European Law: What Is the Purpose of Article 101(3) TFEU - Coursework Example

1. INTRODUCTION The European Community came to see the daylight in the year 1957 by the Treaty of Rome and initially comprised six Member s. On 1st December 2009, the EC Treaty merged with the Treaty of Lisbon and came to be called as the Treaty on the Functioning of the European Union (TFEU). European Union or EU was created to achieve a “common”, market within the Europe. Their basic goal is to allow people, goods, services and capital to move freely among the Member States. Such an aim cannot be achieved unless the fair treatment of the consumers is ensured and they are protected from exploitations of the sellers who might dominate them by resorting to unfair trade practices like cartel or monopoly. Efficient allocation of the resources is also a mandate. Treaty on the Functioning of the European Union or TEFU, ensures such fair dealing via competition laws and prohibit any such trade practices which might be prejudicial to the healthy trade fare. One of the key provisions of TEFU is encompassed in Article 101 which was ex Article 81 of European community. Article 101 of TEFU provides that: 1. The following shall be prohibited as incompatible with the internal 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 internal 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, 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 benefit, 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 a substantial part of the products in question 2. ANALYSYS Explanation: Thus just scanning through the bare provision we can see that section 101 (1) was mainly enacted to prohibit all such agreements or decisions between undertakings and associations which may affect trade between its member states by way of preventing, restricting or distorting of competition within the internal market. It has also included the unfair means which might be resorted to attain such inequitable goals like by fixing selling prices or by way of limiting production, technical development or investment or by placing equivalent transactions at a competitive disadvantage by applying dissimilar conditions. Sub clause 2 of the same article makes any agreements or decisions prohibited pursuant to this Article to be void ab initio. Sub clause 3 of the same Article makes way for the exceptions. It postulates that the provisions of sub clause 1 may be exempted in certain cases where such agreement, undertakings or decision, contributes in improving the production or distribution of goods or promotes technical or economical progress while allowing consumers a fair share of the resulting benefit. However such agreement must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives or pave way for such undertakings to eliminate the competition in respect to the substantial part of the product. Therefore we see that even if an agreement is caught by Article 101(1), it may benefit from an exemption under Article 101(3). Purpose: On analysis we can say that the major purpose behind the article 101 (3) is to widen the ambit or scope of trade welfare, consumer benefit and fair competition. It principally prevents the clause (1) from obstructing in any way the path of consumer advantage and smooth ongoing of the trade practices among its members. This clause is basically a thread enumerating from the concept of consumer welfare and protecting them from being exploited by the sellers who might resort to unfair trade practices like cartels, monopoly etc. This Article is enacted for the purpose to ensure that those agreement which contributes towards trade benefits among the member nations by way of improving process of manufacture and distribution, promoting technical and economical progress and allocating the consumers with a just share of the resulting benefit, must not get chained by clause 1. ECJ, in many of the cases have pronounced that while applying the article, its purpose or object must be taken into consideration. General Conditions: However the EU has guaranteed some extra protection in the implementation of Clause (3) to prevent its misuse. It has imposed certain conditions which are to be taken into account mandatorily while assessing the implementation of the exceptions. The general conditions under which the provisions of the article 101 (3) might be imposed are that any such agreement, undertaking or like must not do away with the competition in the market and must not impose any such restrictions which might hinder fair competition. These conditions are a mandate for any healthy running of the trade and commerce because a market would lack quality and the forces of demand and supply would fail if there isn’t a healthy competition. It would also curtail the consumer’s right to choose the best. The general conditions required to be met under Article 81(3) presently 101(3) are namely economic gains, consumer benefits, indispensability of the restrictions for the attainment of the objectives and that the undertakings involved has no possibility of eliminating competition run from the deeper interpretation of the article. This article makes sure that none of the condition is left out while claiming the benefit of this exception and that one condition should not be used to defeat the other. However their order of applicability may differ from case to case. [Article 81(3) does not exclude a priori certain types of agreement from its scope. However, severe restrictions of competition are unlikely to fulfill the conditions of Article 81(3). Such restrictions are usually blacklisted in block exemption regulations or identified as hardcore restrictions in Commission guidelines and notices. Agreements of this nature generally fail (at least) the first two conditions of Article 81(3). They neither create objective economic benefits nor benefit consumer]1. These are like the four pillars upon which the entire economy seems to balance the interest of its buyers and sellers. In the recent “Glaxo” judgment, the E.C.J. clarifies that [market integration is an objective worthy of being pursued in and of itself]2. The court also noted that the [C.F.I. had not erred in law by criticizing the Commission for not taking Glaxo’s arguments seriously into consideration and nothing in the C.F.I.’s interpretation of Article 81(3) altered well-established principles in EC law]3. 3. CASE LAW In the case Competition Authority v Beef Industry Development Society & Anr4, a civil action was brought by the Competition Authority against the Beef Industry Development Society (“BIDS”) alleging that they had infringed Article 81 of the EC Treaty ( now Article 101 of TEFU) by the plans it adopted for the rationalization of the Irish beef industry. The defendants relied on Article 81 (3) of the EC Treaty [now Article 101(3) of TEFU]. They contended that the court not having found any object or effect of restricting competition need not to examine the impact of Article 81(3) upon the agreement. The court nevertheless did examine the same and held that all four the conditions of Article 81(3), namely economic gains, consumer benefits, indispensability of the restrictions for the attainment of the objectives and that the undertakings involved has no possibility of eliminating competition, are satisfied. This judgment was appealed to the Supreme Court by the Competition Authority. On appeal the Supreme Court decided to make reference to Article 234 (now Article 267 of TEFU) to the Court of Justice for a preliminary ruling. On 20 November 2008, the Court of Justice found that on 3rd November 2009, the Irish Supreme Court held that the BIDS agreement had infringed Article 81(1). The Supreme Court has remitted the case to the High Court to decide on whether the conditions of Article 81(3) are satisfied or not. This case is yet to be decided. 3. CONCLUSION Therefore we see that the principles of article 101(3) of TEFU are subject to the following conditions namely efficiency gains, fair share for consumers, indispensability of the restrictions and finally no elimination of competition. All these four provisions are cumulative in nature. TEFU has made a wonderful spectrum for economists all over by enacting these provisions, which are now a very popular subject calling different views from all over the world. Especially the provisions of Article 101 (3) which have even made the companies speculate with respect to New EU Insurance Block Exemption Regulation. Simply speaking this provision has made a wonderful balance between the rights of the traders vis a vis right of the consumers. Sub clause 3 provides the flavour of trade welfare by purporting the exceptions to provisions complied in sub clause 1. It has an overriding effect over 1 if such agreement furthers the objective of fair trade and commerce. Therefore we see that in this era of “Caveat Emptor”, TEFU is like a strong stepping stone, ensuring the welfare and benefits of the consumers and providing them with a strong platform so that the sellers might not dominate them unduly. The “just deal” provision encompassed by TEFU will not only ensure the protection of consumers in both letter and spirit but would also lead to a tremendous prospering of trade and commerce inter se among the member countries. This policy of fair competition will also encourage sprouting of many more business entrepreneurs and motivate further capital investment. It will not only be beneficial to the inter member trade structure but would also draw foreign investments and hence possibly turn itself into a global trade giant. The world can take a lesson from the very well framed laws under TEFU and utilize the same for the betterment of trade and commerce in their respective zones. SOURCES 1. Retrieved from, http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:EN:PDF, Accesses on 7th May 2010, at 8.30 pm. 2. Retrieved from, http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:082:0020:0023:EN:PDF, Accesses on 7th May 2010, at 8.30 pm. 3. Retrieved from, http://webcache.googleusercontent.com/search?q=cache:7YJQHUGoiZcJ:www.juridicum.su.se/jurweb/utbildning/master/master_of_european_intellectual_property_law/Material%25202010/Module%25201/Claes%2520Granmar/Module%25201%2520Competition%2520law%2520lecture.ppt+Article+101(3)+TFEU+[ex+Art+81(3)]&cd=7&hl=en&ct=clnk&gl=in, Accesses on 7th May 2010, at 9.30 pm. 4. Retrieved from,http://www.lexology.com/library/detail.aspx?g=eb1e88fa-03dc-42cf-bc84-a0c07149b48a, Accesses on 7th May 2010, at 10.30 pm. 5. Retrieved from, http://www.courts.ie/Judgments.nsf/597645521f07ac9a80256ef30048ca52/31F1360097AB4F6080257663003A6AF0?opendocument, Accesses on 7th May 2010, at 10.30 pm 6. Retrieved from , http://docs.google.com/viewer?a=v&q=cache:z7oA7X1S7X0J:www.cjel.net/wpcontent/uploads/2010/02/Dostert.pdf+cases+on+article+81(3),+EC&hl=en&gl=in&pid=bl&srcid=ADGEESi0qLFoqOUvldi6PaJiiSHNWUlhgyj0ORqDSYFHN4rqVQiMniZoBh3wYfop5NhYdG-q9oApgbYGBa2VWw-zOEXY5Z3AvRvjSv8h8Z3Yh8dyJJZ-d76O O5oVWN5V7FGHulXbO9F&sig=AHIEtbTp3oQPvTyzoGjJyJdZD_vJUXuscg, Accesses on 8th May 2010, at 10.30 pm 7. Retrieved from, http://europa.eu/legislation_summaries/competition/firms/l26114_en.htm, accessed at 8th May 2010, 10.30 pm Read More