E.U. Competition Law - Essay Example

Article 81 deprives undesirable trade policies of competition including fixation of price, market sharing, limiting output and bid rigging. Article 81(1) proscribes business agreements that could influence trade between Member States and aim or bring about deterrence, restraint or alteration of competition. Article 81(3) exempts these prohibitions if these agreements improve the manufacture or delivery of goods. This exemption also applies if the agreement brings about technical or economic progress, which permits consumers to benefit. Moreover, the competitive market for a large number of such products should not be eliminated by such agreements. Prohibition will be enforced by Article 81(1) if there is an agreement between two or more undertaking, whose effect on the trade between Member States is either tangible or latent and the intention of the parties to the agreement must be that their agreement should distort, prevent or restrict competition. Article 81(2) EC renders null and void any agreement prohibited by it. This section renders void only those provisions of the agreement that restrict competition. Three forms of collusion have been distinguished under Article 81; they are first, agreements between undertakings that restrict competition. In Hercules Chemicals v. Commission, 1991, case T – 7/89, a fine of € 2.75 million was imposed on Hercules by the Commission, because a number of polypropylene suppliers – including Hercules – in the EEC territory had reached an agreement amongst themselves to allot a minimum price at which this chemical was to be sold. This resulted in the polypropylene market being shared between them. The firm Speed, on the other hand, aims to collaborate with a Dutch firm and a German firm to produce better formula 3 tyres. In addition to these firms there are several more firms that manufacture such tyres; hence, Speed and its associates cannot be accused of cornering the market. Second, decisions by associations of undertakings and third, concerted practices or practices which are unclear. Speed and its Dutch and German collaborators, conducted a meeting in which they had concluded issues like price, cooperation, etc. It was decided in the ICI v. Commission (Dyestuff), 1992, case 48/69, that parallel behaviour combined with something more like communication, price announcement, phone calls, secret meetings, etc, would amount to a restriction of competition. Nevertheless, these parties agreed to share technical know how in order to manufacture a much better quality tyre that would be ideal for icy road conditions. This would benefit the consumers, because there was no increase in the cost of production and it can be assumed that the consumer would benefit from this pricing structure. Therefore, the meeting conducted by Speed and the other parties in respect of their future cooperation, will be exempted under Article 81(3) and the UK tyre manufacturer Roadster’s complaint to the Commission will result in an investigation, but the outcome will be favourable to Speed. Such agreements may affect trade between Member States. The objective of Article 81EC is to establish a single common market. If an agreement does not affect trade between the Member States, then the EC Treaty does not apply to it. Such agreements are to be considered by the relevant Member State, this was the decision in Consten and Grundig v. Commission, 1966, case ECR 299. An analysis to ascertain whether an agreement will be caught by Article 81(1) EC entails the calculation of the market share of the parties along with the identification of the concerned markets. The accepted view is that a low market share seldom generates restrictive effects. Any agreement that aims to prevent, distort or restrict competition violates Article 81(1) EC and it is not required to prove anti – competitive behaviour. The Court of First Instance or CFI opined in Métropole Télévision (M6) et al. v. Commission, 2001, Case T-112/99, that an economic approach had to be adopted in considering agreements of anti – competition according to the provisions of Article 81(3) . This judgment expresses the current stance of the Commission. In this connection a white paper and notice were published in respect of Article 81(3) EC, which was witness to a retreat from the formalistic approach. The agreement entered into by Speed and its collaborators will be exempted from the prohibition of Article 81(1) by the provisions of Article 81(3). The latter also applies to categories of agreements such as technology transfers, R&D, vertical restraints and franchising. In view of the fact that the intention of the new notice is to engender the consumer’s welfare; a substantive analysis of the market is needed in order to determine whether an agreement violates Article 81(1) EC. In a Switzerland meeting of European dyestuff manufacturers, it was decided to increase the price of their products in the common market. Imperial Chemical Industries of the UK agreed to this and implemented it through its subsidiaries. The Commission imposed a fine on the UK Company stating that it had violated the competition law. The company’s contention that it could not be held accountable for the actions of its subsidiaries was not accepted by the court. While assessing agreements for exemption procedures under Article 81(3), the following criteria will be taken into consideration. First, economic benefits like betterment in the manufacturing process, distribution or the encouragement of financial development. These issues will reduce the anti – competitive effects. Second, consumers must also be benefited by the agreement. This is the well known ICI v. Commission, 1972, case ECR 619 (Dyestuffs) case. In Irish Sugar plc v. Commission, 1997, case T 228/97, it was found that the Irish Sugar plc, which was the sole sugar producer of Ireland with a 90% market share, had abused its dominant position by opposing small domestic sugar packers and imports from France and Northern Ireland. Moreover, it offered discriminatory prices or discounts to the customers of a French importer, in order to hinder competition. The result was the creation of artificial barriers between the Member States and a disturbance of the market’s fluidity. The Commission accordingly imposed a fine of € 8.8 million on Irish Sugar plc. Speed is not the sole manufacturer of formula 3 car tyres and its share of the Italian market is just 35%, hence it does not enjoy a dominant position. Therefore, it cannot abuse the competitive effects of the market. Irish Sugars had charged indiscriminate prices in order to eliminate competition, whereas Speed had not made any such attempts and the main purpose of collaboration was to pool their technical knowledge in order to produce better tyres without increasing cost. This benefits the industry and the consumer; hence the Commission will not prevent such collaboration. In A. Ahlström Osakeyhtiö v. Commission (Wood Pulp), 1985, Case 89/85, the ECJ imposed fines on manufacturers of woodpulp as they had contravened Article 81EC by indulging in price fixing practices. This was brought about by one company announcing the prices of woodpulp so as to enable other companies to fix their prices accordingly leading to a concentration of prices. Speed and its associates have not indulged in any such price fixing practices; their only reason for coming together is to share technical expertise so that they can manufacture a better quality product without increasing costs. The applicability of the Article 82 begins when the abuse of dominance starts affecting trade between the Member States. This is inapplicable to the agreement between Speed and its collaborators, because Speed does not enjoy a dominant position in the single market. Moreover, the collaboration is intended to manufacture a better quality tyre at the same cost. This does not entail any anti – competition behaviour. Article 82 EC is breached only if there is an abuse of a dominant position. Any undertaking that enjoys significant market power is said to possess a dominant position. This was the judgment in United Brands Co v. Commission, 1978, case ECR 207, there were discriminatory pricing terms in the agreement. Speed does not possess a dominant position. If there is infringement of Article 81(1) then the EC initiates enforcement action under Regulation 1/2003, that could even require termination of the agreement and imposition of penalties that could amount to as much as 10% of the annual worldwide group turnover of each of the parties. Further, the anti – competitive provisions could be rendered void and unenforceable. The party that is put to a loss due to such infringement can initiate a civil action in the national courts in order to claim damages. Chapter III of the Regulation 1/2003 bestows decision making powers on the Commission. If it is suspected that Articles 81 & 82 have been infringed then the Commission can undertake investigations. National Authorities have an important duty to discharge under the new system. On applying Article 81(3) EC National Authorities can decide whether an agreement can be exempted. Article 5 of Regulation 1/2003 permits NCAs to end an infringement and adopt interim measures and impose fines. At present National Courts can apply Article 81(3) EC if an agreement affects trade between Member States. Community competition rules will govern the substantive issues and national law will deal with procedure. The available remedies for infringement of Article 81 & 82 are damages, injunctions and declarations. Read More