Homewood: EU Law Concentrate 5e
'Because of its wide scope, Article 101(1) TFEU is an effective tool for the achievement of the fundamental aims of EU competition law. At the same time, the exemption provisions in Article 101(3) allow sufficient room for restrictions which, on balance, have beneficial effects.'
Critically assess the accuracy of this statement, with reference to relevant cases.
Introduction: context and aims of EU competition law
The internal market concept – including the free movement of goods and services.
- The free movement of goods rules target actions by Member States – the competition rules target business behaviour.
- Anti-competitive business behaviour has other harmful consequences – harm to consumers, to small- and medium-sized businesses, and to business efficiency.
- Articles 101 and 102 TFEU prohibit restrictive business practices because of these harmful effects.
- Article 101 concerns restrictive arrangements between businesses.
Wide scope of Article 101(1): a tool to achieve the fundamental aims of EU competition law
- Article 101(1) is wide as to the kinds of arrangements covered – agreements between undertakings, decisions by associations of undertakings, and concerted practices. Discuss the scope of each, with authorities (ie case law).
- Article 101 is wide in scope as to object or effect. Either is sufficient (STM). Note a deemed object: market sharing and price fixing.
- Also wide as to scope of 'restriction, prevention, distortion', including an increase in trade (Consten).
- Covers both horizontal and vertical agreements (Consten).
- An 'effect on trade between Member States' is interpreted broadly to include direct or indirect, actual or potential effect (STM, Commission notice: guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty, 2004) – can include agreements between undertakings operating solely within one Member State (Vacuum Interrupters) – agreements are considered in their market context, so may be caught even if, considered in isolation, they would not affect trade between Member States (Brasserie de Haecht).
- Butde minimis agreements outside scope – an appreciable effect on competition required (Volk, Commission notice on agreements of minor importance, 2014) – so wide scope is not unlimited. Note matter of anticompetitive objective under the new notice.
- List of restrictions in Article 101 (1)(a)–(e) is non-exhaustive, leaving it open to Commission/Court of Justice to make decisions on case-by-case basis, having regard to the underlying aims of competition policy.
- The Court of Justice may balance the anti- and pro-competitive effects of an agreement (Pronuptia, Metro), but a rule of reason not expressly recognized and has been denied by the Court of First Instance (now called the General Court) (Métropole Television).
- Article 101(2) provides that restrictive agreements are 'automatically void' but the Court of Justice has introduced the possibility of severance (STM, Consten).
- Achieving competition law aims, for example: internal market – no absolute territorial protection (Consten); harm to consumers and to business efficiency – no price-fixing (ICI, Henessy/Henkell); harm to small- and medium-sized undertakings – no disproportionate non-compete clauses (Henessy/Henkell).
Exemption provisions in Article 101(3): sufficient room for restrictions which, on balance, have beneficial effects?
- Context – restrictions falling within Article 101(1) that are nevertheless permitted because of the overall beneficial effects of an agreement – distribution, production, technical and economic progress, provided proportionality, and no substantial elimination of competition.
- Application of Article 101(3) conditions both to individual agreements and categories of agreements – individual and block exemption.
- Article 101(3) conditions require a balancing of pro- and anti-competitive effects.
- Individual exemption, for example: improving the production or distribution of goods or to promoting technical or economic progress (ACEC/Berliet, Prym-Werke).
- Provided they allow consumers a fair share of the resulting benefit, there are no unnecessary restrictions (CECED) and no elimination of competition (CECED, ACEC/Berliet).
- The block exemptions, for instance Regulation 330/2010 on vertical restraints, cover categories of agreement that are regarded as normally satisfying the Article 101(3) conditions, thus having overall beneficial effects.
EU competition law aims to root out business practices that threaten market integration, reduce efficiency, and harm consumers. Article 101(1) is interpreted broadly, to catch all arrangements between businesses with these harmful effects. At the same time, the framework of Article 101, specifically the provisions in Article 101(3), provides for the assessment of the pro- and anti-competitive effects of agreements and allows exemption for agreements which, despite being restrictive, have overall beneficial effects. In order to further ensure the achievement of EU aims, exemption only applies where consumers derive a benefit, where restrictions are proportionate, and where there is no substantial elimination of competition.