European Commission’s Approach towards the Article 81 EC Essay

admittanceThe fair game of hold 81 is to limit restrictive agreements and other modes of complicity mingled with independent firms in plane as well as vertical relationships1. Some instances of such prohibited practices are, price fixing modification or controlling production, markets, technical evolution or investment sharing markets or sources of supply applying dissimilar conditions to equivalent transactions making the conclusion of contracts adequate to(p) to supplementary obligations that have no connection with the subject of the contracts2.Moreover, it is immaterial if expression 81(1)3 EC is apply in such a fashion that most of the agreements that flash back sparing freedom would be caught without any sparing abbreviation having been performed4. The EC has commenced to apply a untested economic progression and simultaneously the ECJ has accepted the fact that a proper rule of reason analysis has to be conducted under Article 81(3)5.The underlying princip le of Article 3(g) of the EC Treaty6 is to implement a arranging which ensures that competitor in the internal market is not distorted7. Prohibition of concerted practices, abuse of a preponderant position and state aid is restricted to practices that affect trade between the extremity States and ignores practices that influence interior(prenominal) trade8. Nevertheless, Article 81 EC permits anti-competitive practices whose pro-competitive results overshadow their anti-competitive consequences9.In the sequel the scope of Article 81 EC has been discussed, in take to be of anticompetitive issues. In this count the substantive fairnesss restricting the anticompetitive effects of markets and the procedural controls like parapet and exemptions concerning public policy and economic go up have been discussed at length. In this context relevant incident laws have been discussed. The contemporary tendency is to restrict competitive agreements. The guardianship has implemented a to a greater extent economic approach by means of the rule of reason in Article 81(1) EC, which has assisted decentralization with regard to the enforcement of Article 81(3) EC10.Free disceptationIn order to ensure free tilt in the bingle Market, agreements which not only have a significant effect on the trade between the penis States but also pr evet, restrict or distort competition in the Single Market are prohibited by Article 8111. Article 81 EC contains a list of practices that are ordinarily excluded12. These relate mainly to licensing agreements for patents and other intellectual property rights.contention Law TestIn general, the Commissions exemption policy favours the application of a competition law test. The obstruction exemption on vertical restraints is merely an interchange between curbing intra brand competition and encouragement of interbrand competition13. The European Commission is accredited to remove the profit of an exemption in respect of agreements tha t are at variance with Article 81(3)14.upright AgreementsThe national authorities can deprive vertical agreements that contravene Article 81(3) of the benefit of exemption.15 In respect of vertical agreements that restrict competition and include fifty pct or more of a circumstantial market, the Commission will cancel the exemption and apply Article 81(1) in its entirety16. Further, in cases of undue advantage of a dominant position, exemption is permitted by Article 82 EC17.The agreements pertaining to the supply and distribution of goods comply with the pertly Block Exemption Regulation18. These guidelines and Block Exemption Regulation constitute a competition policy that favours an economic approach rather than a regulatory approach to vertical agreements. This indicates the Commissions intention to occupy its competition rules into play19. Formerly the EC had seeed a formalistic approach that had construed any restriction of commercialized freedom to be restrictive of comp etition. Further, the Commission had a monopoly in respect of implementing Article 81(3). Article 81(1) was habituated a wide interpretation as it had to be enforced uniformly in only the Member States20.Article 81In Mtropole Tlvision (M6) et al. v. Commission21, the Court of First casing or CFI held that a monetary outlook was necessary as per the edible of Article 81(3) 22. The judgement in this case is in conformity with the insert outlook of the Commission. This approach is the upshot of the White Paper and the rude(a) notice on Article 81(3) EC23. In this approach there is a retreat from the formalistic approach. Since, the objective of the new notice is to engender the consumers welfare it requires a substantive analysis of the market in order to determine whether an agreement violates Article 81(1) EC24.Article 81(3) rescinds the prohibitions in Article 81(1) if competition exists for a life-size range of products, the manufacture or allocation of goods, and if technic al and economic progress do not verbalize any improvement25.Further, determinations of the Commission under Article 2(4) of Regulation 4064/89 result in a equilibrate exercise26. Thus, while applying Article 81 EC the national courts have to perform the competition law test, which is in most of the cases imposed by Article 81(3) EC27. In all other instances the national courts can go either the Commissions avail as per Article 15(1) EC or the ECJs assistance as per Article 234 EC28. Since, the national courts cannot apply Article 81(3) EC the ECJ transferred the necessary portions of Article 81(3) EC to Article 81(1) EC29.Article 81 EC does not apply to agreements that leave trade between member states un stirred. These agreements are the exclusive domain of the national authorities. This basic test of whether or not interstate trade was affected was dealt with by the E.C.J. in Socit Technique Minire v. Maschinenbau Ulm30, the E.C.J. held that it must be possible to look to w ith a sufficient degree of probability on the basis of a raiment of objective factors of law or of fact that the agreement in oral sex may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States31.Economic ApproachThe adoption of an economic approach first, ensures that legal provisions are not rendered ineffective due to anti-competitive behaviour32. This approach applies a more consistent treatment to the different practices, because a similar treatment is accorded to practices with the same outcome33.Second, this approach ensures that the statutory provisions do not achieve an unjustified frustration of competitive strategies34. Hence, a competition policy approach that recognizes this fact will guarantee the protection of consumers and also encourage increased productivity and growth35.The EU competition law has progressed towards a policy that depends on a market centered economy36 and in 2004 an enforcement procedure incorp orating these considerations was implemented by the European Community.The necessity to adopt an approach that is more economic based to market definition, control condition and abuse has been conceded by the European Commission. Undertakings with a market destiny in excess of fifty percent can easily establish that they are not dominating the market and this stance has been accepted by the Commission37.Daimler Chrysler secured a highly significant drop-off of the fines imposed on it by the Commission for alleged infringements of Art.81 on the German, Spanish and Belgian car market in 200138. The CFI annulled two of the three findings of infringements, which resulted in a reduction of the fine from 71.8 million to 9.8 million39. Since, Daimler Chrysler was unable to establish that its Belgian subsidiary had acted independently the CFI did not annul the decision to fine Daimler Chrysler40. In this case the Commission had labeled three of the Daimler Chrysler agreements as macro cosm anti competitive. The CFI set aside two of these allegations and upheld only one of them41, thereby indicating that competitive agreements had been prohibited.In Tetra Laval v. Commission, the Commission prohibited the fusion of Sidel SA and Tetra Laval BV. Sidel was a manufacturer of stretch blow moulding machines used for packaging liquid foods in plastic. Tetra was a dominant company in the carton-packaging market operating through a related company42. The Commission considered the coalition of Tetra Laval and Sidel to be anti competitive and prohibited it however, the CFI disagreed with the Commission and permitted the merger.Although, Article 81(3) permits the elimination of competition Vis a Vis a significant number of products, the application of Article 8243 cannot be frustrated by Article 81(3) 44. Moreover, not all the restrictive agreements entered into by a dominant undertaking represent the abuse of its dominant position45.The exemptions under Article 81(3) are contained in block exemption regulations46 and their standardization gains automatic exemption if the joint market share is less than 20 five percent and the agreement conform to the requirements of the joint R&D block exemption regulation47. In the context of a new product or a product in which the participating companies do not compete, the block exemptions validity exists even above the twenty five percent ceiling for the duration of the standard setting and subsequently for seven years48. Prohibition of Competition AgreementsOne of the difficulties faced by Community law is to restrict intra brand competition (or competition among retailers or distributors of the same brand) by means of territorial distinctiveness, without restricting parallel trade. Of these restrictions the most important are those that make water territorial restrictions49. Moreover, a distributor might enter into an exclusive distribution agreement solely for the target of obtaining absolute territorial protection in order to ensure protection from free riders and safeguard investment in the advance of the product50.This protection is congenital for launching a new product which requires more promotion than an established product. Moreover, insufficient protection may prevent the distributor from deploying the product with the result that the product may not make an entry into the market51.In the absence of territorial protection around distribution agreements cannot be established, for instance, in Societe la Technique Miniere52, the Court held that a term bestowing territorial distinctiveness on a distributor would not violate Article 81(1), if it was essential for the distributor to market a producers product53. Even though, the Commission is conscious of the commercial necessity for territorial protection, it has never accepted that the aim of territorial restrictions is to assist pro competitive agreements. The Commission while permitting partial territorial exclusivity wi ll not endure the hindrance to parallel imports, even if the agreements granting unconditional territorial protection may augment inter brand competition, and consequently help in the assimilation of markets within the community54.In the Wouters case, there was a disagreement between competition rules and non competition goals. Further, harmonizing amid competition rules are absent in both Articles 81(1) and 81(3) EC55. If suitable conditions are present Article 81 EC can be matched against public interest concern. Since, Article 81(1) and 81(3) did not wed sufficient importance to the protection of the legal professions freedom it was undermined56.Consten and Grundig57 established proscription on the formation of an unqualified territorial defense. Such a stringent approach has been implemented because these restrictions could prevent the development of the internal market by isolating the national markets. Moreover, the Community Authorities want to ensure that some manner of pa rallel trade is preserved by means of passive sales that originate immaterial the contract area. In case of vertical agreements total territorial protection is banned and the Court has fictitious a moderate approach in less restrictive territorial limitations58. The fact remains that even the vertical agreements regulation is unable to distinguish between active sales and passive sales, which are not to be banned59.The guidelines have made it clear that discriminating distribution agreements could result in an increase in intra brand competition and eliminate access to markets60. However, selective distribution agreements could augment inter brand competition or competition based on brands or labels. Since, the sales staff are to be addicted relevant training there will be an increase in after sales services, the help of guarantees, etc61.The relevant case law in respect of selective distributive agreements has been accused of being intricate, irrelevant and perplexing and it has rendered the task of concluding whether an agreement infringes Article 81(1). Moreover, confusion prevails in respect of the products that validate selective distribution62.Vertical restraints are constraints on the freedom of behaviour for undertakings resulting from a vertical agreement. Although, vertical restraints prevent, restrict or distort competition they also engender efficiency improvements. Hence, the resultant economic effect is unclear63.ConclusionCompetition is one of the most important factors that elicit a faster growing, consumer-oriented European economy64. In this context, The Commission has to adopt clear guidelines and binding legislation in order to secure the legal certainty of the undertakings that have to melt down under the EC Competition Law Framework65. The uniformity in interpreting and applying competition rules are essential for legal certainty which is necessary to decentralize EC competition law66.At present an inordinate postponement takes pl ace, from the time a potential claimant is subjected to anti-competitive agreement or practice till it is brought before the national court, question to the ECJ are formulated and a reply is received, and the national court eventually rules on the issue67. It would benefit everyone if both policy and lawmakers study the American experience that reveals that legal certainty cannot be ensured by, leaving it up to the parties in trials before the courts68.In this manner it can be seen that despite the European Commissions approach to Article 81 involving a greater use of sensible economic analysis, too many agreements which are anti-competitive are still prohibited. The foregoing analysis reveals that a significant number of competitive agreements are being prohibited due to decentralization and a narrow approach that favours public interest and economic policy.BibliographyBooks Albors Llorens, Albertina. 2002. EC Competition Law and insurance. Willan Publishing. P. 18. ISBN 190324074 3.Dabbah, Maher M. 2004. EC and UK Competition Law Commentary, Cases and Materials. Cambridge University Press. P. 56. ISBN 0521604680.Mac Culloch, Angus and Rodger, Barry J. 2004. Competition Law and Policy in the EC and UK. Routledge Cavendish. ISBN 185941933X. 139, 191, 192, 195.Stuyck, Julien, Gilliams, Hans and Ballon, Elke. 2002. Modernisation of European Competition Law The Commissions Proposal for a New Regulation.P. 55 -56. ISBN 9050952224.Tillotson, John and Foster, Nigel G. 2003. Text, Cases & Materials on European Union Law 4/E. Routledge Cavendish. P 407. ISBN 1859417779.Journals and workings PapersArticle 81. Official Journal of the European Communities. Consolidated version of the treaty establishing the European Union. 24.12.2002. C 325/64. Retrieved from http//eur-lex.europa.eu/en/treaties/dat/12002E/pdf/12002E_EN.pdfBourgeois and Bocken. Guidelines on the Application of Article 81(3) of the EC Treaty or How to check a Restriction. 32 Legal Issues of Economic Inte gration 111 (2005), pp. 112-113.Brusick, Philippe Alvarez, Ana Maria and Cernat, Lucian. Competition Provisions in regional cunning Agreements How to Assure Development Gains. Chapter IX Modernization of the European System. United Nations Conference on Trade and Development (UNCTAD). 2005. United Nations Publication. Symbol No. UNCTAD/DITC/CLP/2005/1. p. 284.Goldschmidt, Peter I.B and Lanz, Christoph. Maybe Definitely Definitely Maybe? EC Competition Law Is the time ripe for reform? European Institute of Public Administration. EIPASCOPE 2/2001. Retrieved from http//www.eipa.nl/cms/ deposition/eipascope/scop2001_2_2.pdfKallaugher, John and Weitbrecht, Andreas. 2006. Developments under Articles 81 and 82 EC the Year 2005 in Review. C.L.R. Issue 3. p. 139, 143. Sweet & maxwell and Contributors.Komninos, Assimakis P. 2005. Non competition Concerns Resolution of Conflicts in the Integrated Article 81 EC. The University of Oxford Centre for Competition Law and Policy. functional P aper (L) 08/05. Pp. 3, 5, 10. Retrieved fromhttp//www.competition-law.ox.ac.uk/lawvle/users/ezrachia/CCLP%20L%2008-05.pdf