1998] ECR I-7791, [1999] 4 CMLR 112. The judgment has not been free from criticism. See M. A. Bergman, ‘Editorial, the Bronner case: a turning point for the Essential Facilities doctrine?’, [2000] ECLR 59, and, L. Hancher, ‘Oscar Bronner v. Mediaprint’, [1999] 36 CMLRev 1289. For a very helpful analysis of the case law on essential facilities, see B. Doherty, ‘Just what are essential facilities?’, [2001] 38 CMLRev [2001], 397.
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market, carry out abuses in a related market where they have not been proven to be dominant. The key case in this area is the decision of Court of First Instance in TetraPak (II),194 which was confirmed on appeal by the European Court of Justice.195 In that case, the Commission found TetraPak to be dominant in the aseptic market196 but no finding of dominance was made in the non-aseptic market. The Commission then decided that Article 82 EC could be applied to the abusive practices carried out by TetraPak in the non-aseptic market because of the close association between these two markets. TetraPak argued before the Court of First Instance that since the Commission had not proved dominance in the nonaseptic market, Article 82 EC could not apply to practices in that market, as only abuse carried out by a dominant company can fall within the scope of Article 82 EC.197 It also argued that the Commission had not demonstrated the existence of a causal link between the abuses carried out in the nonaseptic market and the dominance of TetraPak in the aseptic market.198 The Court of First Instance highlighted the two circumstances that made Article 82 EC applicable to the practices of TetraPak in the nonaseptic market. First, there were close links between the two markets. These included the fact that the key products packaged in the aseptic and non-aseptic markets were the same, i.e. dairy products and fruit juice, and that many of TetraPak’s customers operated in both markets.199 Second, it was the quasi-monopoly held by TetraPak in the aseptic market that enabled it to carry out the abusive practices in the non-aseptic market. The Court held that: The fact that TetraPak held nearly 90% of the markets in the aseptic sector meant that, for undertakings producing both fresh and long-life liquid food products, it was not only an inevitable supplier of aseptic systems but also a favoured supplier of non-aseptic systems. Moreover, by virtue of its technological lead and its quasi-monopoly in the aseptic sector, TetraPak was able to focus its competitive efforts on the neighbouring non-aseptic markets, where it was already well-established, without fear of retaliation in the aseptic sector, which meant that it also enjoyed freedom of conduct compared with the other economic operators on the non-aseptic markets as well.200
The judgment of the European Court upheld the decision of the Court of First Instance, but it also helpfully indicated the exceptional nature of the case by explaining that: 194 195 196 197 198 199 200
Case T-83/91, supra n. 24. Case C-333/94P, supra n. 156. For a description of the facts, see supra section 3.2.1. Case T-83/91, supra n. 24, at paragraph 102 of the judgment. Ibid., at paragraph 104 of the judgment. Ibid., at paragraph 120 of the judgment. Ibid., at paragraph 121 of the judgment.
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It is true that the application of Article 86 EC [now 82 EC] presupposes a link between the dominant position and the alleged abusive conduct, which is normally not present where conduct on a market distinct from the dominated market produces effects on that distinct market. In the case of distinct, but associated markets, as in the present case, application of Article 86 [now 82] to conduct found on the associated, non-dominated market and having effects on that associated market can only be justified by special circumstances [emphasis added].201
It seems, therefore, that the decision in TetraPak should be confined to the facts of that particular case and not treated as introducing a new principle that could be dangerously wide. Thus it cannot automatically be assumed that if a company is dominant in one market, abuses carried out in a related market, where dominance has not been established, will come within the scope of Article 82 EC. Only the existence of exceptional circumstances would trigger the application of that provision.
3.2.3 Effect on intra-Community trade This condition is analogous to the one set out in Article 81 EC and therefore it has the primary function of delimiting the boundary between the application of EC and of national competition law.202 There are important similarities between the interpretation of this requirement in the framework of Articles 81 and 82 EC. First, the test of effect on intra-Community trade has been construed as widely as its equivalent in Article 81 EC.203 Any effect, direct or indirect, actual or potential, will be relevant to determine whether or not this condition is fulfilled. Thus, in Michelin v. Commission,204 the applicant argued that it had not been shown that its behaviour had actually affected
201 202
203
204
Case C-333/94P, supra n. 156, at paragraph 27 of the judgment. See supra Chapter 2, section 2.2.2. See also Hugin v. Commission (Case 22/78, supra n. 13), where the Court held: ‘The interpretation and application of the conditions relating to effects on trade between Member States contained in Articles 85 and 86 [now 81 and 82] must be based on the purpose of that condition, which is to define, in the context of the law governing competition, the boundary between the areas respectively covered by Community law and the law of the Member States. Thus Community law covers any agreement or any practice which is capable of constituting a threat to the freedom of trade between Member States in a manner which might harm the attainment of the objectives of a single market between the Member States, in particular, by partitioning the national markets or by affecting the structure of competition within the Common Market. On the other hand, conduct the effects of which are confined to the territory of a single Member State is governed by the national legal order.’ See the test devised by the Court in STM v. Maschinenbau Ulm (Cases 56 and 58/65 [1966] ECR 234 and supra Chapter 2, section 2.2.2) in the framework of Article 81 EC. Case 322/81, supra n. 1.
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trade between Member States. The Court, however, took the view that, for that requirement to be met, it was not necessary that the abusive behaviour had affected trade between Member States. It sufficed that it was capable of having that effect.205 Second, this limb of Article 82 EC has also been used a means to uphold the single market objective of competition law, Thus, for example, in Solvay,206 the Commission, after finding that the loyalty rebates and other inducements to exclusivity applied by Solvay were abusive, concluded that the practices affected trade between Member States. This was because they hindered access to the market by competing suppliers and had a market-splitting effect.207 In the case of abusive practices which can effectively eliminate competition, such as refusals to supply and predatory pricing, the Court has held that there is a per se effect on intra-EC trade. In Commercial Solvents,208 this company argued that it had not been proved that its refusal to supply Zoja had an effect on trade. In particular, it argued that 90 per cent of Zoja’s sales were conducted outside the Common Market, and even sales within the Common Market were greatly reduced by reason of the patents held by other companies. Consequently, it could not be demonstrated that the elimination of Zoja from the market would have a significant effect on imports or exports within the EC. The Court took the view that if the aim of a dominant company was to eliminate a competitor, the effect on trade would be automatic, because the conduct would alter the competitive structure in the Common Market.209 Although the Court did not allude to the single market objective of the Treaty, that objective nevertheless seemed to influence this aspect of the judgment. The exclusion of competition will encourage market isolation and render access to the market difficult, and will enlarge the scope for further abusive practices such as the imposition of unfairly high prices. This approach is reminiscent of the Consten and Grundig approach in the framework of Article 81 EC.210 Third, even if the abusive practices are carried out in a national market only, the requirement of effect on intra-EC trade can still be made out if the practices alter the competitive structure in the Common Market. This was expressly acknowledged by the Court in Michelin,211 where the Court held that ‘when the holder of a dominant position obstructs access to the 205
206 207 208
209
210 211
Ibid., at paragraph 104 of the judgment. See also Case C-41/90 Höfner v. Macroton [1991] ECR I-1979, [1993] 4 CMLR 306, at paragraphs 32–3 of the judgment. Commission Decision 90/299/EC, OJ [1991] L 152/21, [1994] 4 CMLR 645. Ibid., at paragraph 65 of the decision. Cases 6 and 7/73, supra n. 167. See supra nn. 167–168 and accompanying text, for a summary of the facts. Ibid., at paragraph 33 of the judgment. See also the decision of the Court of First Instance in the Magill cases (Case T-69/89, supra n. 185, at paragraphs 76–7 of the judgment). See supra Chapter 2, section 2.2.3 Case 322/81, supra n 1.
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market by competitors, it makes no difference whether such conduct is confined to a single Member-State as long as it is capable of affecting patterns of trade and competition in the Common Market.’212 One difference in the interpretation of this condition in Articles 81 and 82 EC is that, in the absence of a de minimis rule akin to the one that applies in the framework of Article 81 EC, it is not necessary to show at this stage that the effect on trade is ‘appreciable’. Article 82 EC already establishes that dominance must be held ‘over a substantial part of the Common market’, which presumes that if an abuse of that position has an effect on trade, that effect will be deemed to be significant enough.213 However, some decisions of the Commission have made reference to the requirement of ‘appreciability’.214
3.2.4 Joint dominance215 Article 82 EC expressly acknowledges that an abuse of dominant position can be carried out by ‘one or more undertakings’. The provision, however, remains silent about the elements necessary to determine the existence of a position of joint or collective dominance. The concept of joint dominance was first defined by the Court of First Instance in its landmark decision in Società Italiana Vetro v. Commission (Italian Flat Glass).216 In that case, the Commission found three Italian producers of flat glass, whose aggregate shares of that market in Italy amounted to 95 per cent, to be in breach of Article 81 EC on the basis that they had engaged in a concerted practice aimed, inter alia, at fixing prices and sharing markets. It also found them in breach of Article 82 for having abused their position of joint dominance by preventing customers from bargaining with them on prices and sales terms. The Commission highlighted the participation of the companies in a tight oligopoly and used two elements to decide that the companies were jointly dominant. First, the companies together had a very large share of the Italian market for flat glass and belonged to groups with multinational dimensions which controlled more than half of the EC production and 212 213 214
215
216
Ibid., at paragraph 103 of the judgment. See supra section 3.2.1 Thus in Hugin Commission Decision 78/68 OJ [1978] L22/23, [1978] 1 CMLR D19, the Commission took the view that Hugin’s practices ‘appreciably’ affected trade between Member States (ibid., at paragraph 72 of the Decision). The Court annulled the Commission’s Decision in appeal, on the grounds that the practices did not affect trade between Member States (see Case 22/78 [1979] 3 CMLR 345, at paragraphs 15–26 of the judgment). For an exhaustive analysis of this topic, see R. Whish, ‘Collective dominance,’ in D. O’Keefe and M. Andenas, Liber Amicorum for Lord Slynn (The Netherlands, 2000), Vol. I, p. 581. Cases T-68, 77 and 78/89 [1992] ECR II-1403, [1992] 5 CMLR 302.
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supply in these products.217 Second, the undertakings presented themselves as a single entity. This was reflected in their business decisions, which displayed a marked degree of interdependence with regard to prices and terms of sale and also in the existence of structural links concerning production between them.218 The Court of First Instance partially annulled the Commission’s decision on the grounds that there was insufficient evidence to show the existence of a concerted practice between the companies.219 It also found that the Commission had not proved the existence of a collective dominant position. More importantly, it defined that term as follows: There is nothing, in principle, to prevent two or more independent economic entities from being, on a specific market, united by such economic links that, by virtue of that fact, together they hold a dominant position vis-à-vis the other operators in the same market. This could be the case, for example, where two or more independent undertakings jointly have, through agreements or licences, a technological lead affording them the power to behave to an appreciable extent independently of their competitors, their customers and ultimately, of their consumers.220
It would seem, therefore, that, in order to be jointly dominant, two or more undertakings need to be, firstly, independent, and secondly, united by economic links. In the context of mergers, the Court has defined joint dominance in similar terms.221 Again reference was made to the existence of ‘factors giving rise to a connection’ between the undertakings, as a result of which they ‘could adopt a common policy in the market [emphasis added]’.222 The Court, however, did not define an economic link in these cases and preferred instead to give an example of what could constitute one, i.e. a technological agreement that would give the parties a lead over their competitors. This raised the issue of the exact meaning of the expression ‘economic links’. Did it mean structural links, as in the example in Italian Flat Glass, or did it represent a wider concept? 217
218 219 220 221
222
Commission Decision 89/93/EEC, OJ [1989] L 33/44, [1990] 4 CMLR 535, at paragraph 79 of the decision. Ibid. Cases T-69, 77 and 78/89, supra n. 216. Ibid., at paragraph 358 of the judgment. See France v. Commission (Case C-68/94 [1998] ECR I-1375), where the Court recognised that the EC Merger Regulation could apply to the creation or the strengthening of a collective dominant position and then defined the concept of joint dominance. This emphasis on the ability to adopt a common market policy has also underlined some of the Article 82 EC cases, like the decision of the Court of First Instance in Irish Sugar (Case T-228/97 [1999] ECR II-2969, [1999] 5 CMLR 1300, at paragraph 46 of the judgment), where the Court cross-referred to France v. Commission on the definition of joint dominance.
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The question remained open for several years,223 and was clarified by the Court of First Instance in Gencor v. Commission,224 a merger case which concerned the proposed merger of the platinum and rodhium operations of Gencor, a South African company, and of Lonrho, a company incorporated under English law.225 The Commission issued a decision under the EC Merger Regulation declaring that the proposed concentration was incompatible with the Common Market because it would lead to the creation of a collective dominant position between the entity arising from the concentration and Amplats, the leading world-wide supplier of platinum metal. Gencor’s main criticism of the Commission’s approach was that it had failed to show the presence of ‘economic links’ between the potential duopolists within the meaning of the case law. The Court of First Instance interpreted its ruling in Italian Flat Glass and explained both that the reference to a technological agreement in that case had only been made by way of example and that the concept of ‘economic links’ was much wider in content and did not merely refer to structural links. Thus, the Court held that ‘the relationship of interdependence existing between the parties to a tight oligopoly’ could, in itself, constitute an economic link. 226 This wide construction of the notion of economic links, has recently been echoed in the context of an Article 82 EC case. In Compagnie Maritime Belge,227 a case where structural links within the meaning of the case law did exist,228 the Court specifically held: the existence of an agreement or of other links in law is not indispensable to a finding of a collective dominant position; such a finding may be based on other connecting factors and would depend on an economic assessment and, in particular, on an assessment of the structure of the market in question.229
Two main conclusions flow from this judgment. First, the decision seems to confirm that the wide interpretation of the notion of economic links adopted in Gencor is not confined to merger cases, but that it could also extend to Article 82 EC cases. This is a very important policy development, particularly because in Compagnie Maritime, the Court could simply have relied on the existence of structural links between the undertakings, just as 223
224 225 226 227 228
229
See the judgment of the Court of First Instance in Joined Cases T-24–26 and 28/93 Compagnie Maritime Belge v. Commission [1996] ECR II-1201, where shipping conferences concluded between shipowners (i.e. agreements regulating the operation of cargo trade on certain routes) were held to be ‘economic links’ within the meaning of the case law. Case T-102/96 [1999] ECR II-753, [1999] 4 CMLR 971. For a summary of the jurisdictional aspects of the case, see Chapter 1, section 1.7.2. Case T-102/96, supra n. 224, at paragraph 276 of the judgment. Joined Cases C-395/96P and C-396/96P [2000] 4 CMLR 1076. See supra n. 223. The companies participated in the so-called ‘maritime conferences’ referred to above. Ibid., at paragraph 45 of the judgment.
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the Court of First instance had done in its decision.230 Second, the decision could also pave the way for the use of this provision in order to control non-colluding oligopolists.231 In an oligopoly, parallel behaviour is the norm and therefore it could easily be said that undertakings adopt a ‘common position in the market’. Furthermore, if the relationship of interdependence between parties to a tight oligopoly is in itself an economic link, it would follow that participants in an oligopolistic market can easily be found to be jointly dominant and their behaviour, if abusive, can be assessed within the parameters of Article 82 EC. This more interventionist approach to oligopolies232 could be a doubleedged sword. On the one hand, it would allow the Commission to control more effectively anti-competitive practices by oligopolists where there is no evidence of collusion. Participants in these markets can predict with great accuracy what their competitors will do, given the degree of interdependence between them, and can therefore engage in anticompetitive practices without the need to collude. Of these anticompetitive practices, the most obvious one would be a parallel increase in prices that is not objectively justified. On the other hand, if used too extensively, it could bring innocent behaviour within the scope of Article 82 EC.
3.2.5 Is there room for objective justification in the framework of Article 82 EC? One of the main differences between Articles 81 and 82 EC is that the latter does not make any provision for exemption. However, the case law on Article 82 EC seems to bear out the principle that, sometimes, behaviour that may seem abusive is objectively justified and therefore escapes the application of Article 82 EC. However, objective justification is a different concept from an exemption. In the context of Article 81 EC, the reasoning would be that an agreement caught by the prohibition in Article 81(1) can be exempted under Article 81(3) EC, if it fulfils the two positive and two negative conditions set out in this provision. The notion of objective justification in Article 82 EC is used to conclude that the behaviour of a 230 231
232
See supra n. 223. If there was evidence of collusion between them, then, of course, Article 81 EC would apply (see Chapter 2, section 2.2.1 In earlier cases, the Court had tried to distance oligopolistic markets from the concept of joint dominance. Thus, in Hoffmann-La Roche (Case 85/76, supra n. 21), where the Court held: ‘A dominant position must also be distinguished from parallel courses of conduct which are peculiar to oligopolies in that in an oligopoly the courses of conduct interact, while in the case of an undertaking occupying a dominant position, the conduct of the undertaking which derives profits from that position is to a great extent determined unilaterally’ (at paragraph 39 of the judgment).
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dominant company which bears the hallmarks of abuse is to be treated as non-abusive if it can be explained on the basis of reasons other than the intention to weaken or eliminate competition or to exploit consumers. The result would be that if the behaviour is ultimately non-abusive, then the prohibition in Article 82 EC would not apply.233 Several decisions of the Court have developed the notion of objective justification in the framework of Article 82 EC. The decisions of the Court in General Motors and in United Brands are two clear examples which have been discussed above.234 In the first case, the Court found that the excessive prices charged by General Motors could be objectively justified. In the second, the Court took the view that the discriminatory prices charged by United Brands were abusive, but it first explored whether the differences in prices could be objectively justified. Likewise, the BP case235 illustrates that the shortage of oil due to the 1973 world crisis could justify the fact that a dominant company reduced its supplies to casual customers proportionately to a greater extent than in relation to long-standing customers. What might otherwise be seen as a refusal to supply, or a discriminatory application of trading conditions, was found to be compatible with Article 82 EC. Other examples of this approach include the decision of the Court in Gøttrup-Klim.236 In that case, an agricultural purchasing association included in its statutes a provision prohibiting its members from purchasing certain fertilisers through competing associations. The Court concluded that such a clause was not abusive because it was limited to ensure the proper functioning of the association and the maintenance of its contractual power in relation to producers.237 Finally, it also seems clear that even if a practice is objectively justified, it still needs to fulfil the further requirement of being proportionate. For example, in BRT v. SABAM,238 a case discussed above, the Court was ready to accept that a national copyright association could ask for the 233
234 235 236 237 238
This is rather similar to the case law on free movement of goods and the notions of direct and indirect discrimination. Article 28 EC prohibits quantitative restrictions and measures having equivalent effect. Quantitative restrictions and measures having equivalent effect, which are directly discriminatory, are caught by Article 28. It is then up to the Member States to invoke one of the express derogations in Article 30 EC to take the measure outside the prohibition in Article 28 EC. However, when measures having equivalent effect are indirectly discriminatory, and under the Cassis de Dijon principle, Article 28 will not apply if the Member State is able to invoke a mandatory requirement that justifies the measure and provided the latter is proportionate. The case law on free movement of persons, establishment and services also illustrates this approach. See supra section 3.2.2. Case 77/77, see supra n. 174. Case C-250/92 [1994] ECR I-5641, [1996] 4 CMLR 191. Ibid., at paragraphs 49–52 of the judgment. Case 127/73, supra n. 103.
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assignment of copyrights in its favour if it was to protect them effectively. It could not, however, impose obligations on its members that were not necessary to achieve that objective and that would encroach unfairly on a member’s freedom to exercise its copyright.239 The notion of objective justification therefore tempers the rigour of Article 82 EC and allows for a fairer and more balanced approach to behaviour that, although seemingly abusive, can be explained rationally. It is, furthermore, a welcome development that not only shows a coherent approach of the case law to other areas of EC law, but also shows that the Commission and the Court consider the interests of dominant companies when applying Article 82 EC.
239
See supra section 3.2.2.
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4 The enforcement of EC competition law
4.1 Introduction EC competition law is enforced at two levels: at Community level by the Commission, and at national level by the national competition authorities and the national courts. For almost forty years, the weight of enforcement policy has fallen on the Commission. In the present system, while national courts and national authorities can apply Articles 81(1) and (2) EC and Article 82 EC, only the Commission can also apply Article 81(3) EC. Mario Monti, the Competition Commissioner, has recently described this division of competences as ‘telling someone to play chess while giving him only half the pieces’.1 Although the Treaty did not make it clear that only the Commission could grant exemptions, the main enforcement regulation, Regulation 17/62,2 explicitly reserved to the Commission the sole power to grant exemptions from the prohibition in Article 81(1) EC.3 There are two types of exemption, individual exemption and block
1
2
3
See the speech by Mario Monti, ‘The application of Community Competition law by the national courts’, Conference held at the Europäische Rechtsakademie, ‘Towards the Application of Article 81(3) EC by the National Courts’, Trier, 27 November 2000. OJ Sp. Ed. [1962] 87. Regulation 17/62 was adopted on the basis of Article 83 (ex Article 87) EC. See Article 9(1) of Regulation 17/62. See also Case 31/80 L’Oréal v. De Nieuwe ([1980] ECR 3775, [1981] 2 CMLR 235), where the Court held: ‘… under Article 9(1) of Regulation 17 … the Commission has the sole power, subject to review by the Court, to declare the provisions of Article 85(1) [now 81(1)] of the Treaty inapplicable pursuant to Article 85(3) [now 81(3)] of the Treaty. The jurisdiction of the national courts is restricted to determining whether the agreement, decision or concerted practice which is the subject of the action before them is in accordance with Article 85(1) [now 81(1)] and, if appropriate, to declaring the agreement, decision or practice in question void under Article 85(2) [now 81(2)]’ (paragraph 13 of the judgment).
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exemption, discussed above.4 To benefit from an individual exemption, the parties must, in the present system, notify the agreement in question to the Commission. If, however, an agreement falls within the scope of a block exemption, there is no need to notify it to the Commission. In 1999, the Commission published its White Paper on the modernisation of the rules implementing Articles 81 and 82 EC, and it suggested a bold programme for the reform of the enforcement of competition law. The thrust of the White Paper is to propose the substitution of the system of notification and individual exemption for a system of directly applicable exception. This would mean that national courts and national authorities could apply Article 81 EC as a whole. The effect would be twofold: to decentralise the enforcement of competition law and remove the administrative burden placed on the Commission by the authorisation system. As a result, the Commission would be able to concentrate on issuing block exemption regulations and on investigating the most serious infringements of the competition rules. The White Paper, therefore, has the potential to change very significantly the current landscape of enforcement of competition law in the EC. Following a period of public consultation on the White Paper, the Commission has recently published a proposal for a draft Council regulation implementing Articles 81 and 82 EC that would replace Regulation 17/62.5 The pages that follow examine both the present system of enforcement at Community and national level and the reforms proposed in the Commission’s White Paper, together with the implications of these reforms.
4.2 The present system – enforcement at community level: Regulation 17/62 Regulation 17/626 sets out in detail the current process of enforcement of Articles 81 and 82 EC by the Commission.7 The following phases may be distinguished in the procedure: initiation, fact finding, statement of objections, hearing of the parties and final decisions.8 An outline of the Commission’s procedure is provided in Figure 4.1.9 4 5 6 7
8
9
See Chapter 2, section 2.4.2. [2000] 5 CMLR 1148. See supra n. 2. Alongside this general system of enforcement, there are special regimes for certain areas, such as transport (see Regulation 141 (OJ Sp. Ed. [1959–62] 291); Regulation 1017/68 (OJ Sp. Ed) [1968] 302; Regulation 4056/86 ([1986] OJ L 378/4) and mergers (Regulation 4064/89, last amended by Regulation 1310/97, OJ [1997] L 180/1)). See, for specialised works in this area, C. Kerse, EC Antitrust Procedure, 4th edn (London, 1998); L. Ortiz Blanco, EC Competition Procedure (Oxford, 1996) and M. Smith, Competition Law, Enforcement and Procedure (London, 2001). See infra p. 115.
The enforcement of EC competition law
Starting the procedure:
Fact-finding powers:
(a) (b) (c) (d)
(a) requests for information (b) investigations
notifications applications complaints own initiative
115
Commission produces the statement of objections
The Commission may take decisions in the course of the procedure (i.e. order interim relief)
Right to be heard of undertakings concerned
Oral hearing (in some cases)
(a) formal decisions: – negative clearance – finding an infringement – granting an exemption (b) informal decisions: – ‘comfort’ letters – modification of agreements – informal settlements
Figure 4.1 Outline of the Commission’s procedure
I
+
Commission takes final decision:
fines
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4.2.1 The Commission’s investigation Phase one: Initiation of the proceedings The Commission may initiate an enforcement procedure through four different channels: following an application, after a notification or a complaint, and on its own initiative. These will be examined in turn. An application by one or more undertakings seeks to obtain a declaration that their activities do not constitute a breach of either Article 81(1) EC or Article 82 EC.10 A notification, by one or more undertakings, seeks to obtain a declaration that an agreement or concerted practice that, in principle, comes under Article 81(1) EC, qualifies for exemption under Article 81(3) EC.11 This method of initiation of the procedure therefore only applies to cases under Article 81 EC, given that exemption from the prohibition in Article 82 EC is not possible. The general rule is that notification is necessary if the parties seek an individual exemption for an agreement or concerted practice.12 However, special dispensation from the need for prior notification is given to some agreements, which are allowed to benefit from an exemption, without it.13 The Regulation also provides that agreements that existed when Regulation 17/62 came into force need to be notified to the Commission14 unless they would have been exempted from notification.15 10 11 12 13
14
See Article 2 of Regulation 17/62. See Article 4 of Regulation 17/62. See Article 4(1) and 9(1) of Regulation 17/62. See Article 4(2) of the Regulation and the amendments set out in Regulation 1216/99 (OJ [1999] L 148/5 to Article 4(2)(2) of the Regulation (see Chapter 2, section 2.4.6). The differences between agreements subject to the obligation of notification (Article 4(1)) and those exempted from it (Article 4(2)) were clearly set out by the Court in Stichting Sigaretten-industrie v. Commission (Cases 240–242/82, etc. [1985] ECR 3831, [1987] 3 CMLR 661): ‘… On the one hand, in the case of agreements covered by Article 4(2) the Commission must examine whether the conditions laid down in Article 85(3) are met even where it becomes aware of the agreements as a result of its own investigation; exemption can only be granted in respect of agreements covered by Article 4(1) if they have been notified. On the other hand, in the case of agreements covered by Article 4(2) the Commission may, under Article 6(2), give an unlimited retroactive effect to its decision granting exemption; according to Article 6(1), decisions exempting agreements governed by Article 4(1) cannot take effect from a date prior to the date of notification’ (at paragraph 75 of the judgment). See Article 5(1) of Regulation 17/62. In relation to these agreements, the Court developed the so-called doctrine of ‘provisional validity’ to protect the general principle of contractual certainty. Under this doctrine, agreements in force when the Regulation was enacted (old agreements), and which have been notified under Article 5(1) of the Regulation, can only be declared automatically void by a national court after the Commission has taken a decision either granting or refusing an exemption. By contrast, in the case of agreements notified after the Regulation entered into force, there is an assumption that the parties implement the agreement at their own risk until the Commission takes any such decision (see Case 48/72 Brasserie de Haecht v. Wilkin-Janssen [1973] ECR 77, [1973] CMLR 287).
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The second benefit of notification apart from the possibility of obtaining an exemption is that the parties obtain temporary immunity from fines – i.e. from the date of notification until the Commission adopts a decision on the application of Article 81(3) EC.16 The Commission may, however, withdraw this temporary immunity if it becomes evident that the agreement or practice will not be eligible for an exemption.17 The Commission may also initiate proceedings following a complaint from an aggrieved party. The Regulation recognises two kinds of complainants: Member States, which have an automatic right to complain, and private parties, who need to show a legitimate interest.18 Neither the Commission nor the Community judicature have defined the notion of legitimate interest, but they have both been generous in recognising such legitimate interest whenever the interests of a natural or legal person have been affected as a result of the activities of one or more undertakings. The obvious examples are the victims of an abuse of dominant position,19 the competitors of companies that have concluded an anti-competitive agreement20 or associations of undertakings21 or consumers22 whose members have been adversely affected. 15 16
17 18 19
20
21
22
That is those falling within the scope of Article 4(2) of the Regulation. See Article 15(5) of Regulation 17/62. This immunity from fines will only apply to agreements that have been notified (i.e. those falling under Article 4(1)) but not to agreements that were exempted from notification (see the literal tenor of Article 15(5) of Regulation 17/62 and the judgment of the Court in Stichting Sigaretten-industrie v. Commission (see supra n. 13), at paragraphs 75–6 of the judgment. See Article 15(6) of Regulation 17/62. See Article 3(2) Regulation 17/62. See, for example, the Commission’s decision in AKZO (Decision 85/609, OJ [1985] L 374/ 1, [1986] 3 CMLR 273). The Commission’s investigation was triggered by the complaint submitted by ECS, the victim of AKZO’s alleged predatory pricing (see paragraph 1 of the Decision). See, for example, the decision of the Court in BAT and Reynolds v. Commission (Cases 142/ 84 and 156/84 [1987] ECR 4487, [1988] 4 CMLR 24), where it appears that BAT had complained to the Commission that the agreements concluded between Philip Morris and Rembrandt were anti-competitive. The Commission initiated an investigation as a result of the complaint and, after suggesting some amendments which were adopted by the companies, it wrote to the complainants informing them that it had closed the file. BAT then challenged the Commission’s letters before the Court (see paragraph 1 of the judgment). For example, in BENIM v. Commission (Case T-5/93 [1995] ECR II-197, [1996] 4 CMLR 305), an association of discotheque operators had complained to the Commission that the activities of the French copyright management society were contrary to both Articles 81 and 82 EC. The Court took the view that ‘an association of undertakings may claim a legitimate interest in lodging a complaint even if it is not directly concerned, as an undertaking operating in the relevant market, by the conduct complained of, provided, however, that, first, it is entitled to represent the interests of its members, and secondly, the conduct complained of is liable adversely to affect the interests of its members’ (at paragraph 28 of the judgment). See Case T-37/92 Bureau Europeen des Unions de Consommateurs v. Commission [1994] ECR II-285, [1995] 4 CMLR 167.
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Following the receipt of a complaint, the Commission is under an obligation to examine carefully the legal and factual aspects of the complaint.23 However, this does not mean that the Commission must investigate all possible infringements of EC competition law. In particular, the Court of First Instance explained in Automec (II)24 that the Commission, as an institution that acts in the public interest, is entitled to define its priorities when investigating infringements of the rules on competition. This means that the Commission may decline to pursue an investigation on grounds of lack of Community interest25 in order to concentrate on more serious infringements of the competition rules. The Commission may not, of course, merely assert the lack of Community interest in the abstract when rejecting a complaint, but must state in some detail the reasons26 why there is no sufficient Community interest. This would allow the complainant to seek judicial review of the Commission’s decision to reject the complaint.27 The Commission may, when faced with a complaint, initiate an investigation, reject the complaint or remain silent. The last two possibilities require some consideration. If the Commission intends to reject a complaint, it needs to inform the complainant of its reasons and set a date by which the complainant must submit its observations. This obligation is laid down in Article 6 of Regulation 2842/98 on hearings.28 In Guerin,29 the Court made it clear that the Commission’s notification under Article 6 is a provisional measure and 23
24
25 26
27
28
29
See BAT and Reynolds v. Commission (Cases 142/84 and 156/84, supra n. 20, at paragraph 20 of the judgment) and Case T-24/90 Automec v. Commission (Automec II) [1992] 5 CMLR 431, at paragraph 79 of the judgment. Case T-24/90, supra n. 23. See also the Opinion of Advocate General Jacobs in Tremblay v. Commission (Case C-91/95P [1996] ECR I-5547, [1997] 4 CMLR 211, at paragraphs 22–3 of the Opinion) and the Notice on co-operation between the national courts and the Commission (OJ [1993] C 39/6, [1993] 5 CMLR 95, at sections III and IV). See Case T-24/90, supra n. 23, at paragraphs 77–85 of the judgment. Any Community act needs to state the reasons on which it is based (see Article 253 EC). For a recent example where a Commission’s decision rejecting a complaint has been annulled due to lack of reasoning, see the decision of the Court of First Instance in Case T206/99 Métropole v. Commission, judgment of 21 March 2001, not yet reported. See Case C-19/93 Rendo v. Commission [1995] ECR I-3319, [1997] 4 CMLR 392, where the Court held that ‘where an investigation is terminated without any action being taken, the Commission is required to state reasons for its decision in order to enable the Court of First Instance to verify whether the Commission committed any errors of fact or law or is guilty of a misuse of powers’ (at paragraph 27 of the judgment). Given the wide discretion of the Commission, the review of the European Court will be limited to cases where there is an infringement of an essential procedural requirement, a manifest error in law or misuse of powers (see Cases 142/84 and 156/84, supra n. 20, at paragraph 62 of the judgment). OJ [1998] L 354/18. Regulation 2842/98 replaced the earlier regulation on hearings (Regulation 99/63 (OJ Sp. Ed. [1963] 47). Case C-282/95P [1997] ECR I-503, [1997] 5 CMLR 447.
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therefore non-reviewable under Article 230 EC.30 In other words, this measure is non-reviewable because it does not irrevocably define the position of the Commission, but is only a preliminary step towards that final definition of position.31 Regulation 2842/98 does not cover what happens following the submission of observations by the complainant, but the Court’s decision in Guerin32 explained that the Commission is bound either (a) to take up the complaint and initiate the investigation or (b) to adopt a decision finally rejecting the complaint. That final decision is, of course, reviewable by the Community judicature by means of annulment proceedings.33 Furthermore, the Court set out two helpful and clear guidelines that filled the gap left by Regulation 2842/98. First, it explained that the Commission must make a final decision within reasonable time following the submission of observations by the complainant.34 Secondly, it emphasised that the failure of the Commission either to open the investigation or to adopt a final decision can be challenged by the complainant under Article 232 EC.35 If, following the submission of a complaint, the Commission remains silent, the complainant can call upon the Commission to respond, i.e. either to initiate proceedings or to issue a notification under Article 6 of regulation 2842/98. If the Commission fails to do either, then the complainant can bring an action for a failure to act under Article 232 EC.36 Finally, the Commission may initiate proceedings on its own initiative. For example, in Bayer,37 the Commission initiated proceedings ex officio against Bayer, as it took the view that a provision in the company’s General Conditions of Sale and Delivery was contrary to Article 81 EC. Traditionally, most investigations have been initiated as a result of applications, notifications and complaints, but in its XXXth Report on Competition Policy,38 the Commission has indicated a drop in the number of complaints and notifications, together with an increase in the number of cases opened ex officio. The Commission has sought to explain this development as a result of the recent changes in competition policy and, in particular, the adoption of the new block exemption regulation on vertical restraints and the White Paper proposals. Both these reforms have, as one of their main themes, the pursuit of efficiency in the treatment of anti-
30 31 32 33 34 35
36 37 38
Ibid., at paragraph 34 of the judgment. See infra nn. 152–154. Case C-282/95P, supra n. 29. Ibid., at paragraph 36 of the judgment. Ibid., at paragraph 37 of the judgment. Ibid., at paragraph 38 of the judgment. For an examination of the action for a failure to act (Article 232 EC proceedings), see infra nn. 181–190. See Case 125/78 GEMA v. Commission [1979] ECR 3173, [1980] 2 CMLR 177. Commission Decision 90/645/EEC, OJ [1990] L 351/46, [1992] 4 CMLR 61. Published on 16 May 2001 on the Commission’s website.
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competitive agreements and concerted practices and the reduction of the administrative burden that falls on the Commission, so that the latter can focus on prosecuting the most serious infringements of competition law.39 Phase two: Fact-finding Following the initiation of the proceedings, the Commission begins to gather evidence on the existence of an alleged infringement of Articles 81 or 82 EC.40 Two main activities are carried out by the Commission in this phase: the requests for information and the conduct of investigations, which are covered respectively by Articles 11 and 14 of Regulation 17/62. Both these provisions have been the subject of abundant case law. The Commission may, under Article 11 of Regulation 17/62, obtain information relevant to its investigation from Member States, undertakings and associations of undertakings. When the Commission requests information from undertakings or associations of undertakings, this process takes the form of a two-step procedure. First, the Commission writes informally to the undertakings with a request for information.41 Secondly, and only if the undertakings do not supply the information requested or do not do so within the time limit, the Commission may issue a formal decision requiring the submission of information.42 This second decision is reviewable by the Court of First Instance.43 Under Article 14 of Regulation 17/62, the Commission has draconian powers of investigation. It can examine company books and business records, take copies of or extracts from these books and business records, ask for oral explanations on the spot or enter any premises, land and even means of transport of undertakings.44 Article 14 indicates the existence of two types of investigation. Paragraph 2 of that provision refers to what can be termed ordinary or voluntary investigations,45 while paragraph 3 refers to investigations ‘ordered by decision’ of the Commission. In the first case, 39 40
41 42
43 44 45
Ibid., at paragraphs 10 to 12 of the Report. As the Court held in Orkem v. Commission (Case 374/87 [1989] ECR 3283, [1991] 4 CMLR 502), ‘The sole purpose of the preliminary investigation procedure is to enable the Commission to obtain the information and documentation necessary to check the actual existence and scope of a specific factual and legal situation’ (at paragraph 21 of the judgment). See Article 11(2), (3) and (4) of Regulation 17/62. See Article 11(5) of Regulation 17/62. See also the Decision of the Court in Case 136/79 National Panasonic [1980] ECR 2033, [1980] 3 CMLR 169, which made it clear that the procedure laid down in Article 11 is a two-stage procedure (ibid., at paragraph 10 of the judgment). Ibid. See Article 14(1) of Regulation 17/62. In this respect, see the Decision of the Commission in Fédération Nationale de l’Industrie de la Chaussure de France (Decision 82/756, OJ [1982] L 319/12, [1983] 1 CMLR 575) at paragraphs 7 and 8 of the Decision.
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undertakings may refuse to submit,46 whereas in the second, they have an obligation to submit to the investigation. Unlike the procedure provided for in Article 11, this is not a two-step procedure and the Commission may choose to order an investigation directly, by means of a mandatory decision.47 In the interpretation of both Articles 11 and 14, the Community judicature has striven to find a balance between the aim of ensuring an effective investigation and the protection of the firms under investigation. Regulation 17/62 itself provides for some safeguards. For example, Article 20(1), states that ‘information acquired as a result of the application of Articles 11, 12, 13 and 14 shall be used only for the purpose of the relevant request or investigation’.48 In particular, the case law has set important limits on the broad powers of the Commission in this field. In Orkem v. Commission49 , the Court held that undertakings under investigation have a duty to cooperate actively with the Commission and to supply the information requested or required under Article 11 Regulation 17/62.50 This duty, however, does not extend to an admission on the part of the undertaking that an infringement of Articles 81 or 82 EC has taken place.51 In Hoescht v. Commission52 the Court clarified some important issues concerning Article 14. The Commission suspected the existence of price fixing practices between producers and suppliers of PVC and polyethylene and decided to investigate several Community undertakings. Upon arrival at the premises of Hoescht, representatives of the company refused entry to the Commission’s inspectors on the grounds that the investigation was an unlawful search. Two months later, and armed with a search warrant obtained by the Bundeskartellamt, the Commission inspectors gained access to the premises of the company and carried out the investigation.
46
47
48
49 50
51 52
But if the undertakings agree to submit to the investigation and then refuse to show the documents requested or show them in an incomplete form, the Commission may impose fines. The companies may not, therefore, argue that they could have refused to submit to the investigation altogether and would not have been fined for it. (See Fédération Nationale de l’Industrie de la Chaussure de France, supra n. 45, at paragraph 7 of the decision). See Case 136/79, supra n. 42, at paragraph 11 of the judgment. The Court reached this conclusion by comparing the wording of Articles 11 and 14 of Regulation 17/62. The Court interpreted this provision in DGDC v. Asociación Española de Banca Privada (Case C-67/91 [1992] ECR I-4875) as meaning that authorities lawfully in possession of information should be unable to use it for a reason other than that for which it was obtained (at paragraph 42 of the judgment). Case 374/87, supra n. 40. This duty of cooperation applies in the context of both informal and mandatory requests for information (see Case T-46/92 The Scottish Football Association v. Commission [1994] ECR II-1039). Ibid., at paragraphs 27–35 of the judgment. Cases 46/87 and 227/88 [1989] ECR 2859, [1991] 4 CMLR 410.
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The Court, drawing on its case law, stressed that Community institutions are bound in their activities to respect fundamental human rights. In the framework of the Commission’s investigations under Article 14, it therefore seemed particularly important to safeguard the rights of the defence.53 First, the Court acknowledged that the right to inviolability of the domicile existed with reference to private dwellings but not to business premises.54 Secondly, the Court emphasised that the Commission is under an obligation to specify the subject-matter and purpose of an investigation. This obligation serves the dual purpose of justifying the investigation and of protecting the rights of the undertaking under investigation.55 Thirdly, the Court made it clear that the Commission’s inspectors do not have the power of forcible entry onto company premises. Should the representatives of the company refuse entry to the inspectors, then the national authorities have an obligation to assist the Commission in carrying out the investigation56 and the Commission has an obligation to respect national procedural guarantees.57 The ruling of the Court in Hoescht reflects a judicious balance between the protection of the firms under investigation and the need to guarantee the effectiveness of the Commission’s investigation. Other decisions of the Court have further illustrated this balancing exercise, as in AM & S v. Commission,58 where the Court recognised the privileged nature of the correspondence between independent lawyers and undertakings.59 Phase three: The statement of objections Following the fact-finding phase of the proceedings, the Commission may produce a statement of objections. Article 3 of Regulation 2842/98 on hearings60 provides that the Commission is under an obligation to inform the parties of objections raised against them and to set a date by which the latter may submit observations.61 The statement of objections, therefore, 53 54 55 56
57 58 59
60 61
Ibid., at paragraphs 13–15 of the judgment. Ibid., at paragraphs 17–18 of the judgment. Ibid., at paragraph 29 of the judgment. The Court also hinted in the judgment that the cooperation of the national authorities may be requested ex ante by the Commission’s team, if it is feared that the undertaking will oppose the investigation (see paragraph 32 of the judgment). Ibid., at paragraphs 31–4 of the judgment. Case 155/79 [1982] ECR 1575, [1982] 2 CMLR 264. Ibid., at paragraphs 20–4 of the judgment. The Court explained that legal professional privilege only applied to communications with independent lawyers: first, because they act in ‘full independence and in the overriding interests of the administration of justice’, and second, because they are subject to rules of professional ethics and discipline (see paragraph 24 of the judgment). See also the Opinion of A.G. Slynn, who surveyed the protection of legal confidence in the national legal systems. See supra n. 28. See Article 3(1) and (4) of Regulation 2842/98, supra n. 28.
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lays down the prima facie case of the Commission against the undertakings concerned. The formal requirements and purpose of the statement of objections have been set out in the case law. Thus it must set out clearly all the essential facts upon which the Commission relies and its evaluation of these facts,62 and its aim is to safeguard the rights of the defence.63 As the Court explained in Woodpulp (II),64 the function of the statement of objections is to give the undertakings ‘all the information necessary to enable them properly to defend themselves before the Commission adopts a final decision’.65 One of the most controversial issues in this area is the extent to which undertakings concerned have the right of access to the Commission’s file. The position of undertakings under investigation and that of third parties will be considered in turn. Access to the file seems essential to enable the addressees of the statement of objections to examine the Commission’s evidence and hence to prepare their defence effectively.66 In Consten and Grundig,67 the Court acknowledged that, while the parties concerned must be informed of the facts upon which the Commission’s complaints are based, it is not necessary that the entire file should be communicated to them.68 Which documents can the Commission refuse to disclose? In Hercules v. Commission,69 the Court of First Instance stated70 that the Commission should make available to the undertakings all documents except internal Commission documents, those containing business secrets and those containing confidential information.71 These criteria were developed further in the 1997 Commission Notice on access to the File72 which, 62
63
64 65
66
67 68 69 70
71
72
Case C-62/86 AKZO v. Commission [1991] ECR I-3359, [1993] 5 CMLR 215, at paragraph 29 of the judgment; Cases 100–103/80 Musique Diffusion Française v. Commission [1983] ECR 1825, [1983] 3 CMLR 221, at paragraph 14. As the Court of First Instance emphasised in BPB Eendracht v. Commission (Case T-311/94 [1998] ECR II-1129), the statement of objections must be framed in terms that are sufficiently clear to enable the applicant properly to identify the objections of the Commission (see paragraph 56 of the judgment). Case 60/81 IBM v. Commission [1981] ECR 2639, [1981] 3 CMLR 635, at paragraphs 14 and 15 of the judgment. Joined Cases C-89/85, etc. [1993] ECR I-1307, [1993] 4 CMLR 407. Ibid., at paragraph 42 of the judgment. See also Case T-311/94 BPB de Eendracht v. Commission, supra n. 62. See Cases T-10–12/92 and T-15/92 Cimenteries v. Commission [1992] ECR II-2667, [1992] 4 CMLR 259. Cases 56, 58/64 [1966] ECR 299, [1966] CMLR 418. Ibid., at p. 338. Case T-7/89 [1991] ECR II-1711, [1992] 4 CMLR 84. The judgment followed the criteria set out in the XXIInd Report on Competition Policy (1992) at points 34 to 35 of the Report. Ibid., at paragraph 54 of the judgment. See also Article 13(1) of Regulation 2842/98 on hearings (see supra n. 28). OJ [1997] C 25/3.
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drawing on the case law, explained the rationale behind the noncommunication of these documents. For example, internal Commission documents are not disclosed in order to protect the secrecy of the Commission’s deliberations and to allow Commission departments to express themselves freely.73 In the case of business secrets and documents for which confidentiality has been requested, the aim is both to prevent the parties from obtaining strategic information on the operation of the business of their competitors74 and to protect the legitimate interests of natural and legal persons.75 The Notice also reflected the landmark judgments of the Court of First Instance in the Soda Ash cases,76 where the Court laid down the principle of ‘equality of arms’, according to which the undertakings concerned must have the same knowledge of the file as the Commission.77 This is particularly relevant in the case of documents that could either exonerate the undertakings or prove the existence of the infringement. The Court made it clear that it is not for the Commission alone to decide which documents will be useful for the undertakings’ defence and that the Commission must allow the undertakings to examine relevant documents so that their probative value for the defence can be assessed. This has two important implications. First, the Commission will not be able to claim that the documents are confidential as a basis for its refusal to disclose them.78 Second, the Court may annul the Commission’s final decision if it finds that the non-disclosed document would have been useful in the defence of the interested parties.79
73 74 75
76
77 78 79
See the Notice at I.A.3. Ibid., at I.A.1. Ibid., at I.A.2. See also the Adams case (Case 145/83, [1985] ECR 3539, [1986] 2 CMLR 506). Mr Adams, a fomer employee of Hoffmann-La Roche, wrote to the Commission informing it of a number of anti-competitive practices carried out by the company. He asked the Commission to keep his identity confidential. The legal advisers to Roche were able to glean from certain Commission documents that Mr Adams was the informant and the latter suffered terrible consequences as a result (see infra section 4.2.3). Case T-30/91, Solvay v. Commission [1995] ECR II-1775, [1996] 5 CMLR 57, and Case T-36/ 91 ICI v. Commission [1995] ECR II-1847. Ibid., at paragraphs 81–3 of the judgment. See Notice at I.A.2. In the Soda Ash judgments, the Court annulled the Commission decisions on the ground that the Commission refused to disclose documents that might have been of use in the defence of the concerned parties. See also the recent judgment of the Court of First instance in Cimenteries (Joined Cases T-25/95 [2000] 5 CMLR 204, at paragraph 247 of the judgment), where the Court has set out a low-threshold test for the annulment of a Commission decision on grounds of non-disclosure of a document. The Court held that if the document would have had ‘even a very small chance of altering the outcome of the administrative procedure if the applicant had been able to rely on it during the procedure [emphasis added]’, then the Commission’s final decision could be annulled on the grounds that the rights of the defence were infringed.
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What is the position in relation to third parties, such as complainants? The judgment in AKZO80 and the Notice on access to file81 make it clear that the Commission has an obligation to respect the confidentiality of certain documents, such as those containing business secrets of the firms under investigation. As a result, a third party cannot have unrestricted access to the Commission’s file, as otherwise firms could complain just to gain access to their competitors’ business secrets.82 In the AKZO case, the Commission disclosed to ECS, one of AKZO’s competitors and the complainant in the case, several documents that AKZO had asked to be kept confidential. The Court took the view that the Commission is under an obligation to state in a decision whether or not it intends to disclose such documents to third parties. The undertakings concerned should then, and before the decision is implemented, have the opportunity to seek judicial review of the decision before the Court of First Instance.83 In AKZO, the Commission had simultaneously notified AKZO of its intention to disclose the documents and shown these to ECS without giving AKZO the opportunity to challenge the notification. The Court declared the notification to be null and void.84 Phase four: The reply and the oral hearing Article 19 of Regulation 17/62 identifies the parties who have a right to be heard before the Commission takes a final decision on the case. That provision draws a distinction between parties that must be heard and parties that may be heard. The undertakings concerned have an automatic right to be heard.85 In ANCIDES v. Commission86 the Court made it clear that the expression ‘undertakings concerned’ referred to those ‘whose agreements or conduct are the subject of an enquiry’87 – in other words, the addressees of the statement of objections. Moreover, third parties that show a ‘sufficient interest’ and apply to be heard88 must also be heard.89 Other natural or legal persons may be heard if the Commission or the competent authorities of the Member States consider it necessary. The right to be heard is developed in Regulation 2842/98 on hearings.90 The 80 81 82 83 84 85 86 87 88
89 90
Case 53/85 [1986] ECR 1965. See the Notice at II.D.1 Ibid., at paragraph 28 of the judgment. Ibid., at paragraph 29 of the judgment. Ibid., at paragraphs 30-1 of the judgment. See Article 19(1) of Regulation 17/62. Case 43/85 [1987] ECR 3131, [1988] 4 CMLR 821. Ibid., at paragraph 7 of the judgment. It follows from ANCIDES v. Commission (Case 43/85, supra n. 86) that, if such legal persons do not apply to be heard, then the Commission does not have an obligation to grant them the right to be heard (ibid., at paragraph 8 of the judgment). See Article 19(2) of Regulation 17/62. See supra n. 28. Thus Chapters II, III and IV of Regulation 2842/98 deal respectively with
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Regulation makes it clear that observations are to be principally submitted in writing but that an oral hearing may also take place.91 If the undertakings concerned request an oral hearing, the Commission is under an obligation to provide one.92 If third parties, whether showing a sufficient interest or not, request an oral hearing, the Commission may, where appropriate, afford them one.93 The hearings are conducted by a Hearing Officer.94 This right to be heard reflects a general principle of law found in all the national legal systems: audi alteram parte.95 This provides that ‘a person whose interests are perceptibly affected by a decision taken by a public authority must be given the opportunity to make his point of view known’.96 In Transocean Marine Paint v. Commission,97 the Court annulled a provision in a Commission decision that attached a condition to the renewal of an exemption enjoyed by the members of the Transocean Marine Paint Association, in respect of which they did not have an opportunity to make their views known. The Court recognised that the Commission has a wide discretion in deciding the conditions under which an Article 81(3) EC exemption can be enjoyed, but the Commission had to respect the right of the undertakings concerned to submit observations before it reached a final decision. Failure to observe this condition would result in the annulment of the relevant part of the Commission’s decision due to breach of an essential procedural requirement.98
Phase five: Decisions of the Commission There are two main types of decision the Commission may adopt: procedural decisions and final decisions. The first are taken in the course of the investigation and the second are taken at the end of it and may be further subdivided into two main groups, informal and formal. They will be considered in turn. Procedural decisions The most important kinds of procedural decision are: (a) those taken under Article 15(6) of Regulation 17/62 to remove temporary immunity
91 92 93 94 95 96
97 98
the right to be heard of undertakings concerned, applicants and complainants and other third parties. See Articles 4, 5, 8 and 9 of Regulation 2842/98. See Article 5 of Regulation 2842/98. See Articles 8 and 9(3) of Regulation 2842/98. For regulation of the conduct of oral hearings, see Articles 10–14 of Regulation 2842/98. This is also recognised the 11th Recital to the Preamble to Regulation 17/62. See Transocean Marine Paint v. Commission (Case 17/74 [1974] ECR 1063, [1974] 2 CMLR 459). Ibid. Ibid., at paragraphs 16–22 of the judgment.
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from fines;99 (b) those under Article 11(5) or Article 14(3) of Regulation 17/62 requiring information to be supplied or ordering an investigation;100 and (c) interim measures. The power of the Commission to grant interim relief was not expressly provided for in Regulation 17/62, but was recognised by the European Court in its landmark decision in Camera Care v. Commission.101 In that case, Camera Care, a company that repaired, hired and sold professional equipment, argued that Hasselblad, one of its suppliers, was in breach of Articles 81 and 82 EC, and asked the Commission to open an investigation against the latter. Furthermore, it asked the Commission to grant interim relief. The Commission agreed to open the investigation but refused to grant interim relief on the grounds that Regulation 17/62 did not confer upon it the power to do so. The Court, however, took the view that, subject to certain conditions, the Commission should be able to grant interim relief. The Court set out its legal reasoning as follows. First, it emphasised how appropriate and necessary it was for the Commission to be able to grant interim relief. It explained that the interests of private parties, of the Member States and of the Community’s competition policy had to be protected from serious and irreparable damage while the Commission’s investigation was taking place.102 It then turned to Regulation 17/62 and found that, since Article 3 enabled the Commission to compel undertakings to bring an infringement of Articles 81 or 82 EC to an end, the Commission should also have the power to take protective measures beforehand. Otherwise the power to make decisions under Article 3 could become ‘ineffectual or even illusory because of the action of certain undertakings’.103 Finally, it attached certain conditions to the grant of interim relief: … [I]t is essential that interim measures be taken only in cases proved to be urgent in order to avoid a situation likely to cause serious and irreparable damage to the party seeking their adoption, or which is intolerable to the public interest. A further requirement is that these measures be of a temporary and conservatory nature and restricted to what is required in the given situation [emphasis added].104
99 100 101 102 103
104
See supra n. 16. See supra n. 42 and supra n. 45–47 and accompanying text. Case 792/79R [1980] ECR 119, [1980] 1 CMLR 334. Ibid., at paragraph 14 of the judgment. Ibid., at paragraph 18 of the judgment. Later in the judgment, the Court also alluded to the Order of the President of the Court in National Carbonising Company (Case 109/75R [1975] ECR 1193), a case under the ECSC Treaty, where it was recognised that Community institutions that receive complaints or take decisions with regard to infringements should be able to adopt any necessary interim measures. Ibid., at paragraph 19 of the judgment.
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The Court explained in subsequent decisions the further condition is that there should be a prima facie case of infringement of the competition rules.105 This does not mean, however, that the Commission should be persuaded that there is a clear and flagrant infringement, but that it should conduct a preliminary assessment and conclude that, in principle, it is likely that Articles 81 and 82 EC might have been breached.106 The Commission has acted cautiously in this field and there have been few cases where it has granted interim relief, but the judgment in Camera Care is a welcome example of teleological reasoning that filled the gap left by Regulation 17/62. The 2000 Draft Regulation implementing Articles 81 and 82 EC now lays down the Camera Care principles in legislative form.107 Final decisions: informal The commonest example of informal decisions are the so-called ‘comfort letters’. As defined by the Court in the Perfume cases,108 these are administrative letters informing the undertakings concerned of the Commission’s opinion that there is no breach of Articles 81 or 82 EC and of its intention of closing the file. Comfort letters are widely used by the Commission, whereas few formal decisions are issued each year. But what is the legal status of comfort letters? Do they bind the national courts? These issues were considered by the Court in the Perfume cases, where the Commission had issued comfort letters with reference to certain selective distribution agreements that subsequently came before the national courts. A reference was made to the Court, which held that ‘comfort letters’ were mere administrative decisions and did not prevent the national courts from reaching a different conclusion about whether or not an agreement was in breach of Article 81 EC. The Court, however, stated that although comfort letters did not bind the national courts, they should be taken into account by the national courts when deciding whether or not there has been a breach of Article 81 EC.109 It is also clear from the case law that, by sending a ‘comfort letter’, the Commission is not prevented from reopening the file following a complaint by from a third party.110 105
106 107 108
109
110
Case T-44/90 La Cinq v. Commission [1994] ECR II-1, [1992] 4 CMLR 449, at paragraph 28 of the judgment. Ibid., at paragraph 61 of the judgment. See Article 8 of the Draft Regulation on enforcement (see supra n. 5) and infra section 4.4.3. Case 37/79 Anne Marty v. Estée Lauder [1980] ECR 2481, [1981] 2 CMLR 143; Case 99/79 Lancôme v. Etos [1980] ECR 2511, [1981] 2 CMLR 164; and Case 31/80 L’Oréal v. De Nieuwe [1980] ECR 3775, [1981] 2 CMLR 235. See Case 31/80 L’Oréal v. De Nieuwe, supra n. 108, at paragraphs 9–11 of the judgment. See, more recently, the Court’s decision in Koelman v. Commission (Case C-59/96P [1997] ECR I-4812). See the Court of First Instance judgments in the Ice-cream cases (Cases T-7/93 and T-9/93 [1995] ECR II-1533, [1995] 5 CMLR 602, at paragraphs 38 and 41 of the judgment (T-7/93) and 112 and 115 (T-9/93).
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The Commission may end the procedure informally by asking the undertakings concerned to modify their agreements, as in BAT and Reynolds v. Commission.111 In that case, the Commission issued a statement of objections with reference to a sale agreement between Philip Morris and Rembrandt, but suggested certain amendments to remove its anticompetitive features. Following the adoption of these amendments by the companies, the Commission closed the file. The procedure may also end by means of an informal settlement. For example, in 1980 the Commission initiated an investigation against the activities of IBM, the world’s largest computer manufacturer at the time, and produced a statement of objections finding the company to be in breach of Article 82 EC. In 1984, however, the Commission accepted an undertaking from IBM to modify its business practices and suspended the investigation before a final decision was taken.112 Final decisions: formal There are three types of formal decision that can be adopted by the Commission at the end of its investigation: (a) decisions finding an infringement of the competition rules; (b) negative clearance; or (c) decisions granting individual exemption. Since there is no possibility of exemption from the prohibition in Article 82 EC, the last type of formal decision is only pertinent in the context of Article 81 EC proceedings. Decisions finding an infringement. Article 3 of Regulation 17/62 expressly provides that where the Commission finds that there has been a breach of Articles 81 or 82 EC, it ‘may by decision require the undertakings or associations of undertakings concerned to bring such infringement to an end’. It is therefore clear that the Commission can issue ‘cease and desist orders’, and plenty of examples can be found in the case law, in the context both of Article 81 and Article 82 EC.113 Two issues, however, need to be considered. First, can the Commission prevent undertakings from entering into similar arrangements in the future? The decisions of the Commission and the approach of the Court seem to differ on this point. In the Dutch building cartel decision,114 the Commission took the view that Article 3 of Regulation 17 enabled it, even if the undertakings had already 111 112
113
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Cases 142/84 and 156/84, supra n. 20. See XIVth Report on Competition Policy (1984), at paragraphs 94 and 95. IBM’s undertaking was closely monitored by the Commission in subsequent years (see XXIst Report on Competition Policy (1991) at paragraph 106). See, for example, the Commission Decision in GEMA (Decision 71/224/EC, OJ [1971] L 134/15, [1971] CMLR D35), in which the Commission ordered the German music performing rights society to put an end to their abusive practices. In the context of Article 81 EC, see the decision of the Court in Automec (II) (Case T-24/90, supra n. 23, at paragraph 52 of the judgment). Decision 92/204, OJ [1992] L 92/1, [1993] 5 CMLR 135, at paragraph 133 of the decision.
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put an end to an infringement, to order the cartel to refrain from any similar practices in the future. For the Commission, this reading of Article 3 was justified, not only for the purpose of imposing fines on undertakings, but also for the protection of public interest. In the Ice-cream cases,115 however, the Court of First Instance took a different view. In these cases, the Commission ordered the parties to refrain from concluding exclusive purchasing agreements in the future. The parties argued that Article 3 of Regulation 17/62 only empowered the Commission to prohibit existing agreements, but not those that might be concluded in the future. In particular, they argued that it would infringe the principle of nondiscrimination, as their competitors could continue to conclude exclusive agreements which might either not be covered by Article 81(1) or might fall within the scope of the relevant block exemption regulation.116 The Court of First Instance upheld these arguments and annulled the relevant provision in the Commission’s Decision.117 The second contentious issue is whether the Commission may order the parties to take some specific course of action to bring the infringement to an end. Here, it seems that a different philosophy applies to cases under Article 81 EC and those under Article 82 EC. In Commercial Solvents v. Commission118 the Commission had found Commercial Solvents in breach of Article 82 EC and had ordered the company to supply Zoja with certain quantities of aminobutanol, the substance that it had previously refused to supply. The Court took the view that Article 3 of Regulation 17/62 gave the Commission the power to order the undertakings ‘to do certain acts or provide certain advantages which have been wrongfully withheld as well as prohibiting the continuation of certain practices or situations which are contrary to the Treaty’.119 It therefore upheld the Commission’s decision ordering Commercial Solvents to supply Zoja with aminobutanol. Similarly, in RTE v. Commission,120 another case concerning a refusal to supply, the Court upheld the Commission’s decision ordering the television companies to supply the relevant information to Magill, as this was, in the words of the Court, ‘the only way of bringing the infringement to an end’.121
115 116
117
118
119 120
121
See cases T-7/93 and T-9/93, supra n. 110. See case T-7/93, at paragraphs 198–200 of the judgment, and Case T-9/93, at paragraphs 158–64 of the judgment. The European Court confirmed, on appeal, the decisions of the Court of First Instance (see Case C-279/95P [1998] ECR I-5609, [1998] 5 CMLR 933). Cases 6–7/73 [1974] ECR 223, [1974] CMLR 309. For a description of the facts, see supra Chapter 3, section 3.2.2 Ibid., at paragraph 45 of the judgment. See Joined Cases C 241–242/91P (the Magill cases) [1995] ECR I-797, [1995] 4 CMLR 718 (for a description of the facts, see supra Chapter 3, section 3.2.2). Ibid., at paragraph 91 of the judgment.
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In Automec (II),122 a case under Article 81 EC, the Court adopted what might seem, at first sight, an inconsistent approach. Automec complained to the Commission that it had been excluded from BMW’s distribution system. It argued that BMW’s action was contrary to Article 81(1) EC and applied for an injunction compelling BMW to resume supplies. The Court held that, although the Commission had the power to bring the infringement to an end, the Commission was not empowered to adopt the specific injunction requested. The Court based its reasoning on a literal reading of Article 81 EC. It explained that Article 81(2) EC only provides for one express consequence of the breach of the prohibition in Article 81(1) EC, namely the nullity of the agreement or concerted practice. It therefore concluded that any other consequence, such as the obligation to make good damage caused to a third party or to fulfil an obligation to contract, must be determined by national law.123 It then alluded to the principle of freedom to contract and explained that, when there are several possible ways to end an infringement, it is not for the Commission ‘to impose on the parties its own choice among the different potential courses of action which all conform to the Treaty’. 124 What is the rationale behind the different treatment of Article 81 and 82 EC cases? In Automec (II), the Commission had argued that it stems from the different logic underlining these two provisions. On the one hand, Article 82 EC refers to any unilateral anti-competitive behaviour and can encompass a wide range of deliberate acts or omissions by a dominant company. The powers of the Commission under Article 3 can therefore extend to issuing orders either to perform certain acts that were unlawfully not done or to refrain from practices contrary to Article 82 EC. On the other hand, Article 81(1) specifically prohibits anti-competitive agreements and the only step that the Commission may take is to discontinue the validity of the agreement or provision in question.125 The Court, in its judgment, did not compare its approach in both types of case but reached a similar conclusion using a literal interpretation of Article 81 EC, discussed above. It would appear that the wider approach adopted by the Court in Article 82 EC cases is a direct consequence of the less restrictive terms in which Article 82 EC is framed. Thus Article 82 EC prohibits any abuse of dominant position and does not outline any specific consequences that flow from the infringement of that prohibition. Article 81 EC, however, prohibits anti-competitive agreements and concerted practices and lays down one specific sanction: the nullity of the agreement 122 123
124 125
Case T-24/90, supra n. 23. Ibid., at paragraph 50 of the judgment. See also the possible implications of the recent decision of the Court in Courage v. Crehan (Case C-453/99, Judgement of 20 September 2001, not yet reported). See infra section 4.3.1. Ibid., at paragraph 52 of the judgment. Ibid., at paragraphs 40–2 of the judgment, where the arguments put forward by the Commission during the proceedings are set out.
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or practice. This would seem to prevent the Commission from ordering action other than the termination of the agreement. Articles 15 and 16 in Regulation 17/62 empower the Commission to impose fines or periodic penalty payments on undertakings. Fines may be imposed on undertakings that have committed either substantive infringements, i.e. breach of Articles 81 and 82 EC, or procedural infringements, i.e. breach of the provisions in Regulation 17/62.126 Periodic penalty payments may be imposed on undertakings that continue to act in breach of the substantive or procedural competition provisions despite having been alerted that their behaviour is unlawful.127 Both these provisions outline clearly the circumstances in which a fine or periodic penalty payment may be imposed. However, in the case of the most severe fines, i.e. those imposed on account of substantive infringements, Article 15(2) does not specify clearly the criteria that the Commission should follow in its calculation, other than that the gravity of the infringement and its duration should be taken into account.128 The 1998 Guidelines on the method of setting fines imposed pursuant to Article 15(2)129 have substantially, but not completely, clarified the principles that should inform the fining policy of the Commission.130 Fines can be imposed both with reference to intentional and negligent infringements of EC competition law. This is set out in Article 15(1) of Regulation 17/62, but it has also been made clear by the Commission and the case law. In an early decision, Re Deutsche Philips,131 the company under investigation argued that it had erroneously maintained an export ban in its wholesale agreements. To prove its point, Deutsche Philips submitted to the Commission evidence, consisting of letters indicating that it had informed its wholesalers that exports to other Member States were not forbidden. The Commission, while accepting that the infringement was not deliberate, fined the undertaking because it had not exhibited the necessary degree of care by modifying its agreement.132 However, and despite the fact that export bans constitute a very
126 127 128
129 130
131 132
See Article 15 of Regulation 17/62. See Article 16 of Regulation 17/62. The case law has added other relevant factors, such as the size of the undertakings concerned, their long-term engagement in international and national trade, their involvement in antit-trust infringement suits brought against them in other jurisdictions, etc. (Case 27/76 United Brands v. Commission [1978] ECR 207, [1978] 1 CMLR 429, at paragraphs 298–301 of the judgment). OJ [1998] C 9/3. See W. P. J. Wills, ‘The Commission’s new method for calculating fines in antitrust cases’ [1998] 23 ELRev 252. Decision 73/332, OJ [1973] L 293/40, [1973] CMLR D241. Ibid., at paragraphs 14–18 of the decision.
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grave infringement of Article 81(1) EC, the Commission imposed a less severe fine than it would have done had the infringement been intentional.133 Negative clearances. Article 2 of Regulation 17/62 provides that the Commission may adopt a decision stating that there has been no breach of Article 81 or 82 EC and that there are, therefore, no grounds for action on its part. Decisions granting an exemption. This possibility is provided in Article 8 of Regulation 17/62. Under this provision, a decision granting an exemption is granted ‘for a specified period of time and conditions and obligations may be attached thereto’.134 Furthermore, an exemption may be renewed, provided the conditions in Article 81(3) EC continue to be satisfied.135 The Commission may also revoke or amend its decision granting an exemption in four cases listed in Article 8(3) of Regulation 17/62: (a) where there has been a change in any of the basic facts that led to the decision; (b) where the parties breach a condition or obligation attached to the exemption; (c) where the decision is based on incorrect information; and (d) where the parties abuse the exemption. As the Court of Justice has emphasised, the effect of a decision granting an exemption is to give the addressees the right to rely on it against third parties that claim the agreement is null and void.136 Formal requirements. Formal decisions need to satisfy certain requirements and failure to do so could result in the annulment of those decisions on grounds of infringement of an essential procedural requirement.137
133 134 135
136 137
Ibid., at paragraph 19 of the decision. See Article 8(1) of Regulation 17/62. See Article 8(2) of Regulation 17/62. In Eurotunnel (Decision 94/894, OJ [1994] L 354/66, [1995] 4 CMLR 801), the Commission renewed in 1994 an exemption granted in 1988 to a contract governing the use of the Channel tunnel concluded between British Railways and SNCF. In 1988, the exemption was gained by acquiescence under Article 12(3) of Regulation 1017/68 (OJ Sp. Ed. [1968] 302), applying rules of competition to transport by rail, road and inland waterway. Under Article 12(3) of that Regulation, if following the publication of a summary of the application for exemption in the Official Journal inviting interested parties to submit comments, the Commission does not notify the interested parties within 90 days that there are serious doubts about the granting of an exemption, the agreement will be deemed to be exempted for a maximum period of three years. In 1994, however, the Commission issued a decision renewing the exemption for a period of 30 years, provided that certain conditions were fulfilled (see Articles 1 and 2 of Decision 94/894). See Case 31/80, supra n. 108, at paragraph 23 of the judgment. Infringement of an essential procedural requirement is one of the four grounds for annulment set out in Article 230(1) EC.
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First, decisions, like any other binding Community act, need to state the reasons on which they are based.138 This means that the Commission has to set out the factual and legal considerations governing its decision. The Commission is not under an obligation, however, to discuss all the points raised during the administrative proceedings.139 For example, in VBVB & VBBB v. Commission,140 an association of Dutch and Belgian book publishers challenged a decision of the Commission finding their agreement on resale price maintenance to be in breach of Article 81(1) EC and ineligible for exemption. The association had argued, inter alia, that a prohibition of the agreement would infringe their freedom of expression and Article 10b is of the Paris Convention on Industrial Property Rights. The association argued before the Court that the Commission did not consider these arguments and that, consequently, its decision should be annulled. The Court dismissed these claims and held that the Commission had sufficiently stated, in the operative part of its decision, all the legal and factual considerations that led to the prohibition of the agreement.141 Second, a formal decision of the Commission can only deal with points in respect of which the parties have been afforded the opportunity of making their views known, in other words can only deal with the points raised by the Commission in the statement of objections.142 In Woodpulp (II),143 the Court annulled a provision in the Commission’s decision because it referred to concertation between the parties on transaction prices whereas the statement of objections only referred to concertation on announced prices. The Commission had claimed that several references to concertation on transaction princes had been made in its statement of objections, but the Court took the view that the complaint about these prices had not been set out clearly. As a result, the undertakings concerned had not had an opportunity to defend themselves effectively and the relevant part of the Commission’s decision was annulled.144 Third, decisions must be effectively notified to the addressees and will only take effect upon notification.145 Notification has to be clear and unequivocal. The Court has held that a registered letter with postal acknowledgement of receipt is a suitable method of notification.146
138 139
140 141 142 143 144 145 146
See Article 253 EC. See VBVB & VBBB v. Commission (Cases 43/82 and 63/82 [1984] ECR 19, [1985] 1 CMLR 27), at paragraph 23 of the judgment. Cases 43/82 and 63/82, supra n. 139. Ibid., at paragraphs 22–3 of the judgment. See Article 2(1) of Regulation 2842/98, supra n. 28. Cases C-89/85, etc., supra n. 64. For a summary of the facts, see Chapter 2, section 2.2.1. Ibid., at paragraphs 40–54 of the judgment. See Article 254(3) EC. See Bayer v. Commission (Case C-195/91P [1994] ECR I-5619, [1996] 4 CMLR 31), at paragraph 21 of the judgment.
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4.2.2 Judicial review The Commission’s enforcement of competition policy is subject to the control of the Community judicature. In particular, there are two kinds of direct action in the EC Treaty that are used to review different aspects of the Commission’s conduct in this field: the action for annulment and the action for a failure to act. These actions are closely related and, in fact, represent two dimensions of the same remedy. While the action for annulment is used to review the legality of Community acts, the action for a failure to act is used to control illegal omissions of Community institutions, i.e. cases where they had an obligation to act and failed to do so. These two actions guarantee that both illegal acts and omissions are subject to judicial control. They are set out in Articles 230 and 232 EC, respectively. In addition to these two actions, the action to review penalties set out in Article 229 EC provides that Council regulations may confer on the European Court unlimited jurisdiction with regard to penalties provided therein. Article 17 of Regulation 17/62 bestows this jurisdiction on the Community judicature, which accordingly may cancel, reduce or increase a fine or penalty payment imposed by a Commission decision. Furthermore, Articles 242 and 243 EC enable the Community judicature to grant interim relief in connection with any of the direct actions mentioned above.147 In respect of the division of jurisdiction between the European Court and the Court of First Instance, all these actions, when brought by private parties, come before the Court of First Instance. An appeal on points of law against decisions of the Court of First Instance can be brought before the European Court. Actions brought by other parties come before the European Court.148 The action for annulment and the action for a failure to act will now be considered in detail. The action for annulment This action occupies a central position in the system of judicial review provided in the Treaty. Four aspects of Article 230 EC proceedings need to be considered: (a) what acts can be challenged; (b) who can bring an action; 147
148
See the Order of the President of the Court of First Instance in Bayer v. Commission (Case T-41/96R [1996] ECR II-381, [1996] 5 CMLR 290), which granted negative interim relief, i.e. suspension of a Commission decision. The Order illustrates clearly the issues that are examined by the Court before an interim stay could be granted (prima facie case, urgency, threat of irreparable damage and conservatory nature of the measures adopted). See Article 225 EC and Article 3 of Decision 88/591, OJ [1988] L 319/1 and Decision 93/ 350, OJ [1993] L 144/21. See also the reforms proposed by the Treaty of Nice (signed on 26 February 2001) to the judicial architecture of the European Union.
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(c) the suitable grounds for review; and (d) the time limit within which proceedings can be brought. These will be considered in turn. Acts that can be challenged Article 230(1) EC makes it clear that only legally binding acts are reviewable. In principle, this would cover regulations, directives and decisions enacted by Community institutions, because these are the three kinds of legally binding act provided in Article 249 EC. In competition proceedings, and given the pivotal enforcement role played by the Commission, most actions for annulment are brought against Commission decisions. The Commission, however, may also act in this area by means of acts that are not specifically termed decisions. Are these to be reviewable? This is an important question and competition cases have provided the guidelines that apply to other areas of EC law. In its landmark decision in Cimenteries v. Commission,149 the Court held that a letter in which the Commission informed a group of cement-makers of the withdrawal of their temporary immunity from fines150 was a decision in substance, given that it produced legal effects on the addressees.151 It was therefore reviewable, even if the word ‘decision’ was not mentioned in the letter. Later case law has confirmed this non-formalistic approach and has emphasised that an act will be reviewable if it produces legal effects, regardless of the form and title given to it. The decision of the Court in IBM v. Commission152 illustrates this approach. In that case, IBM tried to challenge before the Court the Commission’s statement of objections. The Court confirmed that any measure that brought about a distinct change in the legal position of the applicants might be subject to an Article 230 EC action. The form in which a measure was cast was immaterial.153 The Court held that the statement of objections did not produce such legal effects because it was only a procedural measure that did not lay down definitely the position of the Commission, but paved the way for the one that did so.154 This, however, must not be understood as meaning that only 149 150 151
152 153 154
Joined Cases 8-11/66 [1967] ECR 75, [1967] CMLR 77. See Articles 15(5) and 15(6) of Regulation 17/62. In Prodifarma v. Commission (Case T-3/90 [1991] ECR II-1), the Court of First Instance emphasised that a decision to withdraw immunity produces two main legal effects for the parties to the agreement: it lays them open to fines if they continue to implement the agreement and it excludes the undertakings’ good faith in respect of the compatibility of their agreement with Article 81 EC. In other words, if the parties continue to implement their agreement, they do so at their own risk. Case 60/81 [1981] ECR 2639, [1981] 3 CMLR 635. Ibid., at paragraph 9 of the judgment. Ibid., at paragraphs 13–21 of the judgment. As seen above, supra section 4.2.1 (Phase three), the statement of objections only sets out the prima facie case of the Commission and it has the function of allowing the undertakings concerned to prepare their defence
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the final decision is reviewable. Measures adopted under Article 15(6) of Regulation 17/62 are reviewable,155 and so are measures whereby the Commission notifies the applicants of its intention to disclose confidential information,156 and decisions requiring information157 or ordering an investigation158 and those definitively rejecting a complaint.159 Furthermore, final decisions, such as negative clearances, are only reviewable by third parties and not by the addressees of the decision, as the Court of First Instance held in the Dutch banks case.160 The reasoning behind this approach is that negative clearances give satisfaction to the addressees and do not alter their legal position.161 One interesting issue is whether comfort letters are reviewable. Undoubtedly, these may produce legal effects; therefore they should be reviewable. The case law, however, has not settled this point. In the Perfume cases,162 the Court took the view that these were merely administrative decisions, and therefore not binding on the national courts, but it emphasised, at the same time, that they produced legal effects. In Air France v. Commission,163 the Court of First Instance made a passing reference to the Perfume cases and explained that comfort letters cannot ‘form the subject matter of an action for annulment’, which would indicate that they are not reviewable. The question of whether comfort letters are reviewable, therefore, remains open. Who can bring annulment proceedings? Under Article 230 EC, there are three categories of applicant that may bring annulment proceedings: privileged, semi-privileged and nonprivileged. Privileged applicants have automatic standing to bring an action for annulment. These are the Council, the Commission and the Member States.164 Semi-privileged applicants are the European Parliament, the Court of Auditors and the European Central Bank, who can only bring annulment proceedings when their prerogatives are at
155 156 157 158 159
160 161 162 163 164
effectively. Only the final decision of the Commission has the effect of definitely finding an infringement, exempting an agreement or granting negative clearance. See Cimenteries (Joined Cases 8–11/66, supra n. 149). See AKZO v. Commission (Case 53/85, supra n. 80, and supra section 4.2.1, Phase three). See Article 11(5) of Regulation 17/62. See Article 14(3) of Regulation 17/62. See Guerin (Case C-282/95P, supra n. 29, and supra section 4.2.1, Phase two). According to the principles governing the IBM case, a notification by the Commission under Article 6 of Regulation 2842/98 would be a provisional measure and therefore non-reviewable (see also Guerin). See Case T-138/89 [1992] ECR II-2195, [1993] 5 CMLR 435. Ibid., at paragraph 32 of the judgment. Cases 37/79, Case 99/79 and Case 31/80, supra n. 108. Case T-3/93 [1994] ECR II-121. Article 230(1) EC.
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stake.165 Finally, non-privileged applicants are natural and legal persons, who have to fulfil very stringent locus standi requirements, laid down in Article 230(4) EC. The position of non-privileged applicants needs to be considered in detail, as the overwhelming majority of competition cases concern applications submitted by natural or legal persons for the annulment of Commission decisions. Under Article 230(4) EC, a natural or legal person may challenge a Commission decision either if he/she is the addressee of the decision or, if the decision is addressed to a third party, he/she can show to be directly and individually concerned by it. The EC Treaty did not define when a private applicant would be individually and directly concerned, and it therefore fell to the European Court to interpret these two notions. In most areas of EC law, the standard test adopted to determine whether a private party is individually concerned is whether it belongs to a closed class: namely, a group of people that was fixed and ascertainable when the contested measures entered into force.166 Nonaddressees have been found to be directly concerned when the addressee of the measure has no discretion about how to implement it, or even if it has any discretion, it is clear from the circumstances how this discretion can be exercised.167 This double test is extremely difficult to satisfy. As a result, few actions for annulment have been declared admissible. Competition law is, however, one of the areas where the Community judicature has adopted a more flexible interpretation of the standing requirements in Article 230(4). Thus, in Metro (I),168 the Court held that complainants who triggered the Commission’s investigation would have standing to challenge the decision adopted by the Commission at the end of the procedure. The Court did not apply consecutively the standard tests of direct and individual concern, but took an overall approach169 based on the applicant showing a legitimate interest. In the same vein, the Court held in Metro (II)170 that an applicant who participated in the administrative proceedings, even though not in a complainant capacity, was also directly and individually concerned. This would be the case, for example, in 165
166
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Article 230(3) EC. The Treaty of Nice (2001) has given the European Parliament the status of privileged applicant. Case 25/62 Plaumann v. Commission [1963] ECR 95, [1964] CMLR 29; Cases 106–107/63 Toepfer v. Commision [1965] ECR 405, [1966] CMLR 111. Case 11/82 Piraiki-Patraiki [1985] ECR 207, [1985] 2 CMLR 4. Case 26/76 [1977] ECR 1875, [1978] 2 CMLR 1. In competition cases, the Court rarely considers separately the tests of direct and individual concern, but prefers to take an overall approach, focusing mainly on the test of individual concern. This seems to be a logical consequence of the fact that direct concern refers to the absence of discretion bestowed on the addressee of the Commission’s decision. In competition cases, the addressee is always a private party and therefore it is difficult to imagine a situation where it would have discretion about how to implement a Commissions decision. Case 75/84 [1986] ECR 3021, [1987] 1 CMLR 118.
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respect of an interested party who submitted observations under Article 19 of Regulation 17/62. Would an interested private party be individually concerned only if it had actually participated in the Commission’s procedure? In merger cases, the Court of First Instance began to relax the locus standi rules even more. This was achieved in two different ways. First, in Air France v. Commission,171 the Court indicated that an undertaking likely to suffer damage as a result of a Commission decision finding a merger between its competitors not to have a Community dimension would be individually concerned, regardless of its actual participation in the Commission’s proceedings. Second, in the Mineral water cases,172 the Court held that natural or legal persons who enjoy procedural rights under the EC Merger Regulation, i.e. the right to submit observations,173 would be individually concerned by that decision even if these rights have not been exercised in practice. A few months later, a similar approach was taken in Métropole v. Commission,174 an Article 81 EC case. The Court of First Instance held that a direct competitor of the addressee of an individual exemption was individually concerned because the decision could have a clearly damaging effect on its interests and because the applicant enjoyed procedural rights, i.e. the right to be heard under Article 19(3) of Regulation 17/62. Standing was granted irrespective of the fact that the applicant did not take part in the Commission’s procedure.175 The decision in Métropole, however, was distinguished in Kruidvat v. Commission.176 In this case, a parallel importer of luxury perfumes was sued before the national courts by one of Givenchy’s selective distributors in Belgium, on the basis that the sale of Givenchy products by a nonauthorised retailer was in breach of Belgian laws on unfair competition. Kruidvat argued that the selective distribution system operated by Givenchy was in breach of Article 81 EC. The selective distribution system had been notified to the Commission, which granted an exemption to the system under Article 81(3) EC. Kruidvat challenged the Commission’s decision. The European Court upheld the decision of the Court of First Instance and found that Kruidvat lacked standing. In particular, it emphasised that whereas in Métropole the applicant was a direct 171 172
173 174
175 176
Case T-3/93, [1994] ECR II-121. See Case T-96/92 Comité Central d’entreprise de la Société Générale des Grandes Sources and others v. Commission [1995] ECR II-1213 and Case T-12/93 Comité Central d’entreprise de la Société Anonyme Vittel and others v. Commission [1995] ECR II-1247. See Article 18 of Regulation 4064/89 (OJ [1990] L 257/13). Joined Cases T-528/93, T-542/93, T-543/93 and T-546/93 [1996] ECR II-649, [1996] 5 CMLR 386. Ibid., at paragraphs 59–65. See Case C-70/97P [1998] ECR I-7183, [1999] 5 CMLR 68 and the decision of the Court of First Instance in that case (Case T-87/92 [1996] ECR II-1931, [1997] 4 CMLR 1046).
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competitor, Kruidvat had never applied for admission to the Givenchy distribution network and ‘its situation could not be distinguished from that of numerous other economic operators in the parallel market’.177 It follows from the case law discussed above that natural or legal persons who are not the addressees of a Commission decision will have standing to bring an Article 230 EC action in two cases. The first case is if they have participated in the Commission’s procedure leading to the adoption of the contested decision. This is the most frequent scenario in competition cases, where interested parties do, as a rule, become involved in the Commission’s procedure. The second case arises even if they have not participated, provided that they (a) enjoy procedural rights i.e. they are interested parties, and (b) the decision has effects on them that are clearly distinguished from those it has on other parties generally affected by the decision. So far, the case law has only shown that a direct competitor would be in such a position.178 Grounds for review Article 230(1) EC lays down four possible grounds for the annulment of Community acts: lack of competence, infringement of an essential procedural requirement, infringement of the Treaty or of any rule relating to its application, and misuse of powers. Time limit Article 230(5) EC provides that there is a two-month time limit within which an action for annulment may be brought. The time limit runs from the date a decision has been published or notified to the addressee or, in the absence thereof, from the date on which the decision came to the applicant’s knowledge. The interplay between Article 230 EC and 234 EC proceedings In addition to the action for annulment, which is the direct avenue for the challenge of Community acts, Article 234 EC provides an indirect avenue for judicial review. The latter provision allows or obliges, as the case may be, the national court to make a reference to the European Court concerning the legality of a Community act which is at issue on national proceedings. In competition cases, the European Court has frequently suggested this avenue to parties who have been unable to show standing under Article 230(4) EC.179 The rule set out in TWD,180 however, applies: if an applicant clearly had standing to bring an Article 230 EC action (i.e. in competition cases, if it has participated in the Commission’s investigation) 177 178 179 180
Ibid., at paragraph 46 of the judgment. See Case C-70/97P, supra n. 176. See Case C-70/97P, supra n.176, at paragraph 49 of the judgment. Case C-188/92 [1994] ECR I-833.
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and failed to do so within the two-month time limit, it cannot then bring national proceedings and expect the national court to make a reference to the Court concerning the validity of the Commission’s decision. The action for a failure to act The action for a failure to act is available in cases where a Community institution has failed to act, in infringement of the Treaty. Its purpose is, therefore; to force an institution to act.181 There are three aspects of Article 232 EC proceedings that will be examined in turn: (a) the procedural requirements attached to the action for a failure to act; (b) who can bring an action; and (c) which omissions are reviewable. Procedural requirements Article 232(2) makes it clear that the Community institution in question – in competition cases, the Commission – needs to have been called upon to act before an action for a failure to act can be brought before the Community judicature. This is an essential procedural requirement, and failure to comply with it will determine the inadmissibility of the action. Only if the Commission has failed to define its position within two months of being called upon to act would an applicant be entitled to bring an action for a failure to act. Moreover, if, following such a call, the institution defines its position, then an action for a failure to act is no longer appropriate, even if it has already been brought before the Court. For example, in Asia Motor France v. Commission,182 the applicant, an importer of Japanese cars, complained to the Commission that an agreement concluded between five other importers of Japanese cars was contrary to Article 81 EC. As nothing was heard from the Commission, the applicant brought an action for a failure to act. A few months later, the Commission wrote to the applicant pursuant to Article 6 of Regulation 99/63183 to let it know that it intended to reject its complaint and invited it to submit observations. The Court held that the action for a failure to act had become devoid of purpose because the Commission had defined its position. In other words, once an act has been adopted, the action for a failure to act ceases to be relevant and annulment proceedings become the appropriate avenue of review. In this case, and although the Commission had enacted a decision finally
181
182
183
See the Opinion of the (then) Advocate General Edwards in Asia Motor France v. Commission (Case T-28/90 [1992] ECR II-2285, [1992] 5 CMLR 431). Case T-28/90, supra n. 181. See also GEMA v. Commission (Case 125/78 [1979] ECR 3173, [1980] 2 CMLR 177). Regulation 99/63 had now been replaced by Regulation 2842/98 on hearings. The corresponding provision of old Article 6 of Regulation 99/63, is Article 6 in the new Regulation (see supra section 4.2.1 (Phase one)).
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rejecting a complaint, the applicant brought an action for annulment against the decision provisionally rejecting the complaint. This meant that the action for annulment was also declared inadmissible because, according to the case law, such acts are not reviewable.184 Who can bring an action for a failure to act? The action for a failure to act is closely related to the action for annulment. Accordingly, this is reflected in the similar categorisation of potential applicants set out in Article 232 EC. Thus there are three kinds of applicants. First, the Member States and all three political institutions – the Council, the Commission and the Parliament – constitute the privileged applicants, i.e. those enjoying automatic standing. Second, the European Central Bank is the only semi-privileged applicant, in that it can only bring proceedings in areas ‘falling within its field of competence’. Thirdly, natural and legal persons constitute the category of nonprivileged applicants and have to satisfy very stringent locus standi conditions, as is the case under the action for annulment. Again, the question of standing of private parties is of crucial importance because most competition cases are brought from the private sector. The wording of Article 232(3) EC suggests that the standing requirements laid down by this provision are even more stringent than the corresponding ones in Article 230(4) EC. Thus, a private party can only bring an action if the Community institution in question has failed ‘to address to that person an act’. It would seem therefore that it does not cover a private party wishing to challenge the failure of an institution to adopt an act that, although would have been addressed to a third party, would have concerned it directly and individually. In the framework of competition law, the Court of First Instance certainly interpreted the provision in this light in Prodifarma v. Commission.185 It denied standing to a private party on the grounds that the decision the private party was asking the Commission to adopt would not have been addressed to it.186 The issue was not settled until the decisions of the Court in ENU v. Commission187 and T. Port,188 the first falling within the framework of the EURATOM Treaty,
184
185 186
187 188
A Commission decision provisionally rejecting a complaint is non-reviewable because it is an act that does not irrevocably define the position of the Commission, but is merely a preparatory step for the decision that does so (see supra section 4.2.1 (Phase one)). Case T-3/90, supra n. 156. Ibid., at paragraphs 35–7 of the judgment. Although the Court regarded the literal wording of Article 232 EC as a sufficient basis to dismiss the application as inadmissible, it went on to consider ad abundantiam whether the applicant would have been directly and individually concerned (see paragraphs 39–45 of the judgment). This could well indicate the first move towards harmonising the standing requirements in Articles 230 and 232 EC. Case C-107/91 [1993] ECR I-599. Case C-68/95 [1996] ECR I-6065, [1997] 1 CMLR 1.
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and the second, within the complex litigation concerning the common organisation of the market for bananas. In these cases, the Court finally made it clear that the requirements of standing should be identical in both actions. This is the logical consequence of the fact that both actions constitute aspects of the same remedy. Reviewable omissions The Commission cannot be subject to Article 232 EC proceedings, unless it has an obligation to act under the Treaty which it disregarded. The case law has made it clear that this action cannot be used to force the Commission to find the existence of an infringement. In GEMA v. Commission,189 the applicants submitted a complaint with the aim of obtaining a formal decision from the Commission, finding two companies in breach of the Treaty provisions on competition. The Commission wrote to the applicants announcing its provisional intention to reject the complaint and inviting them to submit observations. The applicants argued that the letter of the Commission was not a definition of position and brought an Article 232 EC action against the Commission which was declared to be inadmissible by the Court. The Court took the view that the Commission’s letter was a definition of position. Furthermore, it held that a complainant is not automatically entitled to obtain a final decision from the Commission on the existence or non-existence of an infringement. A different conclusion would be at variance with the letter of Article 3 of Regulation 17/62, which allows the Commission the opportunity of not adopting a final decision finding that an infringement has taken place.190
4.2.3 Damages against the Commission Articles 235 and 288(2) EC set out the general principle that Community institutions may be liable for damages that arise from their conduct. There have been few competition cases where natural or legal persons have brought actions for damages against the Commission. Moreover, these have rarely been successful, mainly on account of the rigorous conditions attached to these actions by the Community judicature. Thus, in Automec (I), the Court held:
189 190
Case 125/78, supra n. 182. Ibid., at paragraph 18 of the judgment. See also the letter of Article 3 of Regulation 17/62, which provides: ‘Where the Commission, upon application or upon its own initiative, finds that there is infringements of Article 85 [now 81] or Article 86 [now 82] of the Treaty, it may by decision require the undertakings or associations of undertakings concerned to bring such an infringement to an end [emphasis added]’.
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… an application seeking compensation for damage caused by a Community institution must state the evidence from which the conduct alleged against the institution can be identified, the reasons for which the applicant considers that there is a causal link between the conduct, the damage it claims to have suffered, and the nature and extent of that damage. 191
One of the rare cases where this action has been successful was the Adams case,192 discussed above.193 In that case, the Commission showed to Hoffmann-La Roche, the former employer of Mr Adams, documents which identified him as the Commission’s informant with reference to certain anti-competitive practices carried out by that company. A string of tragic events followed, including the arrest of Mr Adams by Swiss police. The Commission was found to be liable for damages for failing to make all reasonable efforts to keep the applicant’s identity confidential. Mr Adams, however, was only awarded half the damages he had claimed, as the Court took the view that he had contributed to the damage through his own negligent conduct. Consistent with other principles of Community law, if damages arise from a legally binding act, the applicant has to show that the act is illegal in addition to showing the existence of damage and a causal link between the illegal act and the damage suffered.194 Recent case law on damages has harmonised the conditions that apply to state liability for damages and those that apply to the non-contractual liability of the Community institutions.195 Thus in areas where a Community institution has considerable discretion, as would seem to be the case of the Commission in some aspects of competition investigation, mere illegality would not suffice: it would have to be shown that the breach of law is sufficiently serious.196 The decisive test is whether the institution concerned has gravely and manifestly disregarded the limits on its discretion,197 a standard which is, of course, very difficult to satisfy. If, however, the institution has reduced discretion or no discretion, a mere breach of EC law is automatically a sufficiently serious breach.198
191 192 193 194
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196 197 198
Case T-64/89 [1990] ECR II-367, [1991] 4 CMLR 177, at paragraph 73 of the judgment. Case 145/83 [1985] ECR 3539, [1986] CMLR 506. See supra n. 75. See Case C-87/89 Sonito v. Commission [1990] ECR I-1981, at paragraph 16 of the judgment. See Case C-352/98P Bergaderm v. Commission, [2000] ECR I-5291, and T. Tridimas, ‘Liability for breach of Community law: growing up or mellowing down?’, [2001] 38 CMLRev 301. Ibid., at paragraph 41 of the judgment. Ibid., at paragraphs 42 and 43 of the judgment. Ibid., at paragraph 44 of the judgment.
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4.3 Enforcement at national level: national courts and national authorities – the present system Articles 81 and 82 EC are also enforceable at national level by national courts and national authorities. The power of the national courts to apply these provisions is based on the direct effect of Articles 81(1), 81(2) and 82 EC. In BRT v. SABAM,199 the Court held that the prohibitions in Articles 81 and 82 EC produce direct effects and therefore create direct rights for individuals which the national courts must safeguard.200 The national courts continue to have jurisdiction to apply the provisions of Articles 81(1) and 82 EC even after the Commission has initiated an investigation.201 The national competition authorities derive their power from Article 84 EC and Article 9(3) of Regulation 17/62, which read in conjunction provide that the national authorities can apply Articles 81(1), 81(2) and 82 EC as long as the Commission has not initiated its investigation. Although national courts and national authorities can enforce Articles 81(1), 81(2) and 82 EC, they cannot, in the present system, apply Article 81(3) EC, given that Regulation 17/62 reserves to the Commission the exclusive competence to grant exemptions.202 This partly decentralised system of enforcement has given rise to a complex relationship between the two levels of enforcement in Article 81 EC cases, which will be examined next. The enforcement of Article 82 EC at national level, however, has been largely uncontroversial.
4.3.1 Enforcement by national courts Quite frequently, the legality of agreements is contested before the national courts on the ground that they breach Article 81 EC. In Delimitis,203 the Court set out to examine the division of competence between the national courts and the Commission, with the principal aim of providing guidelines that would diminish the risk of conflicting decisions. That case has already been discussed above204 and concerned an agreement between a German publican and a brewery. Under the terms of the agreement, the publican had to obtain his requirements exclusively from the German brewery. The publican decided to terminate the contract, and the brewery, claiming that he still owed a certain amount of money, deducted that amount from the deposit provided by the publican. The 199 200 201
202 203 204
Case 127/73 [1974] ECR 51, [1974] CMLR 238. Ibid., at paragraph 16 of the judgment. See Case C-344/98 Masterfoods v. HB Ice Cream [2001] 4 CMLR 449, at paragraph 47 of the judgment. See Article 9(1) of Regulation 17/62. Case C-234/89 [1991] ECR I- 935, [1992] 5 CMLR 210. See supra Chapter 2, section 2.2.3.
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publican issued proceedings before the national courts and argued that the agreement was contrary to Article 81(1) EC and, therefore, null and void. The judgment of the Court gives some helpful insight into the options open to a national court when considering the legality of an agreement before it, and highlights the difficulties that arise from the lack of direct effect of Article 81(3) EC in the present system. The Court distinguished the following possible scenarios. First, when the agreement is clearly either outside or within the scope of Article 81(1) EC and there is ‘scarcely any risk of the Commission taking a different decision’,205 the national court may continue proceedings and declare the agreement either valid or null and void.206 Second, when the national court takes the view that the agreement is caught by Article 81(1) EC but may be the subject of an exemption, then the action of the national court will vary depending on whether a block exemption or an individual exemption might be applicable. If the agreement falls within the scope of a block exemption, the national court may apply the provisions of the block exemption to it. If the agreement could benefit from an individual exemption, the national court should stay proceedings and, if appropriate, grant interim relief, pending the decision of the Commission.207 The Court also emphasised that both the Commission and the Community judicature have a duty of sincere cooperation with the national courts. This is enforced through the national courts’ right to seek information on the state of the procedure from the Commission, or to contact this institution in particularly difficult cases. The duty of cooperation with the Community courts is enforced by the system of preliminary references set out in Article 234 EC.208 The Delimitis guidelines are, to a great extent, reflected in the 1993 Notice on co-operation between the Commission and the national courts.209 The main purpose of the Notice, as stated by the Commission in the opening paragraphs, is to achieve effective cooperation between the national courts and the Commission in the application of Articles 81 and 82 EC to individual cases.210 The Notice emphasises the different philosophy that underlines these two levels of enforcement. Whereas the Commission is an administrative authority and hence acts in the public interest, the national courts have the task of safeguarding the subjective rights of private 205 206 207
208 209 210
Case C-234/89, supra n. 203, at paragraph 50 of the judgment. Ibid. Ibid., at paragraphs 51–2 of the judgment. This is the case provided, of course, that the agreement has been notified to the Commission or is exempted from notification. In the present system, only these agreements may benefit from an individual exemption (see supra section 4.2.1 (Phase One)). Ibid., at paragraphs 53 and 54 of the judgment. OJ [1993] C 39/6, [1993] 5 CMLR 95. Ibid., at paragraph 3 of the Notice.
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individuals.211 It also outlines the difficulties that arise from the lack of direct effect of Article 81(3) EC.212 On the whole, however, it strongly conveys the message that it is possible for both systems not only to coexist, but also to be consistent and to contribute to the creation of a uniform body of law. A recent case has shed further light in this difficult area. In Masterfoods v. HB213 parallel proceedings took place before the Commission and the national courts, in reference to an agreement including an ‘exclusivity clause’. The Commission enacted a decision finding this clause to be in breach of Article 81(1) EC, which was challenged by the applicant directly before the Community judicature under Article 230 EC proceedings. The national court made a reference to the European Court, asking whether it should stay proceedings pending the outcome of the action for annulment. The Court held that the outcome of the dispute before the national court depended on the validity of the Commission’s decision. Therefore the duty of cooperation between the Commission and Community courts, on the one hand, and the national courts, on the other, meant that the latter should stay proceedings pending the decision on the Article 230 EC proceedings. This obligation to stay proceedings would apply unless the national court decided itself to question the validity of the Commission’s decision via an Article 234 EC reference.214 The reason for this approach was again to avoid conflicting decisions.215 Thus, the direct effect of the competition provisions allows private parties to claim before the national courts that certain agreements or practices are unlawful. Private parties are also likely to seek a remedy, for example compensation for loss suffered as a result of such an agreement or practice. There is hardly any Community regulation of the remedies that apply to claims based on EC law brought before national courts. As a general principle, such matters are regulated by national law (the principle of national procedural autonomy), subject to the conditions that the
211
212 213 214
215
Ibid., at paragraph 4 of the Notice. The Notice also highlights other important differences, such as the fact that whereas the Commission acts in accordance with the procedural regime set out in Regulation 17/62, national courts exercise their powers within the framework of national procedural rules (at paragraph 9 of the Notice). Ibid., at paragraphs 24–32 of the Notice. Case C-344/98, supra n. 201. In this respect, see the Opinion of AG Cosmas who took the bold view that to allow a national court to make an Article 234 EC reference when annulment proceedings are already pending, although not expressly prohibited in the Treaty, would be contrary to the principle of sound and rational administration and could lead to abuses of procedure (see paragraphs 34–59 of his Opinion). The approach taken by the Court, however, is consistent with its case law, which has always recognised the parallel application of Articles 230 EC and 234 EC, subject to the TWD rule (see supra nn. 179–180). Ibid., at paragraphs 54–7 of the judgment.
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national remedy should be effective and non-discriminatory.216 A remedy is effective when it does not render the exercise of an EC right impossible or excessively difficult.217 It is non-discriminatory when it lays down requirements identical to those that would apply to a similar domestic claim.218 Under English law, it seems that damages would be available to third parties in cases of breach of Articles 81 and 82 EC. The House of Lords held in Garden Cottage Foods219 that since Article 82 EC is directly effective, it should also give individuals who have suffered loss or damage as a result of a breach of that provision a private cause of action under English law. The same approach should also apply to Article 81 EC cases.220 The appropriate cause of action would be breach of statutory duty,221 despite earlier suggestions by Lord Denning in Application des Gaz v. Falks Veritas222 that a new tort should be created to accommodate competition claims. There is, however, still uncertainty about how such action for damages ought to be construed in domestic law.223 In 1991, in its seminal judgment in Francovich and Bonifaci,224 the Court recognised that Member States could, subject to certain conditions being fulfilled, be liable for damages in cases where they acted in infringement of EC law. The Court therefore introduced a new and uniform remedy of a Community nature. The Francovich decision concerned the failure of a Member State to implement a directive, but three 1996 cases extended the principle to other breaches of EC law, such as those attributable to the national legislature225 or to administrative authorities.226 It was unclear in Francovich whether the principle of state liability only applied when the breach was of a non-directly effective provision of EC law, but Brasserie du Pêcheur227 made it clear that the principle also extended to breaches of 216
217 218 219 220 221
222 223
224 225
226 227
See Case 37/76 Rewe-Zentral Finanz v. Landwirtschaftskammer für das Saarland [1976] ECR 1989, [1977] 1 CMLR 533. For a clear statement of these principles in a competition case, see GT-Link v. De Danske Statsbanes (Case C-242/95 [1997] ECR I-4449, [1997] 5 CMLR 601) at paragraphs 24–6 of the judgment. See Case 37/76, supra n. 216, and Case 199/82 San Giorgio [1983] ECR 3595. See Case 37/76, supra n. 216. Garden Cottage Foods v. Milk Marketing Board [1984] AC 130. See Cutsforth v. Mansfield Inns [1986] 1 CMLR 1. The statute is the 1972 European Communities Act which incorporated Article 82 EC into UK law (see per Lord Diplock, at p. 141 and section 2 of the 1972 European Communities Act). [1974] Ch. 381, 386. See R. Whish, ‘The enforcement of EC competition law in the domestic courts of Member States’, [1994] ECLR 60. Joined Cases C-6/90 and 9/90 [1991] ECR I-5357, [1993] 2 CMLR 66. See Joined Cases C-46 and C-48/93 Brasserie du Pêcheur and Factortame [1996] ECR I-1029, [1996] 1 CMLR 889, and Case C-392/93 R. v. HM Treasury, ex parte BT [1996] ECR I-1631, [1996] 2 CMLR 217. See Case C-5/94 R. v. MAFF, ex parte Hedley Lomas [1996] ECR I-2533. Cases C-46 and 48/93, supra n. 225.
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directly effective provisions of EC law. Following these cases concerning the non-contractual liability of Member States, there has been considerable debate among academics as to whether this principle could also apply to actions between private parties.228 Competition law would obviously be a fertile ground for claims for damages against private parties, because Articles 81 and 82 EC are addressed to the activities of undertakings. In fact, in his Opinion in Banks v. British Coal Corporation,229 a competition case, Advocate General Van Gerven made a strong case in favour of the extension of the principle of non-contractual liability to cases where a private party infringes a provision of EC law. In its recent decision in Courage v. Crehan,230 the court had a clear opportunity to extend the Francovich principle to actions between private parties, but instead of doing so, it confirmed that the configuration of a right to compensation in these cases was a matter for national law. The case raised two issues. First, whether a party to an agreement prohibited under Article 81(1) EC could seek compensation for loss against its co-contractor. Secondly, whether the English rule which prevents a party to an illegal agreement from seeking damages from the other party, was compatible with EC law. The Court first held that Article 81 EC conferred rights – and this would include the right to compensation for loss suffered as a result of that agreement – on any individual, even where he is a party to an anti-competitive agreement.231 Secondly, the Court confirmed that the configuration of such a right to compensation was a matter for national law, provided that the principles of effectiveness and non-discrimination were complied with.232 The Court went on to strike down the English bar, but only in so far as it was an absolute one and prevented a private party from seeking compensation solely on the ground that it was a party to it.233 EC law, however, did not preclude such a rule, where the claimant is found to ‘bear significant responsibility for the distortion of competition’.234 The ruling in Courage, therefore strongly conveys the message that the Court is not ready to create a centralised action for damages against private parties and that it prefers to guarantee a minimum level of effectiveness for Community rights while preserving the application of national rules.
228
229 230 231 232 233
234
See A. Ward, Judicial Review and the Rights of Private Parties in EC Law (Oxford, 2000), at pp. 127–8. In a competition context, see C.A. Jones, Private Enforcement of Antitrust Law in the EU, UK and USA (Oxford, 1999), at pp. 75–8. Case C-128/92 [1994] ECR I-1209, [1994] 5 CMLR 30, at paragraphs 43–5 of his Opinion. Case C-453/99, Judgement of 20 September 2001, not yet reported. Ibid. at paragraphs 23–27 of the judgement. Ibid. at paragraphs 28–29 of the judgement. Ibid. See also the Opinion of Advocate General Mischo in that case at paragraphs 33–60 of his Opinion. Ibid. at paragraph 31 of the judgement.
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As for the question of interim relief in English law, it is clear from Garden Cottage Foods235 and from Cutsforth v. Mansfield Inns,236 that in principle, interim relief is available to restrain breaches of Article 82 and 81 EC respectively. The claimant would, of course, have to satisfy the general conditions in American Cyanamid v. Ethicon,237 which means that it would have to show, inter alia, that damages would not be an adequate remedy. In practice, this complicates the availability of interim relief in competition cases.238
4.3.2 Enforcement by national authorities As seen above, Articles 81(1) and (2) EC and Article 82 EC can also be enforced at national level by national authorities, an expression which appears both in Article 84 EC and in Article 9(3) of Regulation 17/62. The European Court interpreted this expression early in its case law and held in BRT v. SABAM239 that it referred to national competition authorities such as the Office of Fair Trading in the United Kingdom or the Bundeskartellamt in Germany. Unlike the national courts, the power of national competition authorities to enforce Articles 81 and 82 EC is limited in that they can only do so as long as the Commission has not initiated an investigation.240 The legal issues surrounding the concurrent application of EC and national competition law have already been discussed in this work. 241 The Commission has repeatedly emphasised the importance of the involvement of national authorities in the application of EC competition law.242 In 1997, it issued a Notice on co-operation between the national authorities and the Commission,243 with the aim both of raising the profile of this aspect of the enforcement of competition at national level and also of guaranteeing an effective system of cooperation between the Commission and these authorities. As in the case of national courts, the raison d’être of the Notice is the maintenance of a coherent system of law, not only to preserve the uniformity of EC law but also to guarantee legal certainty for undertakings.
235 236 237 238 239 240 241 242 243
See supra n. 219. See supra n. 220. [1975] AC 396. See Chelmkarm v. Esso [1979] 1 CMLR 73. Case 127/73, supra n. 199. See Article 9(3) of Regulation 17/62. See supra Chapter 1, section 1.6. See the XXIIIrd Report on Competition Policy (1993) at paragraphs 189–91. OJ [1997] C 313/3, [1997] 5 CMLR 884.
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4.4 The new system of enforcement of competition law: the White Paper and the Draft Regulation In April 1999, the Commission published its White Paper on modernisation of the rules implementing Articles 85 [now 81] and 86 [now 82] of the EC Treaty,244 where it launched a radical programme for the reform of the system of enforcement of competition law which had been in place for nearly forty years. The Commission opened a five-month period of public consultation and, after the receipt of observations from the sectors concerned,245 a Draft Regulation was enacted in September 2000.246 The White Paper, the Observations submitted and the Draft Regulation will be considered in turn.
4.4.1 The White Paper on enforcement247 The White Paper outlined the manifest problems inherent in the present system and discussed several options for reform. It was divided into three main chapters that followed an Executive summary and an Introduction. In the first chapter, the Commission explained the principal reason for the centralised and ex ante control system248 provided in Regulation 17/62: the need to maintain a uniform and coherent application of Article 81(3) EC and to guarantee legal certainty for undertakings. It also emphasised that the system of notifications and applications had soon imposed a crushing administrative burden on the Commission, which it sought to address in three different ways. First, it tried to limit the number of notifications and applications by introducing the de minimis notices and by adopting block exemption regulations. Secondly, it began to use comfort letters to speed up the processing of notifications and applications. Finally, it emphasised, by adopting general notices, the important role of the enforcement of competition at national level. These measures, however effective they might once have been, were no longer sufficient or appropriate, and more radical reforms were needed. In the second chapter, the Commission argued that it was timely to encourage a full decentralisation of the enforcement of EC competition policy because the latter had now reached a sufficient degree of maturity, clarity and consistency. This went hand in hand with the urgent need to
244 245
246 247 248
OJ [1999] C 132/1, [1999] 5 CMLR 208. A summary of the observations submitted was published on the Commission’s website on 29 February 2000. [2001] 5 CMLR 1148. See supra n. 244. The ‘ex ante control system’ indicates that prohibited practices are void until the relevant authority has authorised them.
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simplify the administrative task of the Commission, which was to be achieved by the removal of the ex ante control system. The Commission went on to explore two kinds of options for reform: (a) one based on the improvement of the present authorisation system, and (b) a totally different approach based on a switch to a directly applicable exception system. In the first group, the Commission examined four possibilities, all guaranteeing the maintenance of a system of ex ante control. These were: adopting a ‘rule of reason’ approach, enabling the national competition authorities to grant exemptions, broadening the scope of application of Article 4(2) of Regulation 17/62, and simplifying the procedures laid down in Regulation 17/62. The Commission, however, took the view that none of these options would satisfactorily address the existing problems and strongly supported the adoption of a directly applicable exception system allowing for ex post supervision of restrictive practices. This meant that Article 81(3) EC would become directly applicable and therefore enforceable by the national courts and national authorities. It did not mean that national courts and authorities would grant exemptions, but simply that they could apply the conditions in Article 81(3) EC, just as they had always applied those in Article 81(1) EC and Article 82 EC. Article 81 EC would, therefore, be applied as a whole. An agreement or concerted practice that fell under Article 81(1) EC but satisfied the conditions in 81(3) EC would be valid, whereas one that did not fulfil them would be void. A national court would no longer have to stay proceedings, following the Delimitis guidelines,249 until the Commission issued a decision granting an exemption. Instead, undertakings would be able to obtain an immediate decision on their agreements if these satisfied the conditions in Article 81(3) EC. In the third chapter, the Commission explained in full the changes encapsulated in the adoption of a directly applicable exception system. In particular, three aspects seemed important: (a) the ending of the system of notification and authorisation; (b) the decentralised application of the competition rules; and (c) an intensified ex post control. In its commentary on the implications of decentralisation, the Commission already identified what was to become one of the main preoccupations in the debate that followed the publication of the White Paper: how to ensure the uniformity and coherence of EC competition law.250 To address this issue, the Commission suggested two sets of complementary solutions. On the one hand, the Commission would continue to play a pivotal role in the direction competition law would take. Thus, it 249 250
See supra section 4.3.1. See also J. D. Cooke, ‘Changing responsibilities and relationships for Community and national courts: the implications of the White Paper’, in The Modernisation of European Competition Law: The Next Ten Years, Occasional Paper No. 4 (University of Cambridge, Centre for European Legal Studies, 2000).
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would carry on issuing block exemptions, notices and guidelines and would deal with the most serious infringements of competition law by means of formal prohibition decisions. The latter would carry important weight as precedents. On the other hand, some mechanisms of cooperation and information dissemination would be put in place between the national courts and authorities and the Commission. For example, national courts and authorities would have to inform the Commission of cases where they applied Articles 81 and 82 EC. Furthermore, national authorities would have a specific duty to notify the Commission of cases where they intended to withdraw the benefit of a block exemption. Also, the Commission would be allowed to intervene in proceedings before the national courts as an amicus curiae. Finally, the Commission argued the need for an intensified ex post control, suggesting three main ways to achieve it: first, by strengthening the Commission’s powers of enquiry, which would be manifested in the amendment of Articles 11 and 14 of Regulation 17/62; secondly, by increasing the importance of complaints; thirdly, by harmonising the fines and periodic penalty payments provided in Regulation 17/62 with those provided in the EC Merger Regulation.
4.4.2 The reactions to the White Paper251 The White Paper was welcomed by a wide range of the sectors concerned: the European Parliament, the Economic and Social Committee, the Member States and EEA States, industry and lawyers. While the response was positive overall, some anxieties were expressed on particular aspects of the reforms suggested by the Commission. These will now be examined briefly. First, and although there is nothing in the Treaty that expressly excludes the system of directly applicable exception, one Member State expressed doubts that such a system could be compatible with the Treaty. It would appear, however, that this view is not so much based on the issue of compatibility as on concern about whether Article 81(3) EC can be directly effective.252 Secondly, the abandonment of the system of notifications met with a favourable reaction from the European Parliament, the ECOSOC and most Member States. Two Member States, however, opposed this proposal on 251
252
See the Summary of Observations, supra n. 245 and the Resolution of the European Parliament of 18 January 2000 ([2000] 5 CMLR 1212). See also the IVth Report of the House of Lords Select Committee on European Union (15 February 2000). See the Summary at point 3.2. This point has been very competently addressed by C.-D. Ehlermann in ‘The modernisation of EC antitrust policy: a legal and cultural revolution’, [2000] 37 CMLRev 537, at pp. 553–60, and where the author concludes that the arguments against the direct effect of Article 81(3) are not decisive.
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the basis that the present system has a preventive effect and that the abolition of notifications would lead to a de facto control of abuse system, and diminish legal certainty for undertakings. Although lawyers generally supported the new system, some felt they were not sufficiently prepared to give guidance to their clients on the conditions laid down in Article 81(3) EC.253 Thirdly, on the proposed decentralisation to national courts, the main fear shared by all the interested parties was whether national courts would apply Article 81(3) in a coherent and consistent manner.254 A particular cause for concern was whether they would be able to undertake the complex economic assessment that is part of the application of Article 81(3) EC.255 Some solutions were suggested, ranging from the creation of specialised courts or provision of training for national judges to the appointment of a national Advocate General to assist national courts. Fourthly, the proposed system of cooperation and exchange of information was generally well received. The Commission’s potential role as amicus curiae, however, produced an unenthusiastic response from the majority of Member States, either because this role of the Commission might meddle with the independence of national courts or because it might be too cumbersome for the Commission to implement256 Finally, on the decentralisation to national authorities, all the sectors concerned supported a move towards enhancing the role of national authorities in the application of competition law. Some voices in the industry and among the legal profession expressed disquiet about the ability of national competition authorities to apply EC law and about practical matters such as the lack of resources or translation logistics that were likely to ensue.257
4.4.3 The Draft Regulation implementing Articles 81 and 82 EC258 On 27 September 2000, the Commission published a proposal for a new Council Regulation whose aim is to reform the present system of enforcement set out in Regulation 17/62 and the corresponding transport regulations.259 The proposed new Regulation is based on the White Paper and takes due account of the concerns raised by interested parties during the consultation process. The Regulation has at its core the setting out of 253 254 255
256 257 258 259
See the Summary at point 4.1. See the Summary at point 5.2. In this respect, see also Whish, ‘National courts and the White Paper: a commentary’, in The Modernisation of European Competition Law: The Next Ten Years, supra n. 247, at p. 74. See the Summary at section 5.3. See the Summary at section 6. See supra n. 246. See supra n. 7.
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the new principle of directly applicable exception and of the guidelines that will govern the decentralised application of EC competition law. It is divided into an Explanatory Memorandum and 42 articles that represent the operative part of the Regulation. In the introductory section of the Explanatory Memorandum, the Commission dispels any doubts on the compatibility of a new system of directly applicable exception with the Treaty and on the capacity of Article 81(3) EC to produce direct effects. On the first point, it explains that the Treaty not only does not exclude this possibility, but that it could also be read as encouraging it, given that Article 83(2)(b) EC lists ‘to simplify administration’ as one of the objectives of implementing regulations. The application of Article 81(3) EC by national courts could clearly achieve this. On the second point, the Commission acknowledges that, although Article 81(3) EC leaves ‘a certain margin of appreciation in its interpretation’, this does not render that provision unsuitable for direct application. This is confirmed by the successful and long-standing application of Articles 81(1) and 82 EC by the national courts.260 Chapter One lays down the general principles that govern the new regulation. First, the principle of directly applicable exception is set out in Article 1 in legislative form. The Explanatory Memorandum describes the functioning of this principle as follows: … agreements, decisions or practices that fall under Article 81(1) and do not satisfy the conditions of Article 81(3) are prohibited and void ab initio in accordance with Article 81(1) and 81(2). On the other hand, agreements, decisions and practices that fall under Article 81(1) but do satisfy the conditions in Article 81(3) EC are valid ab initio, no prior administrative decision to that effect being required.261
Secondly, Article 2 provides that the burden of proof that the conditions in Article 81(3) EC have been met falls on the party invoking the benefit of Article 81(3). Thirdly, Article 3 addresses an important gap in Regulation 17/62 and regulates the relationship between EC competition law and national competition law. The rule is that whenever an anti-competitive practice may have an effect on intra-EC trade, only EC competition law should apply.262 Chapter Three deals with the different types of Commission decision. Thus, Article 7 maintains the power of the Commission to adopt a decision finding an infringement of either Article 81 or 82 EC. Article 8 codifies the 260 261
262
See the Explanatory Memorandum at point 2.B. See the Explanatory Memorandum at point 4 (Article 1). The powers of the Commission, of national courts and national authorities within the framework of this new division of responsibilities are considered in detail in Chapter 2. See supra Chapter 1, section 1.6.
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findings in Camera Care263 and lays down the power of the Commission to adopt interim relief, as well as the necessary conditions that need to be fulfilled for interim relief to be granted. Furthermore, Article 9 introduces a new provision, by empowering the Commission to adopt decisions accepting commitments offered by undertakings in the course of the proceedings where it intends to find an infringement of Articles 81 or 82 EC. Finally, Article 10 provides that the Commission may also adopt decisions finding that Article 81 EC is inapplicable, either because the conditions in Article 81(1) EC have not been fulfilled or because the conditions in Article 81(3) EC have been satisfied. These declaratory decisions will be used solely on the Commission’s own initiative and for reasons of Community public interest. They will be used therefore as a policy instrument to guarantee the consistent application of EC competition law. Chapter Four is devoted to one of the crucial aspects of the White Paper: the need to ensure uniformity in the application of competition law. This general principle is expressly set out in Article 16, whereas Articles 11 and 15 lay down specific rules governing the cooperation between, respectively, the Commission and the national authorities, and the Commission and the national courts. The mechanisms suggested in the White Paper, i.e. the exchange of information between the Commission and national courts and authorities, and even the more contentious role of the Commission as an amicus curiae, are retained. Chapter Five deals with the powers of investigation bestowed on the Commission. It reflects the intensified ex post control suggested by the White Paper. Articles 18 and 20 constitute the core of this Chapter and introduce amendments to the current Articles 11 and 14 in Regulation 17/62.264 The main change proposed concerning requests for information is that duly authorised lawyers should be able to answer requests for information on behalf of undertakings or associations of undertakings, although the latter would bear responsibility for the correctness of the information.265 The Regulation modifies the current powers of investigation of the Commission under Article 14 of Regulation 17/62 on three counts:266 • it extends the powers of search to private homes if it is suspected that company documents are kept there; • it allows the Commission’s inspectors to seal cupboards and offices at the beginning of an inspection to make sure that no documents disappear in the course of the investigation; and 263 264 265 266
Case 792/79R, supra n. 101. See supra section 4.2.1 (Phase two). See proposed Article 18 of the Draft Regulation. See proposed Article 20 of the Draft Regulation.
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• unlike Regulation 17, which only allows inspectors to ask for oral explanations relating to documents, it allows them to ask any questions related to the subject matter of the investigation. Finally, Article 19 creates a legal basis for a new power of the Commission: to interview natural or legal persons, whether or not they are themselves the subject of the proceedings, and to record their statements. The remainder of the Draft Regulation addresses some of the less controversial aspects of the White Paper. Thus Articles 22 and 23 update the fines and periodic penalty payments that can be imposed by the Commission in order to ensure their deterrent effect. Article 26 lays down the principle of access to the Commission file, and Article 28 appears as the legal basis for the adoption of new block exemption regulations by the Commission. There is also a set of transitional and final provisions.267
4.5 Concluding remarks This chapter has surveyed both the current system of enforcement of EC competition law and the radical reforms proposed by the Commission in its White Paper. It is likely that these reforms will be implemented soon, but it is also important not to lose sight of the system that has been in place for more than three decades and of the case law that has interpreted the provisions of Regulation 17/62 and filled some of its obvious gaps. The decentralisation proposals included in the White Paper were partly a response to the pressing need to reduce the administrative load that has overburdened the Commission for years. More importantly, however, they have also sent a strong message that the Commission is ready to regard national courts and authorities as equal partners in the enforcement process and it acknowledges their ability to apply fully Article 81 EC without undermining the consistent application of the law. The key to the success of the new system will be to ensure the close and effective cooperation between the Commission and national courts and authorities while preserving the Commission’s role in steering and shaping competition policy. Some teething problems are to be expected, but – in the words of Ehlermann268 – ‘the legal and cultural revolution’ brought about by the Commission’s proposals seems to be a necessary one, even if some debate still surrounds practical ways of implementing it.269
267 268 269
See Articles 35–42 of the Draft Regulation. See op. cit., supra n. 252. For a comprehensive discussion of potential problems raised by the White Paper, see The Modernisation of European Competition Law: The Next Ten Years, op. cit., supra n. 247.
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Index
159
Index
XXIVth Report on Competition Policy, 86 XXIXth Report on Competition Policy, 6 abuses of dominant position, 2, 5 concept, 88–9 examples in Article 82 EC, 89–97 other forms, 97–105 actions for annulment, 119, 135–6 applicants, 137–40 grounds for review, 140 reviewable acts, 136–7 time limit, 140 actions for a failure to act applicants, 142–3 procedural requirements, 141–2 reviewable omissions, 143 actions to review penalties, 135 activities of governments, rules concerning, 3 acts, reviewable, 136–7 agreements, 18–22 anti-competitive object or effect, 34–40 effect on trade between Member States, 28–34 modification of, 129 see also exclusive sales agreements; franchise agreements; gentlemen’s agreements; joint discount agreements; market sharing agreements; research and development agreements annulment proceedings see actions for annulment anti-competitive abuse, 89
anti-competitive object or effect, 34–9 within the Common Market, 39–40 apparent unilateral behaviour, 27–8 applicants actions for annulment, 137–40 actions for a failure to act, 142–3 applications, 116 appreciability, requirement of, 107 Article 81 EC, 2, 16–17 availability of damages in cases of breach, 148 basic prohibition, 18–45 exemptions, 46–67 issues in common with Article 82 EC, 10–15 rule of reason approach, 68–73 sanction of nullity, 46 scope of application, 4 Article 82 EC, 2, 74–112 availability of damages in cases of breach, 148 issues in common with Article 81 EC, 10–15 scope of application, 4f, 5 associations, anti-competitive practices, 22 audi alteram parte, 126 authorisation system, improvement of, 152 authorised dealers, prohibition of crosssupplies, 36 barriers to entry, 86–7
160
EC Competition Law and Policy
basic prohibition, Article 81(1) EC, 18–45 basic test, 29–30 black lists, 53 black-clauses, 61–3 block exemption regulations, 51–4 block exemptions, 47 conditions for granting, 48 drawbacks, 55–6 options for reform, 56–8 withdrawal, 64 breach of statutory duty, 148 casual customers, refusal to supply, 100 cease and desist orders, 129 collective dominance see joint dominance comfort letters, 51, 128 reviewable, 137 commercial policies, by Member States, 83 Commission co-operation with national courts, 146–7 damages against, 143–4 enforcement at community level, 5, 114– 43 jurisdiction to apply Articles 81 and 82 EC, 12–15 commission schemes, 95–6 Commission’s Communication on the application of EC competition rules to vertical restraints: A follow-up to the Green Paper on Vertical Restraints (1998), 57 Commission’s Green Paper on Vertical Restraints (1997), 55–6 Commission’s Notice on agreements of minor importance (1997), 31–2, 33f, 34 Common Market, anti-competitive object or effect, 39–40 common rebate or discount policies, adoption of, 41 common sales conditions, 42 common sales policy, 41–2 Community competition law, and national law, 8–10 community level, enforcement at, 114–44 compensation, right to, 149 Competition Act (1988), 8 competition law, foundations, 1–15 competition policy, aims, 6–7 complainants, types, 117 complaints investigation, 118 rejection, 118–19 remaining silent, 119 complex cartels, 23 concerted practices, 22–7 anti-competitive object or effect, 34–40
effect on trade between Member states, 28–34 see also tacit cooperation consumer preference, 80 for local sources, 83 contractual clauses in vertical agreements, 36 cooperation, forms of, 18–28 cost of establishment, 87 Council Regulation 1215/99, 57 Council Regulation 1216/99, 57, 58 crisis cartels, 42–3 cross-elasticity of demand, 80–81 cross-elasticity of supply, 81 cross-supplies, prohibition between authorised dealers, 36 damages against the Commission, 143–4 cases of breach of Articles 81 and 82 EC, 148–50 de minimis rule, 31–4, 107 decisions, Commission, 126–34 decisions by associations of undertakings, 22 anti-competitive object or effect, 34–40 effect of trade between Member states, 28–34 demand elasticity, 79 demand substitutability, 79–81 direct concern, test of, 138 direct effect, principle of, 5–6fn, 8 directly applicable exception principle of, 155 system of, 51, 72, 152 discounts, 93–6 adoption of common policies, 41 discriminatory practices, 7, 44–5, 91–6 disguised cooperation, 27–8 distribution channels, nature of, 81 distribution franchise agreements, 71 distributors, imposition of export bans, 36 doctrine of effects, 13–15 doctrine of essential facilities, 102–3 dominant companies, refusal to supply, 99–103 dominant position definition, 84–8 determination of existence, 75–84 within the Common Market, 88 see also joint dominance Draft block exemption regulation on vertical restraints (1999), 58 Draft Guidelines on vertical restraints (1999), 58
Index Draft Notice on agreements of minor importance (2001), 32–4 Draft Regulation implementing Articles 81 and 82 EC (2000), 10, 154–7 EC competition law see Community competition law EC Treaty lack of definition, 11 provisions on competition, 2–3 ECJ see European Court of Justice economic analysis, to establish anticompetitive behaviour, 30, 36–9 economic links, 108–10 economic unity approach, 13 effect, anti-competitive, 36–9 effects, doctrine of, 13–15 enforcement at community level, 5, 114–44 at national level, 5–6, 145–50 new system, 151–7 equality of arms, principle of, 124 essential facilities, 102–3 establishment, initial cost, 87 European Court of Justice (ECJ), 2, 5 ex officio proceedings, initiation, 119–20 exchanges of information, 26–7 on prices, 41 exclusive distribution agreements, 29, 31 exclusive purchasing agreements, parallel networks, 36–9 exclusive sales agreements, 69–70 exemptions, 46–7 comparison with objective justification, 110–11 conditions for granting, 48–50 decisions granting, 133 power to grant, 47 types, 47 see also block exemptions; individual exemptions exploitative abuse, 89 export bans, imposition on distributors, 36 fact-finding, on alleged infringements, 120– 22 fidelity rebates, 93–4, 95–6 files, access to Commissions, 123–5 final decisions, 119, 128–34 reviewable, 137 financial risk, 87 fines imposition, 132–3 temporary immunity, 117 fixed rebates, 94 fixing, of prices, 36, 40–41
161
formal final decisions, 129–33 formal requirements, 133–4 reviewable, 137 forms of cooperation, 18–28 anti-competitive object or effect, 34–40 effect on trade between Member states, 28–34 foundations, competition law, 1–15 franchise agreements, 71 freedom to contract, principle of, 131 gentlemen’s agreements, 19 governments activities, rules concerning, 3 grounds for review, actions for annulment, 140 Guidelines on vertical restraints (2000), 58–9 hearings, 125–6 horizontal agreements, 20–21, 36 price fixing, 40–41 reform of, 54, 65, 67 immunity from fines, temporary, 117 implementation test, 14–15 indirect avenue, for judicial review, 140–41 indirect price fixing, 41 individual concern, test of, 138–9 individual exemptions, 47 conditions for granting, 48–50 requirement for notification of agreements, 50–51 informal final decisions, 128–9 reviewable, 137 informal settlements, 129 information exchanges of, 26–7 requests, 120 infringements decisions finding, 129–33 fact-finding on alleged, 120–22 investigation of, 118 initiation of enforcement procedures, 116–20 intellectual property rights, 86 exploitation of, 100–102 interchangeability, 77–82 interim relief, 150 granting, 127–8 intra-Community trade effect of abusive practices, 105–7 effect of agreements, 28–34 investigations conduct of, 120–21 protection of firms under, 121–2
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investment, agreements to limit or control, 42 joint discount agreements, 44–5 joint dominance, 107–10 judicial review, 135–43 legitimate interest, 117, 138 levels of enforcement, 5–6 license, refusal to, 101 loyalty rebates, 93–4, 95–6 market behaviour, regulation of, 1 market power, indicators, 84–6 market share, 84–5, 88 market share caps, 56, 57 market sharing agreements, 7, 36, 43–4 markets abuses in related, 103–5 oligopolistic, 25–6 unjustified limitation, 91 member undertakings, anti-competitive practices, 22 Merger Regulation (1989), 3, 108fn mergers between undertakings, 2–3 definition of joint dominance, 108 procedural rules, 3 minimum prices, fixing, 41 modification of agreements, by undertakings, 129 monopolies state, 83 statutory, 87 Monti, Mario, 113 national authorities, enforcement by, 5–6, 150 national courts, enforcement by, 5–6, 145– 50 national law, and Community competition law, 8–10 national level, enforcement, 145–50 national markets, 88 national procedural autonomy, principle of, 147–8 nationality, discrimination on grounds, 92 negative clearances, 133 reviewable, 137 negative conditions, for granting of exemptions, 49–50 negligent infringements, imposition of fines, 132–3 non-colluding oligopolists, 110 non-contractual liability, principle of, 149
non-discrimination, principle of, 7, 91–2, 130 non-privileged applicants actions for annulments, 138–40 actions for a failure to act, 142–3 Notice on co-operation between the Commission and the national courts (1993), 51, 146–7 Notice on co-operation between national competition authorities and the Commission (1997), 9, 150 notifications, to qualify for individual exemption, 50–51, 116–7, 134 nullity, sanction of, 46 object, anti-competitive, 34–6 objective justification, Article 82 EC, 110–12 observations, submission by complainants, 118–9 oligopolies, 25–6, 110 opposition procedures, 53 oral agreements, 19–20 oral hearings, 126 ordinary investigations, 120–21 parallel behaviour, 24–7 parallel importers, 35 parallel networks of exclusive purchasing agreements, 36–9 perfectly competitive markets, 1 periodic penalty payments, 132 positive conditions, for granting of exemptions, 48–9 predatory pricing, 97–9, 106 price fixing, 36, 40–41 pricing, 80 discriminatory, 45, 92–3 see also purchase prices; resale prices prior notification, dispensation from need, 116 private parties, standing of, 138–40, 142–3 privileged applicants actions for annulment, 137 actions for a failure to act, 142 procedural decisions, 126–8 procedural infringements, 132 procedural requirements, actions for a failure to act, 141–2 procedural rules, 3 proceedings, initiation, 116–20 production agreements to limit or control, 42–3 unjustified limitation of, 91 products, discriminatory allocation during supply shortages, 93
Index prohibition of cross-supplies between authorised dealers, 36 proportionality, principle of, 49–50 protection of firms under investigation, 121–2 public undertakings, rules, 2 purchase prices, imposition of unfair, 89–90 quantity discounts, 94 rebates, 93–6 adoption of common policies, 41 recommendations, 22 refusal to license, 101 regional markets, 88 Regulation 17/62, 3, 47, 114–44 Regulation 2790/99, 41, 44, 46, 54, 58–65, 66–7f regulatory barriers, 87 related markets, abuses in, 103–5 relevant geographic market, 82–4 relevant product market, 77–82 resale price maintenance (RPM), 41, 46 resale prices, fixing, 36 research and development agreements, 7, 42 reviewable acts, 136–7 reviewable omissions, actions for a failure to act, 143 right to be heard, 125–6 rule of reason, 68–73 rules activities of governments, 3 activities of undertakings, 2–3 sanction of nullity, 46 scope Article 81 EC, 4 Article 82 EC, 4f, 5 selective distribution agreements, 27–8, 70 selling prices, imposition of unfair, 89–90 semi-privileged applicants actions for annulment, 137–8 actions for a failure to act, 142 service networks, quality, 86 settlements, informal, 129 severability, 46 similar behaviour, 24–7 single market, achievement, 6–7, 10, 22, 29, 36, 43, 91, 106 standing, private parties, 138–40, 142–3 state aids, 3 state liability, principle of, 148–9 state monopolies, markets subject to, 83 statement of objections, 122–5, 134 statutory duty, breach of, 148
163
statutory monopolies, 87 structural links, 108–9 structure Article 81 EC, 4 Article 82 EC, 4f, 5 substantial part of Common Market, definition, 88 substantive infringements, 132 substitutability, 77–82 supply allocation of products during shortages, 93 refusal to, 99–103, 106 sharing sources, 36, 43 supply substitution, 81 supremacy of EC Law, principle of, 8–9 tacit collusion, 23 tacit cooperation, 20 target discounts, 94–6 target prices, fixing, 41 technical development agreements to limit or control, 42 unjustified limitation, 91 technological lead, of undertakings, 86 temporary immunity from fines, 117 territorial protection, 36, 44 third parties, access to files, 125 tie-in clauses, 45 time limit, actions for annulment, 140 trade between Member States effect of abusive practices, 105–7 effect of agreements, 15, 28–34 trading conditions discriminatory, 44–5 fixing, 41–2 imposition of unfair, 90–91 transport costs of, 83 special regulations, 3 tying, 96–7 umbrella block exemption regulation 2790/ 99, 41, 44, 46, 54, 58–65, 66–7f undertakings access to Commission’s files, 123–4 collusion between, 4 definition of, 11–12 forms of cooperation, 18–28 modification of agreements, 129 prohibition of abuses of dominant position, 5 rules concerning activities of, 2–3 size, 85–6 undertakings granted special rights, rules, 2 unfair purchase price, imposition, 89–90
164
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unfair trading conditions, imposition, 90– 91 unilateral behaviour, apparent, 27–8 vertical agreements, 7, 20, 21–2, 59 contractual clauses in, 36 territorial protection, 44 vertical integration, degree of, 86 vertical restraints, process of reform, 54–65
voluntary investigations, 120–21 white lists, 53 White Paper on modernisation of the rules implementing Articles 85[now 81] And 86 [now 82] of the EC Treaty (1999), 47, 51, 68, 72–3, 114, 151–3 reactions to, 153–4 written contracts, 18
