European Commission’s Approach towards the Article 81 EC Essay

IntroductionThe objective of term 81 is to limit repressing agreements and new(prenominal) modes of complicity among independent firms in horizontal as well as perpendicular relationships1. Some instances of such masterhibit practices are, price fixing confining or controlling crosswayion, merchandise places, technical development or investment address-out foodstuffs or sources of supply applying dissimilar conditions to equivalent transactions making the expiry of contracts subject to supplementary obligations that induct no connection with the subject of the contracts2.Moreover, it is sassy if bind 81(1)3 EC is implemented in such a form that most of the agreements that curtail economic immunity would be caught without either economic analysis having been performed4. The EC has commenced to apply a new economic cash advance and simultaneously the ECJ has accepted the item that a proper rule of reasonableness analysis has to be conducted under denomination 8 1(3)5.The underlying principle of expression 3(g) of the EC Treaty6 is to implement a system which take ins that contest in the cozy market is non coloriseed7. Prohibition of concerted practices, abuse of a ascendant position and state aid is restricted to practices that affect pile among the member States and ignores practices that influence domestic trade8. Nevertheless, oblige 81 EC permits anti-competitive practices whose pro-competitive results dwarf their anti-competitive consequences9.In the sequel the scope of article 81 EC has been discussed, in delight in of anticompetitive issues. In this regard the substantive integritys restricting the anticompetitive lay outs of markets and the adjective controls like prohibition and freedoms concerning public polity and economic approach bewilder been discussed at length. In this context relevant crusade laws have been discussed. The modern-day tendency is to restrict competitive agreements. The missionary work h as implemented a to a greater extent economic approach by kernel of the rule of reason in obligate 81(1) EC, which has assisted decentralization with regard to the enforcement of clause 81(3) EC10.Free contestIn order to ensure free ambition in the whiz Market, agreements which not only have a signifi merchant shipt effect on the trade between the Member States but also prevent, restrict or distort competition in the Single Market are veto by clause 8111. Article 81 EC contains a total of practices that are usually excluded12. These relate mainly to licensing agreements for patents and other intellectual holding rights.Competition Law TestIn general, the Commissions granting immunity insurance favours the application of a competition law test. The block granting immunity on vertical restraints is merely an interchange between curbing intrabrand competition and encouragement of interbrand competition13. The European Commission is authorized to remove the advantage of an ex emption in respect of agreements that are at variance with Article 81(3)14. good AgreementsThe interior(a) authorities contribute deprive vertical agreements that contravene Article 81(3) of the benefit of exemption.15 In respect of vertical agreements that restrict competition and allow fifty percent or more of a specific market, the Commission will cancel the exemption and apply Article 81(1) in its entirety16. Further, in cases of undue advantage of a plethoric position, exemption is permitted by Article 82 EC17.The agreements pertaining to the supply and distribution of goods comply with the new Block freedom 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 bring its competition rules into play19. Formerly the EC had adopted a formalistic approach that had construed any restriction of commercial freedom to be restrictive of competition. Further, the Commission had a monopoly in respect of implementing Article 81(3). Article 81(1) was given a wide interpretation as it had to be enforced uniformly in all the Member States20.Article 81In Mtropole Tlvision (M6) et al. v. Commission21, the motor inn of First Instance or CFI held that a monetary outlook was essential as per the victuals of Article 81(3) 22. The judgement in this case is in conformity with the present outlook of the Commission. This approach is the upshot of the White motif and the new notice on Article 81(3) EC23. In this approach on that point is a retreat from the formalistic approach. Since, the objective of the new notice is to fix 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 large range of products, the manu positionure or apportionment of goods, and if technical and economic progress do not show any improvement25.Further, decisions of the Commission under Article 2(4) of Regulation 4064/89 result in a balancing exercise26. Thus, while applying Article 81 EC the interior(a) courts have to perform the competition law test, which is in most of the cases oblige by Article 81(3) EC27. In all other instances the national courts can obtain either the Commissions assistance 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 unaffected. These agreements are the exclusive domain of the national authorities. This radical 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 t hat it must be possible to foresee with a enough degree of probability on the basis of a set of objective factors of law or of fact that the agreement in question whitethorn 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 aforesaid(prenominal) outcome33.Second, this approach ensures that the statutory provisions do not achieve an unfounded frustration of competitive strategies34. Hence, a competition policy approach that recognizes this fact will guarantee the guard of consumers and also encourage augmentd productiveness and growth35.The EU competition law has progressed towards a policy that depends on a market c visualizeed e conomy36 and in 2004 an enforcement procedure incorporating these considerations was implemented by the European union.The fatality to adopt an approach that is more economic based to market definition, dominance and abuse has been conceded by the European Commission. Undertakings with a market share in excess of fifty percent can easily pretend that they are not dominating the market and this stance has been accepted by the Commission37.Daimler Chrysler secured a highly solid reduction of the very wells 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 labelled three of the Daimler Chrysler agreements as being 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 unification of Sidel SA and Tetra Laval BV. Sidel was a manufacturer of stretch blow moulding machines apply 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 merger 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 riddance 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.T he 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 cardinal 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 later on 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 allocators of the same brand) by means of territorial reserve reserve distinctiveness, without restricting parallel trade. Of these restrictions the most cardinal are those that create territorial restrictions49. Moreover, a distributor might enter into an exclusive distribution agreement solel y for the purpose of obtaining absolute territorial security in order to ensure shield from free riders and forethought investment in the promotion of the product50.This protection is essential for launching a new product which requires more promotion than an complete 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 some distribution agreements cannot be established, for instance, in Societe la Technique Miniere52, the woo 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 pe rmitting partial territorial exclusivity will 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 attach 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 Auth orities want to ensure that some manner of parallel trade is preserved by means of passive sales that originate outside the contract area. In case of vertical agreements total territorial protection is banned and the Court has fabricated a moderate approach in less restrictive territorial limitations58. The fact remains that even the vertical agreements regulation is unable to grapple between active sales and passive sales, which are not to be banned59.The guidelines have made it clear that selective 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 given relevant training there will be an increase in after sales services, the servicing of guarantees, etc61.The relevant case law in respect of selective distributive agreements has been accused of being intricate, a ntonymous 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 validigital audiotapee 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 stuffing legislation in order to secure the legal certainty of the undertakings that have to operate 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 stop takes place, from the time a potential claimant is subjected to anti-competitive agreement or practice money box it is brought before the national court, question to the ECJ are formulated and a retort 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, go forth 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 legion(predicate) 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 Competitio n Law and Policy. Willan Publishing. P. 18. ISBN 1903240743.Dabbah, Maher M. 2004. EC and UK Competition Law Commentary, Cases and Materials. Cambridge University Press. P. 56. ISBN 0521604680.Mac Culloch, black 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 impertinently Regulation.P. 55 -56. ISBN 9050952224.Tillotson, fast one and Foster, Nigel G. 2003. Text, Cases & Materials on European Union Law 4/E. Routledge Cavendish. P 407. ISBN 1859417779.Journals and Working 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 Restrict a Restriction. 32 Legal looses of Economic Integration 111 (2005), pp. 112-113.Brusick, Philippe Alvarez, Ana maria and Cernat, Lucian. Competition Provisions in Regional plenty Agreements How to Assure knowledge Gains. 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