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Article 101 TFEU consist of three paragraphs and two parts, the first step starts with the first paragraph Article101(1) which prohibits agreements, decisions by associations of undertakings and concerted practices that are restrictive of competition. The second step, that will only become valid when an agreement is found to be restrictive of competition and fall under Article 101(1). Article101(3) contained conditioned of a legal exception to the prohibition

 

The details of article101(1) is to declare the criteria of what shall be prohibited as incompatible with the internal market. To quote the Article 101(1) TFEU states that

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“…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 affect the prevention, restriction or distortion of competition within the internal market,”

It can be seen from the above that targeted of this article is; undertaking, associations of undertaking and concerted practices are require elaboration. Also, the terms ‘agreements’ and ‘decisions’ too.

First, the meaning of ‘undertaking’. Treaty on the Functioning of the European Union does not define an ‘undertaking’1. It has always been a challenge for EU court to analyse its meaning. Undertaking can be considered by these five aspects in the text that follows.

 

The undertaking need to adopt a functional approach because the same legal entity may act as an undertaking when it is doing one thing but not act like that when it is doing another thing. It must behave as an undertaking and follow the purpose of competition rules at all time.

“The concept of an undertaking encompasses every entity engaged in an economic activity regardless of the legal status of the entity and the way in which it is financed.”2 From this quoted of Höfner and Elser judgment states, the undertaking must be engaged in an economic activity. Or if not economics activities it must engaged in these three kind of activities; Solidarity; the exercise of public powers and procurement pursuant to a non-economic activity.

It can clearly be seen from many cases law that the undertakings can be the members of the professions3 such as in the case Pavel Pavlov v Stiching Pensioenfonds Medische Specialisten4, self-employed medical specialists have been justified as undertakings.

According to the meaning within EU competition law, not every worker in the system is constitute in undertaking and not every trades unions that happens will be accepted as an agreement of undertaking. Every entity that has employees and trades unions should be determined case-by-case whether it will fall in Article 101 or not.

Second, the ‘Decisions by associations of undertakings’: a coordination between undertakings may be achieved through a trade association where firms come together as a cartel. This plays important role when there is large numbers of firm consist in the cartel to help recognized that is the trade restrict competition and shall be prohibit by Article101(1).

Third, they are merely convenient label to separate concert practices from agreement5. The real meaning of concerted practices is a form of coordination between undertakings which did not reached the stage of being a completely concluded agreement.6 The burden to proof to the court that what will be considered as concerted practices is on the commission.

 

An agreement that falls within article101(1) TFEU is not always illegal. This is where article 101(3) comes in, the article presents us with an exception of article101(1) by providing what can be acceptable7. The article 101(3) has four requirements that an agreement must have:

 

A)  an improvement in the production or distribution of goods or in technical or economic progress

the benefit that directly from an agreement must be a common value to the EU market as a whole, not just an individual private company and keep all the benefits to themselves. Any advantages that happens because of the agreement must outweigh the damage it might produce while working on it8.

B)  fair share for consumers

the agreement must allow consumers a fair share of the resulting benefit. It is not necessary that consumers share in each and every efficiency that is brought about by the agreement, as long as they receive a fair share of the overall benefits. For example, higher price can be beneficial option to the consumers as long as they can be compensated, may be increased quality together with the price.

 C) indispensability of the restrictions

The Agreement must not impose restrictions that are not indispensable to the attainment of the benefits. The indispensability condition can be categorized as two-fold, firstly whether the restrictive agreement itself is reasonably necessary in order to achieve the efficiencies; and secondly whether the individual restrictions of competition owing from the agreement are reasonably necessary for the attainment of the efficiencies.

D) no elimination of competition in a substantial part of the market

the agreement must not afford undertakings the possibility of eliminating competition. This condition shows that in the end the protection of transparent and effective competition is prioritized over procompetitive efficiency gains that result from restrictive agreements.

So far, this paper has focused on the EU competition law. The following section will discuss the US antitrust law, Sherman Antitrust act section1. The law meant to prevent agreements in restraint of trade that will eventually leads to monopoly. The courts have come to judge violations of Section 1 of the Sherman Act by two paths:

A)  per se illegal; action that the courts have found a certain action to be harmful and it must only prove to be guilty9.

B)  rule of reason; action that enhancing economic efficiency although it may against competitive, the court has authority to judge on its legality10.

According to quote that the question has given, “efficiencies are relevant in the substantive assessment of the compatibility of an agreement with the whole of Article 101 TFEU and section 1 of the Sherman Act, respectively.”

The word ‘efficiencies’ subject to this condition, means efficiency in term of the economic efficiency which every resource is optimally allocated to serve each entity in the best way while trying to reduce cost and inefficiency as much as possible.11

-To what extent do you agree with the statement?

I strongly agree with this statement because as far as article 101(3) concerned, to satisfy this law the restrictive agreement must contribute to improving the production or distribution of goods or to promoting technical or economic progress in order to fall under the exception that is this section which the burden of proving facts that the agreement do satisfies all condition of Article101(3) is on the undertaking itself.

Focus on section 1 of Sherman Antitrust act, one of approaching way to this law is ‘the rule of reason’ one of a legal doctrine that used to interpret the Sherman Antitrust act, in order to determine whether some action is illegal or not depends on economic factors that is a direct result from the action that in fact, against competitive but found to have valid efficiency enhancing benefits

By my reckoning, to measure the compatibility of these two is to find a similarity between them, analyse the elements and how the similar part of law works similar to each other and how they coordinate.

 

It is evident from above that both of them; Article101(3) TFEU from EU competition law and Section 1 Sherman Antitrust act from US antitrust law, have the same purpose. Whenever an agreement that already has been consider as harmful or so to say anticompetitive, also creates action that benefit the market or as we called ‘economic efficiencies’. The law would reconcile those guilt, for article 101 has it exception specify in (3), for section 1 Sherman act the court has an authority to judge by ‘the rule of reason’.

 

The goals of U.S. antitrust law are to promote competitive markets that drive down consumer prices whereas the goals and purposes of EU competition law incorporate a larger variety of goals, most notably integrating European markets, creating the Single Market, and promoting balanced and sustainable development of economic activities.12 Despite these differences these two political jurisdiction are very resemble in essence details such as both in European Union and US law, vertical agreements are considered to be less harmful than horizontal agreements.13

 

-Discuss critically when and in what manner the European commission and/or the European courts have considered ‘efficiencies’ relevant in their interpretation and application of Article 101 TFEU

 

Before considering whether or not that an agreement can be declared inapplicable by article101(3) first, the agreement must be restricted and fall under article101(1). An agreement that falls under article101(1) if it has all the criteria of article101(3) this means that the agreement will be under a legal exception. All four criteria of article101(3) are mainly related to economic efficiency and all the benefits to competitive market.14

This is when efficiencies become relevant all four conditions;

(A)       an improvement in the production or distribution of goods or in technical or economic progress

the agreement that made by undertaking must produce benefits for the EU as a whole, from this statement a narrow view of article101(3) can be observed that it is only permits those agreements that would bring improvement economic efficiency.15  The commission’s White Paper on Modernization16, explained article101 (1) and (3) in an easy way; that the article101(3) are based on explicitly of terms in economic efficiency.17

However, another point of view of Article101(3) is a broader way which go beyond and seems to have an influence on th

(B)        indispensability of the restrictions

The efficiencies that happens by the agreement must be only way for undertaking, no other economically practical and less restrictive way to achieve them.18 It is on the parties of undertaking that must demonstrate the EU court that nature of all restriction that it is reasonable and necessary to produce the claimed efficiencies.

(C)        fair share for consumers

in case MasterCard v Commission said that if an agreement is likely to lead to higher prices, consumers must be taking care of by undertaking must increased quality or other benefits.19 This shown that the pass-on requirement is directly delicate to the customers. it is necessary to consider whether the claimed efficiencies will create ‘real value’ for consumers that will compensate for this.

(D)       no elimination of competition in a substantial part of the market

The article 101(3) is given priority to those pro-competitive efficiency than others. The concept of elimination of competition in a substantial part of the market. The Court of Justice has since confirmed that efficiencies are firmly part the analyzation between article102 and 101(3). A dominant undertaking necessarily constitutes an abuse of a dominant position. e fact that most block exemptions contain market share caps means that dominant rms will rarely be in a position to rely on them20.

 

-To what extent, if at all, does the approach differ from that adopted by the US court in relation to section 1

Section 1 of the US Sherman Act 1890 characterizes some agreement as per se illegal, and another called rule od season analysis. The per se infringement is often used with an agreement that strongly illegal. What is already consider as per se infringement is not open to discuss that it does not restrict competition. There is an obvious analogy between what is per se illegal under the sherman act, what is restriction of competition, that is to say if an agreement infringes Article 101(1) per se, undertaking can still attempt to justify it under the exception that is article101(3). Action like this will not happen in US law, since there is no things that have features like legal exemption in that system.

Article 101(1) has some draws back; the law is too broad so it is applied to too many agreements. That is when the ‘rule of reason’ come in use, which would result in fewer agreements being caught. The question is whether the EU Courts have adopted a rule of reason under Article 101(1). Discussion of the rule of reason under Article 101(1) is still not clear. It is sometimes used as little more than a slogan by opponents of the judgments of the Courts and, in particular, decisions of the Commission. Normally a rule of reason is a term that being used for good rather than bad, or reasonable rather than unreasonable, judgments and decisions, no one could disagree with it. However, if proponents of the rule of reason mean that US jurisprudence on the rule of reason under the Sherman Act 1890 should be adopted into EU competition law for permanently use, this might not be good for the system because EU law is different in many ways from US law such as, EU has the ‘bifurcation’ of Article 101(1) and Article 101(3), which does not exist in the Sherman Act.

In Continental TV Inc v GTE Sylvania the Supreme Court defined the rule of reason as calling for a case-by-case evalu- ation ‘that is, the factfinder weighs all the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition’21. One agreement should be unlawful or not it has to balance between the pro-competitive side and anticompetitive side of the agreement. US and EU competition law are materially different in numerous respects, and terminology should not be imported from US law that could made this significant fact more unclear22.

The fact that the Court of Justice has handed down reasonable judgments does not mean that it has adopted the rule of reason in the sense in which that expression is used in the US.

White Paper on Modernisation23 the Commission said that the adaptation of the rule of reason under Article101(1) will create the risk of duplication framework from article 101(3). I agree that the commission and the courts should be reasonable and use Article 101(1), but this does not mean the court should use the analysis method that quite different from their own.

 

 

 

 

 

1 Whish, R. and Bailey, D., 2015. Competition law. Oxford University Press, USA. p.85

 

2 Case C-41/90 1991 ECR I-1979, 1993 4 CMLR 306, para 21. ?

 

3 Whish, R. and Bailey, D., 2015. Competition law. Oxford University Press, USA. p.92

4 Cases C-180/98 etc Pavel Pavlov v Stichting Pensioenfonds Medische Specialisten 2000 ECR I-6451, 2001 4 CMLR 30, para 77.

5 Black’Communication and Obligation in Arrangements and Concerted Practices’ (1992) 13 ECLR 200; Black ‘Concerted Practices, Joint Action and Reliance’ (2003) 24 ECLR 219; Odudu e Boundaries of EC Competition Law (Oxford University Press, 2006), pp 71–91

 

6 Case 48/69 1972 ECR 619, 1972 CMLR 557, para 64

 

7 Faull, J. and Nikpay, A., 2007. Faull and Nikpay: The EC Law of Competition. Oxford University Press. Ch 3

8 Callman, R., 1973. The Law of Unfair Competition in the Member States of the European Economic Community. The International Lawyer, pp.855-866.

9 Bork, R.H., 1966. The rule of reason and the per se concept: Price fixing and market division. The Yale Law Journal, 75(3), pp.373-475.

 

10 Korah, V., 1981. The Rise and Fall of Provisional Validity–The Need for a Rule of Reason in EEC Antitrust. Nw. J. Int’l L. & Bus., 3, p.320.

 

11 Ravenscraft, D.J. and Scherer, F.M., 2011. Mergers, sell-offs, and economic efficiency. Brookings Institution Press.

 

12 Marco Colino, S. 2011, Competition law of the EU and UK, 7th edn, Oxford University Press, Oxford;New York;.

13 Zekos, G.I., 2008. Antitrust/Competition Arbitration in eu versus us Law. J. Int’l Arb., 25, p.7.

 

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18 Ibid, para 75; note that under para 85 of the Commission’s Guidelines on the assessment of horizontal mergers OJ 2004 C 31/5 e ciencies are recognised in the assessment of mergers only where they can be shown to be merger-speci c.

 

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