European Union (EU) competition law understands the need to safeguard competition in the common market while equally enhancing effective collaboration where appropriate between enterprises to benefit consumers. This collocation is at the Centre of Article 101 of the Treaty on the European Union’s Function (TFEU). Article 101 tackles the multilateral or bilateral conduct between two or more business ventures. This may take a multitude of forms like market sharing, price-fixing, most favoured nation (MFN), or parallel imports clause. The European Commission differentiates between business practices at the same level in the market where their goods compete directly using horizontal arrangements and at varying levels of the market, commonly referred to as the vertical arrangements. This essay critically evaluates the statement “Concerted practice is the most nebulous of the three categories caught by article 101 treaty of the functioning of the European Union (TFEU)” with reference to the court of justice of the European Union’s case law on the interpretation of Article 101 TFEU and the relevant academic authorities.
Article 101(1) of the TFEU forbids concerted practices and agreements between associations or undertakings which may impact trade between member states and inhibit, distort or prevent competition within the market either by effect or object. It is crucial to understand that from the outset that the institutions have no mandate to address anti-competitive co-operation happening in only one member state because such occurrences remain under the legal power of national competition agencies. For instance, the United Kingdom uses rules enshrined in Article 101 to tackle domestic arrangements in the Competition Act 1998. But when it involves practices with a cross-border nexus that go against the de minimus threshold, they are often handled by the Commission in the first instance. The guidelines presented regarding the Article’s usability exhibit an excellent point of reference for the Commission’s technique. From the guidelines, it can be observed that the Commission is very stringent on so-called ‘object restrictions which have a higher probability of negative implications.’ These effects include market sharing, reduction of output, and price-fixing, all of which cause a reduction in the wellbeing and the welfare of the consumer since customers have to pay higher prices for relevant services or goods. Additionally, there is also a possibility of misallocation of resources since such services or goods are produced in adequate quantities. The role of the Commission in addressing such malpractices is to install an anti-competitive impact on the common market as an issue preventing the necessity for lengthy economic analysis.
Since the practices fostered by object restrictions are so critical, most of the credibility of institutions depends on their ability to punish and prevent such violations. The evidence indicates that institutions have applied an admirably robust technique. For example, in 2015, the Financial Times reported fines due to price-fixing to have hit a world record of £5.3bn. The European Union formed a huge portion of the total sum, and the EU is treated as a trailblazer for regimes that are less developed. Additionally, in 2012 14 international freight forwarding firms were fined a total of EUR 169m for practices associated with four price-fixing cartels. A year before, the Commission had levied a fine of more than EUR 86m on different producers of window mountings after noticing that they had secretly convened a meeting at a trade association convention to arrange for price increases for the coming year. This determination shows the Commission’s willingness to punish un-official gentlemen’s agreements’ as a harshly composed statement of co-operation. Provided the harmful impacts of price-fixing, which the Commission recognises in paras 21 and 22 of the Guidelines, it is commendable that there is such an uncompromising approach to severe violations.
The technique to other concerted practices has faced equally rigorous restrictions. The posture to output confinement is summarised in the renowned Irish Beef case. The court of justice of the European Union fined Irish beef processors for conspiring to minimise overcapacity in the local beef market that had the impact of changing the supply-demand dynamics in such a trick to hike prices. This decision is another clear indication of the Commission’s commitment to deter anti-competitive conspiracy even in scenarios where they might have led to the collapse of other major competitors in the domestic market if they acted otherwise. Consequentially, the correct interpretation of Article 101 TFEU is a mantra that shows that EU policy is there to protect competitors. But these institutions do not only punish the cases of horizontal co-operation. They also address incidences of vertical co-operation. For example, resale price maintenance is regarded as detrimental to consumers since it involves price-fixing for a supra-competitive end consumer. As a result, both parties share the defects by maintaining a more considerable margin. Another form of vertical co-operation is known as parallel imports, which is also another area of serious concern demonstrated by the court’s decision to uphold the Commission’s determination in the pioneer case.
It can be seen that institutions have done much work in ensuring that no companies violate Article 101. However, the main concern remains to know whether the correct balance has been struck to ensure that companies that might yield a net advantage to consumers have not been tamed. Particular exceptions are explicitly addressed under Article 101(3). But in article 101(1), analysis stage, the institutions are organised to permit specific arrangements on the condition that there is an adequate benefit to counterbalance foreclosure impacts. In a case involving T-Mobile, the court was ready to identify for the defendants on the ground that dissemination of sensitive market data could lead to enhanced customer service, even if, as a general principle, such dissemination were against the competition law. This is one example of the institution’s sensibility and precise approach to examining anti-competitive impact with consumer-based advantages even when there are concerns about ‘object’ restrictions. This can also be seen in the attitude of vertical prohibitions. When determining the case of CEPSA, the court decided that vertical agreements pertaining to resale price upkeep obligations do not need the interpretation of Article 101(1). As a result, the Commission on Vertical Restraints’ guidelines acknowledges that the resale price’s maintenance may bestow a net gain to customers by influencing new market entrants to embrace the business ideas, deterring free-riding, and giving encouragement to provide pre-sale practices.
However, this does not imply that the institution’s approach to effect restrictions is unduly soft as opposed to object. When the consumers’ interests are prejudiced, Article 101(1) ‘s applicability and incorporation of the guidelines strictly to punish non-compliance. In early 2000, Bayer was heavily fined by the Commission for involvement in an agreement with the distributors to censor parallel pharmaceuticals imports. In circumstances where MFN clauses are involved, the Commission demonstrated its mandate in 2012 when it fined various retailers and publishers for an agreement that ensured that the process of the e-book would not be affordable in third-party retailers. In such a scenario, the overall impression regarding the interpretation of article 101(1) is that the institutions have accomplished a delicate balance between leniency and enforcement.
While Article 101(1) operates as an initial filtering technique for anti-competitive practices, such as cross-border nexus or the de minimus requirements, the primary approach of legitimising collaboration between companies is Article 101(3). According to the interpretation of the court, it means that even if an agreement violates article 101(1) on the principle of the same, it may still be allowed by the Commission on the condition that it fulfills four cumulative rules under article 101(1)(3): known as efficiency gains, the preservation of competition, a fair share of benefits for consumers and the determination of whether the applied measures are a sine qua non of the goals. To further explain the applicability of article 101(3), the Commission has issued guidelines relating to the use of article 101(3) outlining a series of tactics used in examining pro-competitive impacts. For instance, efficiency benefits may constitute a range of econometric and economic properties, including qualitative and cost efficiencies. To use the example of the court’s determination of T-Mobile’s case, competitors’ exchange of sensitive market information could yield beneficial efficiency profits, which lower prices since there will be a rationalisation of variable costs. Alternatively, another appropriate example would be involving the exclusive distributorship concords, which may enhance innovation by assuring key market players about their downstream and upstream practices and promoting long-term investment.
Although the Commission’s tactic under Article 101(3) has played a significant role in ensuring a level competition ground, it has also had imminent criticisms such as not applying scientific practices to fight against concerted activities. Initially, the Commission took the unpredictable collaboration process, capitalising on social gains instead of evaluating all the agreements in a rational economic analysis. But based on the motivation derived from other regimes like that of the United States of America, the Commission has implemented a more robust and rational economic approach to addressing the main elements of Article 101(3). The outcome of this routine Operandi is to examine how market transaction costs and failures may affect the potential evaluation of harmful competitive effects. However, according to some commentator’s non-economic objectives still serve a crucial role in using Article 101(3) even though the methodology design is more of a scientific approach. It is believed that sometimes the Commission has avoided the temptation to apply Article 101(3) to promote social objectives than encouraging competition according to its obligation. Article 101(3) has for many times been exemplary to promoting social goals. However, the Commission’s accompanying block exemptions form a critical means of exempting particular sectors from cross-examination where the partnership is recognised as a requisite matter. For example, shipping companies are among organisations that need an excellent level of mutual understanding between charter firms for them to succeed in their logistical businesses, earn lucrative profits due to various exemptions. As a result, these exemptions end up benefiting the consumers in the affected sectors as they permit some organisations to operate freely without adhering to the risks in such a way that they encourage better services and lower prices. According to the guidelines, it is an inconsequential arrangement that impacts a small portion of the market, which is not perceived as an infringement of Article 101. Such open exemptions lead to a practical expedient of allowing the institutions to concentrate only on the most disastrous and consequential violations of article 101.
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