LEGAL CARTELS FORMED BY ARTICLE 101

LEGAL CARTELS FORMED BY ARTICLE 101

INTRODUCTION

How far can businesses go in pursuit of profits and market share? I always wonder. They are always pushing for greater market freedom and yet they still want the law to take its cause. Article 101 of the Treaties of the Functioning of European Union (TFEU) which pertains to rules applying to undertakings gives a glimpse of just how complex governing businesses can be. The article indicates agreements or undertakings which are prohibited as well as the exemptions to the agreements. The prohibited actions are; 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 (1). These agreements or decisions arising from the above said actions therefore become void. The exemptions to this may be caused by any agreement or category of agreements between undertakings, decisions or category of decisions by associations of undertaking or any concerted practice or category of concerted prices.

To have a better insight and understanding of article 101, knowing the object v effect concept will be essential. Object agreements are a type of agreement that out rightly by their very nature are seen to be restrictive to competition (Egervari, 2011). These are agreements that are likely to have adverse effects on competition if implemented. Effect agreements on the other hand do not have obvious restrictions; however they should be investigated for such effects. The agreement is assessed in its market context as well as from an economic perspective.

 

Article 101’s provisions have over the period of its existence come under scrutiny, various interpretations as non written exemptions. One of the key non written exemptions has been the De minimis doctrine. A product of the case of Volk v Vervaecke, the provision states that an “an agreement falls outside the prohibition in Article 101(1) where it has only insignificant effect on the market, taking into account the weak position which the persons concerned have on the market of the product in question” ( Whish, 2012 ).

The De minimis doctrine also indicates below what threshold the doctrine applies. The first provision is if the aggregate market share held by the parties involved in the agreement is not more than 10% on any of the relevant markets which are affected by the agreement where the agreement is between undertakings which are actual or potential competitors in any of the markets under scrutiny (Whish, 2012). The second condition is in reference to an agreement between undertakings which are not actual or potential competitors in any of the markets and states that “if the market share held by each of the parties to the agreement does not exceed 15% on any of the relevant markets affected by the agreement” (Whish, 2012). However this safe harbor does not apply to horizontal agreements to fix prices, to allocate markets or customers or limit output or sales and vertical agreements to impose export bans or restrict sales.

It is also important to note that Article 101 (1) applies to both horizontal and vertical agreements. Horizontal agreements involve undertakings within the same level of the production/distribution chain such as retailers and manufacturers (Amodine, 2013). Vertical agreements on the other hand involve undertakings which operate at different levels such as a distribution agreement between a manufacturer and distributor (Amodine, 2013).

This paper seeks to identify the various provisions of Article 101 under which it possible for Cartels to be legally established and run.

Wouters Case

Wouters v Algemene Rad Van de Netherlands is marked as an important case in the European Court of Justice, it is actually the most referred to case in EU competition law and the ruling set precedents which have been used to develop the law. The case provided a clear understanding concerning competition law and the freedom of establishment. Headed by Judge Rodriguez Iglesias, the European court of Justice held the verdict that restrictions could be justified but only on the grounds of legitimate public policy. In this case, the European Court was required to consider the compatibility with Article 81 EC of a Dutch rule which foreclosed the creation of multi-disciplinary partnerships involving lawyers and accountants. The Court’s verdict was that the national rule had an adverse effect on competition and trade between Member States would be affected (para 86). It was possible to offer a wider range of services from   multi-disciplinary partnership as well as benefit from economies of scale generating cost reductions. The prohibition was therefore liable to limit production and technical development within the meaning of (what is now) Article 81(1)(b) EC.

 

The Court went on to state that for the sake of application of Article 101 an account must be taken of the overall contex

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