EU Competition Law Issues - Essay Example

? EU Competition Law By of Institute Executive Summary This paper shall analyze the extent to which the concept of an “agreement between undertakings”, for the purposes of Art 101(1) TFEU, has become so broad as to render the requirement for a “concurrence of wills” between at least two undertakings almost meaningless. It will also analyze the application of the law in various case studies and the nature of agreements involved between two parties in a competitive business environment. The paper will additionally address different applications of article 1 (101) TFEU and the extent to which the article appears to be inconsistent with the concurrence of wills. For a better understanding, the paper will first approach the legal interpretation of concurrence of wills as provide for in Article 81 of EC. Introduction: Understanding Concurrence of Wills as Per Article 81 of EC The EU competition law does not any distinctions otherwise referred to as formalistic between any two varied forms of collaboration within the provisions of Article 81 of the EC law. One may find reference to this in the case involving Volkswagen v Commission1. The concept of agreement, within the interpretation of this article, on the existence of the concurrence of wills, explores different possibilities of trade and sales relations between two or more parties. The article provides that form in which the concurrence of wills manifests itself remains vital provided it is in utmost good faith by parties involved (Office of Fair Trading, 2010, p. 12). In other words, the article also implies that courts shall construe agreements to mean concurrence of wills. One may also interpret the article to understand agreements as to mean existence of a common intention between two or more parties. It is also possible for one to contest that while analyzing cases that relate to the existence of a concurrence of wills for the purposes of Art 101(1) TFEU, authorities should put into consideration the incentives that are part of the arrangement for terms of trade between parties (Christa, Jacques and Wesse, 2011, p. 29). Understanding concurrence of wills as an inherent part of any agreement suggests that parties in an agreement must reach a point of convergence of interests. Convergence of interest to promote commerce within the provisions of accepted form of competitions such a mergers and collusions. The EU Article 81 interprets collusion in terms of jurisdiction functions rather than in substantive function. The problem is that collusion, under Article 81, does not hold given that it is never jurisdiction in many cases but substantive. Provisions of Article 101(1) TFEU The Treaty on the Functioning of the European Union, Art 101(1) TFEU, takes any agreements between undertakings, decisions by association of undertakings and concerted practices to mean agreements. For better understanding, the article also takes such agreements to mean Horizontal Corporation. In addition to that, clarification, the article also defines Horizontal Corporation to mean any agreement into which actual competitors or potential competitors enter. The article also covers two companies that deal in the same line of the product, though, in different geographical conditions (Office of Fair Trading, 2010, p. 21). For the purposes of Art 101(1) TFEU, one expects the article to assess an agreement between undertakings. This is because an agreement is capable of affecting trade between member states. The article assess whether an agreement has elements of an anti-competitive object on competition. It also assesses whether an agreement an actual or potential restrictive effect on competition. In case a court determines an agreement as restrictive of competition within the provisions and interpretation of Article 101 (1), then Article 101 (3) comes into force. The function of article 101(3) is to assess the extent to which the agreement may provide for pro-competitive advantage over the restrictive nature so determined under Article 101 (1). The major purpose of Article 101 (3) is to find out whether there is a balance in the agreement. It is permissible for an agreement to be construed to be consistent with Article 101 (3) if the pro-competitive benefits outweigh the restrictive nature of the agreement2. In case that it is otherwise, then Article 101 (2) interprets such an agreement as invalid in the context of TFEU laws. A case study for application of the concept of agreements for the purposes of Art 101(1) TFEU is a case brought before the General Court. The court was to determine this case pursuant to provisions and interpretation of agreements with regard to legal interpretation of Article 101(1) TFEU. The parties to the dispute were GlaxoSmithKline Company and others, a case that brought the bench to the real task with regard to interpreting Article 101 and other related articles. The case is GlaxoSmithKline Services Unlimited v Commission of the European Communities (European Commission, 2011, 47). In deciding the case, the Court Of Justice found that GlaxoSmithKline had entered into what in termed as a parallel trade, which was not consistent with the principles of the TFEU charter. The court interpreted that this has backing from Art 101(1) TFEU that defines the extent to which agreements may be permissible in the spirit of sustaining the objectives of the union. The General Court maintained that by entering into an agreement with the Spanish Wholesaler, at terms that one could perceive to be unfair competitive advantage, and that article 101 (3) finds no overall good for the joint market as the overriding factor, the whole arrangement was null and void pursuant to article 101 (2) TFEU. In addition to the perceived infringing of the Article 81 of the European Community, the case had precedence from previous cases such as Case 19/77 Miller International Schallplaten versus Commission [1978] ECR 131 and 32/78, 36/78 to 82/78 BMW Belgium and Others versus Commission [1979] ECR 24353. The court also found that GlaxoSmithKline acted contrary to the principle that is in place to regulate any agreement that acts to sustain parallel trade, and that the concept of object could as well apply in the pharmaceutical products sector. Besides, the court also held in regard to the provisions in Article 81 of the European Community, that any agreement in the pharmaceutical industry that works in a manner perceived to give undue advantage along national lines, or that which reestablishes nations division in trade between member states, might act as an impediment to the goals of the treaty. The court had elaborated that such goals include economic integration through merging of the national markets. To conclude the case, the courts held, in what lent the interpretation of Article 101 (1) so broad, that one may very easily construe it to undermine the requirement for concurrence of wills almost meaningless. The court determined that, in the spirit of the law and mutual interests of member states, it must apply the Article to cushion not only businesses but also consumers. The court had argued that the agreement that the GlaxoSmithKline Company reached with the Spanish dealer was in bad taste in regard to the principles of the union. It appeared, according to the court, that such preferential treatment was restrictive to competition and that it denied the final consumers the benefits that accrue from effective competition. It also went ahead to clarify that it was also the duty of the court to make sure that the structure of the market did not come under threat from unlawful practices. The court derived this backing from Article 101 (1) 74 that the nature of the whole arrangement could not fulfill the conditions provide for in Article 101 (3) thus invoking Article 101 (2) TFEU. Nevertheless, one question to what extent Article 101 (1) TFEU does allow the application of concurrence of wills as provided for in other chapters. Is the article becoming an obstacle to the application of other sections of the charter? There is a need to analyze the extent to which the concept of an “agreement between undertakings”, for the purposes of Art 101(1) TFEU, has become so broad as to render the requirement for a “concurrence of wills” between at least two undertakings almost meaningless as some scholars have pondered. For the purposes of Art 101(1) TFEU, concurrence of wills with regard to agreements seems to have taken a different dimension. Nonetheless, one should appreciate the fact that the interpretation is always in admirable spirit ad for the general good of the Union. Probably the critical problems are the legal implications that arise from agreements undertaken and interpreted for the purposes of Art 101(1) TFEU. The Article that comes into force is predominantly Article 101 (2) which only affirms inconsistency with Article 101 (1) and Article 101 (3). What then are the benefits under Article 101 (3) that has a strong correlation and consistency with Article 101 (1)? Some of the concerns that scholars have pointed out is that while carrying out competition analysis, it would be prudent if the NCAs disregarded objectives that are purely non-competitive in nature (Odudu, 2006). These scholars are of the opinion that competition authorities are likely not to be in a good position to analyze such objectives. They, additionally, suggest that it should not be within the authority of a competition authority to decide whether to consider allowing restriction of competition in a free market in its bid to achieve noncompetition goals or not. On the same matter, other scholars have also come up with related opinion, though, aimed at addressing a slightly different concern. Such scholars have noted, with concern, which the nature of competition arising from agreements between two or more parties have always tended to portray a crucial need for any judgment to consider equity issues. They highlight that since equity, in its nature, does not have what the competition authorities may boldly describe as objective characterizes or predictive characteristics, then it should not attempt to make a judgment in such efficiency or related matters (Jones and Sufrin, 2010). They further maintain that in order to analyze aggregating benefits accruing to consumers, the competition authorities would have to task themselves with making evaluations and comparisons from consumers. They should do this in order to analyze the extent to which agreements have affected markets (Lugard and Hancher, 2005). On the other hand, there are also other parallel opinions that have a different interpretation of how Article 101 (3) works in relation to Article 101(1) TFEU. Such opinions remark that it is prudent for the article to maintain the economics of two-sided market. They contend that such economics are vital in so far as aggregating matters to do with benefits accruing to consumers in a market that agreements have affected. In other words, it is implying that the guidelines of the Commission should be applied not rigidly as they are but with flexibility given each scenario. It is apparent that the article does not give any provisions on the extent to which the Commission should be flexible. Such opinion, though, making Article 101 (1) become so broad by such an arrangement, takes into consideration the necessity to have two sides of the market. Failing to consider all the forces involves may render decisions made in this regard erroneous. All positive assessments of collusive conduct should be bilateral or multilateral but within the policy framework. The extent to which the Commission may consider noneconomic benefits and indirect benefits, arising from agreements, greatly varies, and decisions are situation specific. Some brilliant example can be found in cases such as Phillips-Osram, case OJ [1992] L037/16 (European Commission, 2011, p. 16). In this case, the commission found that there was indirect environmental benefit and acted with flexibility. The nature of agreements is sometimes so wide even for the courts to address without impeding on national interest. For instance, in Matra4 Judgment, the General Court5 opted not to interpret whether or not Article 101 (3) provided for indirect benefits of employment. In short, one may actually argue that the concept of an agreement between undertakings, for the purposes of Art 101(1) TFEU, has become so broad as to render the requirement for a concurrence of wills between at least two undertakings almost meaningless. Every agreement between two or more parties remains intricately connected to the provisions of Article 101 (1) whose interpretation usually invokes other articles as necessitated by the nature of the agreements. One may wonder the fate of the concept of concurrence of wills. Article 101 (1) appears to have replaced concurrence of wills. This is because in the event that there is a conflict between provisions in Article 81 EC and Article 101 (1), then Art 101(1) TFEU prevails in the interest and spirit of agreements as redefined. Since concurrence of wills also imply agreements, it would be better if parties to agreements in the EU bloc are to reach any decision or understanding, it would be wise if their common interest draws its guidance from Article 101(1). As such, the business parties will be sure of operating within the provision of regulations the charter on the common market. The broad nature of the meaning of agreements for the purposes of Art 101(1) TFEU thus requires one to consider any concurrence of wills with regard to this article (Christa, Jacques and Wesse, 2011, p. 34). All aspects of trade completion within the block rotate around the article. There are cases where courts have used the article to respond to extremely many and varied cases pertaining to competitions perceived as restrictive or in other terms, inconsistent with EU law. Taking case laws or decisional practice, one nay observe that the General Court and the European Court of Justice acted, most of time, to make sure that member states respect the provisions of the charter. It appears that it will be a Herculean task trying to define, in short, explicit and in an inclusive manner the wider concept of agreement that applies do broadly currently. Concurrence of wills has not been rendered meaningless, but Article 101 (1) seems to have added to it additional clauses to redefine its meaning. Bibliography Christa, T., Jacques, B., and Wesse, G., 2011. Essential EU Competition Law in Charts. Budapest: HVG-ORAC Publishing House Ltd. European Commission, 2011. Notices from European Union Institutions, Bodies, Offices and Agencies. Official Journal of the European Union 14.1.2011. Ezrachi, A. 2010. EU Competition Law: An Analytical Guide to the Leading Cases. London: Hart Publishing. Jones, A. and Sufrin, B., 2010. EU Competition Law: Text, Cases & Materials. New York: Oxford University Press. Lugard, H.P. and Hancher, L., 2005. On the Merits. Current Issues in Competition Law and Policy. Oxford: Intersentia. Odudu, O.2006. The Boundaries of EC Competition Law: The Scope of Article 81. New York: Oxford University Press. Office of Fair Trading, 2010. Article 101(3) – A Discussion of Narrow Versus Broad Definition Of Benefits. London. Read More