EC Competition Law Essay - Article 81

Introduction

Despite the ambitious efforts of Article 81 to catch as much anticompetitive conduct as possible through its broadly defined “agreements” and “concerted practices”, the title statement is nevertheless correct in stating that genuinely unilateral conduct escapes its scope. By analysing the limitations of Articles 81 and 82 EC, Part 1 of the essay will establish what constitutes genuinely unilateral anticompetitive conduct that slips through the net of both Articles. However, it is not only the direct limitations of Article 81 that render it incapable of catching unilateral conduct, but also the problematic issue regarding the “exact delimitation of the concept of an ‘agreement’ within the meaning of Art 81(1), and the distinction between such an agreement and unilateral conduct”.^[1] This paper shares the view expressed in the title statement; Article 81 will require an amendment if it is to catch more unilateral conduct because its current flaws prevent it from achieving more. In order to justify this stance, this paper shall in Part 2 and Part 3 conduct a thorough investigation and evaluation of the legal evolution of how the European Courts and the Commission have determined where the borderline lies between unilateral conduct in vertical restraints and between an ‘agreement’ within the meaning of Article 81. As will be shown, the EC institutions – especially the Courts – have recently become more restrictive in their definition of what constitutes an agreement under Article 81. This development has had the regrettable result of allowing even more unilateral conduct to go uncaught. As a result of both the direct limitations of the Articles and of the now more restricted definition applied to an agreement, an amendment of Article 81 is in fact the only way in which this unilateral anticompetitive behaviour could be brought within the scope of EC competition law. Lastly, the essay disagrees with the notion that the proposed amendment would have the effect of encroaching on the provisions of Article 82, as it would target only genuinely unilateral conduct which by definition also escapes the provisions of Article 82.

Part One – Unilateral Anticompetitive Conduct

Within EC Competition Law

Legal Theory of EC Competition Law

Competition law is central for the Community and it facilitates several of EU’s fundamental aims.^[2] For instance, the Courts and the Commission have consistently upheld the common market objective when interpreting Articles 81 and 82.^[3] Competition law also generates greater market integration by maintaining open and competitive markets and by removing restrictions on parallel trade.^[4] By maximising efficiency and by protecting the goal of undistorted competition^[5], competition law also ensures and enhances consumer welfare.^[6]

Definitions and Limitations of Articles 81 and 82

Articles 81 and 82 contain the main treaty provisions of the competition rules and thus form the cornerstones of Community competition law.^[7] As the Treaty itself does not contain any definitions of the concepts contained in the Articles, the case law of the Courts and the decisions of the Commission have developed the actual definitions^[8], and the concepts have intentionally been “extremely broadly construed”^[9] in order to catch as much anticompetitive action as possible. For instance, the object of ‘concerted practices’ is to catch the anticompetitive action that does not quite constitute a definite agreement, despite the latter being very broadly defined.^[10] In fact, the EC institutions have sought to avoid a legalistic distinction between the two concepts in order maximise the types of unilateral conduct that can be caught under Article 81.^[11] As will be shown, the definitions of the concepts contained in the Articles have evolved in clearly discernable trends over time and it is interesting to note the persuading argument that the definition sought by the Commission or by the Courts has often been “coloured by [their] view of the goal or goals of the antitrust laws.”^[12]

The most significant limitation of Article 81 is the fact that “collaboration between or amongst undertakings is a sine que non for [its] application”^[13]. The prohibition of Article 81 consequently only applies to the obstacles to competition that arise from concertation, and accordingly, no unilateral conduct – regardless of how blatantly anticompetitive it may be – can fall foul of Article 81.^[14] Similarly, although Article 82 addresses unilateral undertakings, it is still constrained by the inherent limitations that only abuse of a dominant position is caught under its provisions, meaning that unilateral conduct of non-dominant undertakings falls outside of its scope.^[15] The Courts and the Commission initially both interpreted and applied an ‘agreement’ under Article 81 very broadly “in an attempt to fill this ‘lacuna’”^[16] resulting from the failings of Article 81 and Article 82 to accommodate genuinely unilateral conduct. Since Article 81 does not address unilateral measures and since Article 82 can only catch unilateral measures when both dominance and abuse are demonstrated, genuinely unilateral conduct taken by a non-dominant undertaking thus remains unequivocally outside the scope of EC competition law as it stands today. This is the central issue identified in the title statement, and to which this essay can only identify an amendment as a possible solution.

Establishing the Focus; Article 81 and Vertical Agreements

This essay focuses only on unilateral conduct within the context of Article 81, both since the concept of unilateral behaviour primarily refers to activities that are outside the scope of Article 81 EC rather than to that of Article 82, and since the complications regarding the delimitation between unilateral conduct and an agreement take place within Article 81, not Article 82.^[17] Furthermore, although it would have been both interesting and possible to extend the scope of the essay to include an investigation of the unilateral conduct of dominant undertakings and of “undertakings occupying a joint dominant position”^[18], as well as of unilateral conduct within horizontal agreements, this essay will nevertheless limit its scope to the analysis of vertical unilateral conduct that is not caught under 81. As identified by the opening statement, it is especially within vertical agreements that unilateral conduct escapes uncaught. In fact, all the leading case law and decisions regarding the “distinction between agreements within the meaning of Article 81(1) and unilateral conduct have concerned vertical agreements.”^[19]

Part Two – Legal Evolution; Past to Present

Summary of Broad Trends

The case law and the Commission decisions regarding the delimitation between an agreement within the meaning of Article 81 and unilateral practices that escape the Article, has been described as “one of the greatest weaknesses of Community Competition Law”^[20]. Part Two will establish the legal evolution of how the Courts and the Commission determine what constitutes an agreement and how they distinguish between ‘ apparently unilateral conduct’ within vertical restraints (which, as will be shown, is in fact caught under Article 81 as forming part of an agreement) and ‘ genuinely unilateral conduct’. Although it is inherently difficult to distinguish between unilateral and multilateral conducts in vertical restraints, there are clear discernable trends within the case law and decisions of how the competition authorities have drawn this borderline.^[21] Initially, both the Courts and the Commission adopted extremely broad interpretations of concepts under Article 81, but gradually they began to speak in different voices. As will be shown in the case law and decision analysis, the Commission – in its central role as the main enforcer and developer of Community competition law and policy^[22] – initially sought to extend the meaning of an ‘agreement’ within Article 81.^[23] This approach reflected the Commission’s intention of broadening the competition rules in order to pursue and realise the objectives of the Community, especially that of market integration.^[24] The Commission was heavily criticised both for letting its policy aims colour its definition of the competition laws and for applying Article 81 too broadly and too strictly^[25]. The Courts, on the other hand, have pursued a more nuanced approach within vertical arrangements under Article 81, and their judgements have evolved since they are not bound by a system of precedent.^[26] Consequently, the Courts have recently come to define an agreement under Article 81 in more restrictive terms and are now applying an increasing number of conditions that need to be met in order for certain conduct to classify as an agreement. Though the Commission has begun to follow suit, albeit to a lesser extent, it would yet be premature to claim that the Commission is fully adhering to the Courts’ approach to Article 81.^[27] Although this general movement “away from overstretched interpretations of Article 81”^[28] is rational and justifiable, it has nonetheless had the negative effect of allowing yet more unilateral conduct to slip through the net. As will be illustrated in the forthcoming analysis and evaluation, the only way in which more unilateral conduct can be caught under EC competition law is by an amendment of Article 81.

[...]

^[1] Wickihalder “The Distinction Between an ‘Agreement’ Within the Meaning of Article 81(1) of the EC Treaty and Unilateral Conduct” European Competition Journal, April (2006): 87-118, p.88.

^[2] Craig and De Búrca EU Law – Text, Cases, and Materials, 4th Edition, Oxford University Press, 2008, p. 950.

^[3] Albors-Llorens EC Competition Law and Policy, Willan Publishing, 2002, p. 7. See also Whish Competition Law, fifth edition, LexisNexis Ltd., 2003, p. 21.

^[4] Prosser The Limits of Competition Law, Oxford University Press, 2005, p. 17. See also Op. Cit. Wickihalder (2006): p. 88.

^[5] Jones and Sufrin EC Competition Law, 3rd Edition, Oxford University Press, 2008, p. 92. See also Competition Law Forum “The Reform of Article 82: Comments on the DG-Competition Discussion Paper on the Application of Article 82 to Exclusionary Abuses”, 31.3.06, p. 1.

^[6] Etro “Competition Policy: Toward A New Approach” European Competition Journal, Vol.1, No. 1 April (2006): 29-56, p. 32.

^[7] Lane EC Competition Law, Longman, 2000, p 49. See also Op. Cit. Jones and Sufrin (2008): p. 95.

^[8] Op. Cit. Albors-Llorens (2002): p. 11.

^[9] Mancero-Bucheli “Anti-Competitive Practices by Private Undertakings: An Analysis from the Perspective of EC Law” The International and Comparative Law Quarterly Vol. 47, No. 1 (Jan 1998): 149-173, p. 156.

^[10] Op. Cit. Lane (2000): p. 54.

^[11] Op. Cit. Whish (2003): p. 101.

^[12] Op. Cit. Wickihalder (2006): p. 92, Burns quoted. This will be further explored in Part 2 of this essay.

^[13] Op. Cit. Lane (2000): p. 139. Italics added.

^[14] Another limitation of Article 81 exists but is not directly relevant for this essay it the fact that, in order to be joined, the anticompetitive conduct must have an appreciable effect on trade between member states; this is known as the de minimis rule (See Lane “European Union Competition Law” International & Comparative Law Quarterly, 53(2) (2004): 465-478, p. 469. If the anticompetitive behaviour is not sufficiently appreciable as to affect trade patterns, it will not fall within the provision of Article 81 (see Op. Cit. Albors-Llorens (2002): p. 27-29).

^[15] Op. Cit. Albors-Llorens (2002): p. 75.

^[16] Op. Cit Wijckmans and Tuytschaever and Venderelst (2006): p. 65.

^[17] Ibid. p. 20.

^[18] Lane “Competition” International & Comparative Law Quarterly, Vol. 49, No. 1 (2000): 227-234, p. 230. See also Op. Cit. Albors-Llorens (2002): p. 108.

^[19] Op. Cit. Wickihalder (2006): p. 91.

^[20] Ferro “Reassessing Borders Between Agreements and Unilateral Practices After Case C-74/04, Volkswagen II” European Competition Law Review, 28(3) (2007): 205-211, Hawk quoted on p. 1.

^[21] Op. Cit. McCabe (2008): p. 600, see also p. 607.

^[22] Op. Cit. Jones and Sufrin (2008): p. 100 and 126-7.

^[23] Op. Cit. Wickihalder (2006): p. 105.

^[24] Op. Cit. McCabe (2008): p. 607.

^[25] Op. Cit. Craig and De Búrca (2008): p. 986. See supra, note 12.

^[26] Op. Cit. Jones and Sufrin (2008): p. 104.

^[27] Op. Cit. Craig and De Búrca (2008): p. 998.

^[28] Op. Cit. Ferro (2007): p. 209.