Effective the Restrictions in Combating Anti-Competitive Behavior - Assignment Example

WITH REGARD TO PRODUCTS ENTERING THE MARKET THROUGH DISTRIBUTORS, HOW EFFECTIVE ARE THE RESTRICTIONS IN ARTICLE 101 TFEU IN COMBATING ANTI-COMPETITIVE BEHAVIOR Name: Tutor: Course: College: Date Anti-competitive behavior in market makes it possible for companies to abuse a particular dominant market position. Consumers ultimately end up paying higher prices for goods or have their options of goods and services narrowed as a result of agreements made between particular businesses. This springs a necessity to have laws that limit or regulate such practices. To prohibit anti-competitive collusions between businesses, such business agrees to fix prices of commodities or carving up markets. Regulation makes light commission’s administrative power and allows it to focus its resources on execution of the most severe competition infringements. It also increases the part played by national completion authorities (NCA) and national courts in enforcing EU competition law therefore warranting an effective and even application (Cavicchiolli 1991). The main EU competition rules are encompassed in article 101(treaty on the functioning of the European Union TFEU) which covers anti-competitive agreements. The new rules came into force as from June 1, 2010 and will expire in May 2022.A paramount aim of the founding fathers of the European community was creation of a single market. To accomplish this, a compatible, fair and transparent regulatory framework had to be established. The first major decision under article 101 was taken by the commission in 1964 (Kimmer 2011). There is debate surrounding the purpose of the law of competition while some assert that it serves as elimination for substandard firms that are non-competitive. It is argued that the law stands in the way of free flow of goods and services. The general court says that the law is to protect the final consumer whereas Stephen (2010) states its purpose in protection of member states as a whole. The overall bargain however is to maintain a balance between undertakings and the consumer. Article 101 is construed widely. It includes formal and informal agreements, concerted practices where businesses tend to increase or decrease prices simultaneously without physically consenting to do that. Coincidental price increase or reduction will not itself uphold as a concerted activity hence there should be proof that the parties involved were knowledgeable of the fact that their actions may destabilize the normalcy of competition operation within the internal market. In the light of agreements, sheer anti-competitive influence is ample to make it unlawful despite parties being unaware of it or having no intent to spur the effect to occurrence (Okeoghene, 2006). In accordance to article 101 there are actions (relevant to both vertical and horizontal agreements) that are prescribed as being unsuitable for the internal market. These are; all the agreements made between undertakings -form of cooperation (contact) between UT which, without having reached the stage where a formal agreement properly so called has been concluded, knowingly substitutes practical cooperation between them for the risks of competition , Decisions made by associations - covers decisions taken collectively by a trade association and non-binding recommendations(Chris 2009). If normally complied with and any concerted practice-form of cooperation (contact) between UT which, without having reached the stage where a formal agreement properly so called has been concluded, knowingly substitutes practical cooperation between them and risks of competition that are likely influence trade between member states and which hold their object the inhibition, restraint or deformation of competitive forces in the internal market particularly those that directly or indirectly fix trading condition, share markets or share sources of supply, limit or regulate markets or production, apply uneven conditions to similar transactions with other trading parties and in turn placing them at a competitive inconvenience and those that make conclusion of contracts bound by the recognition of third parties with additional obligations with no connection to the subject of such contracts. All the agreements and decisions interdicted by article 101 are therefore automatically nullified Tobias and Benoit (2007). Businesses that infringe these rules and are liable for participation in anti-competitive practices or agreements are subjected to large fines by the EU or the national competition authorities. Imprisonment is not an option under article 101 itself however; some countries within the European Union have laws that apply prison sanctions. Effect on trade must however be more than deminimis (insignificant effect) to fall within scope of Art 101 TFEU Kola (1997). If aggregate market share of parties to the agreement is less than or equal to 10% of relevant product market, then deminimis then it entails a horizontal agreement and if aggregate market share of parties to the agreement is less than or equal to 15% of relevant product market, then deminimis, this is a vertical agreement Whish (2009). To determine if an arrangement is anti-competitive, it is assessed on the basis of objective or its effect on competition in the internal market. There are specific guidelines on applicability of article 101. It provides a conceptual legal framework for an even assessment while considering both influencing effects of competition and pro-competitive effects. Agreement must have positive benefits. For the very purpose of these criteria, references to article 101of the TFEU should be understood as references to article 81 on the EC treaty Elliot (2010). If object of agreement is clearly anti-competitive, then not need consider its effect. Only consider effect if no clear anti-competitive purpose. The first criteria postulate that the agreement contributes to overall positive benefits of the public (agreement must have positive benefits). In this case the more benefits postulated the higher the chance of exemption. For instance a business may argue that in spite of their business having illegal holdings, the societal benefits overshadow the probable substantial harm arising from the loss of competition. In this case the business applies for an authorization Okeoghene (2006). Where the Co. gives facts consideration after studying them and grants the business authorization then it safeguards the business from court action. Different types of agreements garner different benefits. Production benefits where specialization agreements allow UTs to concentrate efforts and achieve benefits of scale; Chappee /Buderus [1970] CMLR D7 – agreement between 2 manufacturers, who competitors in air conditioning equipment market. Agreement reduced competition, but it also had clear economic benefits relating to production and distribution, as well as technical and economic progress. Agreement granted exemption by the Commission, as all conditions under Art 85(3) EEC (at time) were met Okeoghene (2006). Another benefit is distribution where exclusive distribution agreements allow UTs to streamline a distribution process. The commission can grant exemption as the agreement improves distribution of products concerned which would have been relatively difficult with competition Fenin (2009). Transocean Marine Paint [1976] CMLR D9- distribution agreement between marine paint manufactures partitioned the common market on a national basis, though did not provide for absolute territorial protection. Commission granted exemption as agreement improved the distribution of the product concerned, which otherwise would have been much harder. Another criterion is Economic progress where the agreement is generally presumed if benefits exist on the other grounds Rompuy (2012). The chief of Justice can grant exemption if an agreement improves technical progress where it facilitates UTs to develop technology further. The act of commission regulation (EC) 772/2004 of year 2004 on application of article 81(3) of the treaty to groups of technology transfer agreements. Technology transfer agreements only concerns licensing of technology. In this case such an agreement will boost economic efficiency as they can limit duplication of research and development and propel supplementary innovation. It is however necessary to know if the technology license in particular is caught by article 101 in the first place. The preliminary points to consider are; is there presence of an agreement between two or more undertakings? For instance inter-group licenses are not contained in article 101, does the agreement have the capacity to affect trade between member states to a substantial level? Does the agreement restrict or limit competition to a significant effect in internal market? Because restrictions in relation to exploitation of technology in markets no within member states will not be contained in article 101 Geist (2004). To assess if this criterion is met, Commission (originally) had to identify the relevant product market; the geographical market; the UT’s market share etc. to assess whether UT faced sufficient competition or not Porat and Stein (2011). The Third, guideline purports that agreement must not execute limitations on competition that is not required in the agreement Albors (2002). Each restriction must be beneficial in achieving ultimate objectives of the agreement. A principle example is Carlsberg Beers Agreement [1985] 1 CMLR 735 – agreement between Brewery and Hotel chain in the UK. Hotel chain to buy 50% lager from Carlsberg. Commission granted agreement an individual exemption, since it was necessary to allow Carlsberg to establish itself in the UK market and build up a distribution market/network The fourth criterion states that agreement must not in any way eradicate competition with regard to the product in concern. UTs in the market must be subject to completion whether from the internal market or from the EU market. In assessing this element, the commission has to recognize and characterize the product market geographical market scope coupled with UTs market share to assess if competition purported by UT is ample Friedman (2009). The criteria set out in the guidelines should be applied according to the individual situation being assessed. The CoJ will monitor how regulations and criteria is applied under new implementation arrangement introduced by regulation (EC) no 1/2003 so as to indicate if any amendments should be made.unlesss they satisfy the exemption in article 101(3) Winfred (2004). The chief justice applies these principles in four main policy areas; on cartels where it uses the rules to prevent abuse of the firm’s dominant market players this is governed in article 101 TFEU. Mergers where the commission has control of proposed mergers and potential joint ventures that involve companies that have a known and defined amount of effect on the turnover in the European Union Van (1980). This is governed by this council regulation 139/2004 EC which is the merger regulation. When the company is found at fault then actions are taken against it and historically these actions against those found acting in breach of contact have had a preventative effect. These punishments contain heavy fines and ugly reputational damages in which they make firms fearful of any involvement Coase (1937). Agreements between businesses that considerably narrow competition in a market, agreements that prohibit or restrict dealings with a competitor or agreements that bind, maintain or regulate prices Cavicchiolli (2000). Under Regulation 17/62, to obtain an individual exemption under Art 85(3) EEC in relation to behavior that would otherwise be caught under Art 85(1) EEC and so void under Art 85(2) EEC, the UT had to notify the Commission of its agreement Conford (2009). Upon realization that an activity is illegal the commission investigates complaints or presented issues that are brought to its attention Thijssen (2001). If at the end of the investigation, the commission believes that there has been a breach in the market laws, arrange of actions can be taken. This includes educating a business about compliance with the act or the business can be issued warning Tobler and Beglinger (2010). In the case of cartels, a member of the cartel can bring claims in the office of the CoJ for cooperation or for immunity under the commissions’ cartel leniency policy Keeton (2009). There are sometimes block exemptions Goyder and Goyder’s EC Competition Law (2009). Block exemptions apply to agreements which are in theory a breach of Art 101(1) TFEU (Art 81 (1) EC: Art 85(1) EEC), but which are exempt from Art 101(1) because of their beneficial nature Van (1980). If an agreement falls within the scope of a block exemption regulation then there was originally no need to notify the Commission to obtain an individual exemption for this agreement Porat Stein (2011). Horspool calls block exemptions “class relief” from Art 101 TFEU Deakin (2004). A methodology to serve as a guideline to check for anti-trust practices between companies is extremely essential Great Britain (1998). Due to the laws of EU companies have onus to conduct a self-assessment analysis with regards to compartments in article 101 of the TFEU member states need to appreciate the difference between techniques in the EU nations and other styles such as the American Cincera (2004). Thus have to take them into consideration the European commission decided to consider the application of article 101 and 102 of the TFEU so as to ascertain the effective supervisor of the EU competition techniques and simplify administration to a greater extent this was done so as to meet the challenges posed by the enlargement of the European union in 2004 Rompuy and Kovacic (2012). Consistent enforcement of the article 101of the TFEU treaty in curbing anti-competitive businesses agreements by the commission has been regarded as being effective Waugh (2004). The article is directly effective as it allows it to be executed in national courts through the European Union and provides a context for the purpose of secondary legislation. The methodologies worked fairly when the European economy was steadily rising Steiner and Woods (2011). Since then the market has become bigger and anti-competitive behaviors have become more complex in nature. Analysts have hence reiterated that the commissions execution of article 102 is largely ineffective and some argue that the commission is very strict in its application of European commission competition rules and that it usually disregard the dynamics contained in company behavior which at times has objectives to be beneficial to consumers and to the quality layered on goods or services Hoefner (2003). 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