Article 101 TFEU - Competition

Why was Article 101 introduced?

Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits any agreements or cartels between Member States that could disrupt free competition within the internal market. It was introduced as part of the EU’s general anti-trust rules to prohibit ‘any agreement or concerted practice which is made between two or more undertakings, which may affect trade between Member States and which has the object or effect or preventing, restricting or distorting competition.’^[1] Article 101 was, therefore, part of the EU’s drive towards ensuring that fair competition existed between Member States. This was recognised by the European Commission when it was pointed out that; ‘Article 101 is to protect effective competition by ensuring that markets remain open and competitive.’^[2] Any activity that would be likely to distort competition with the EU is, therefore, prohibited by this Article even if the agreement is signed outside of the EU since Article 101 effects all trade that would have an impact on the internal market as identified in Gas Insulated Switchgear^[3] where an agreement between European and Japanese companies to abstain from bidding in the EU and Japan violated Article 101 on the basis that it ‘contributed directly to the restriction of competition on the internal market.’^[4] Whilst Article 101 only impacts trade between Member States, the scope of this Article is rather wide since it covers any trade that would be likely to have an impact upon the free competition of the internal market.^[5] Therefore, if there is a possibility of trade moving across borders then this will be sufficient enough to fall within the ambit of Article 101.

Aims of Article 101 TFEU

The main aim of Article 101 is to provide redress to those affected by any restrictions that are placed on free competition within the internal market. Free competition is a vital part of the functioning of the internal market which is why it is imperative that provisions are in place to prohibit any restrictions that are placed on trade. As put by Frenz; there needs to remain an ‘open, free and distortion free system of competition within the European Union.’ This is the primary objective of Article 101 since there exists no other rights or obligations that are placed on states and private actors and so Article 101 ‘represents the sole basis for specific substantive and legal consequences in competition law.’^[6]

Changes to the law

The main legal change that was made by Article 101 was the prohibition that was placed on anti-competitive agreements, including price fixing. It is provided under Article 101(2) that such agreements would automatically be void for distorting free competition within the internal market. This was a significant change as competing undertakings are being made to determine their conduct and pricing independently. This seeks to ensure the effective regulation of fair trade and prevent unfair practices being adopted. It is widely accepted that price-fixing agreements are primarily aimed at restricting competition^[7] and so it is plausible that such agreements are automatically voided under this Article since parties to the agreement will be unable to argue that their particular price-fixing arrangement does not place a restriction on trade. The expressions contained within Article 101 (agreement and concerted practice) were also given a broad meaning so that agreements outside of the internal market could also fall within the scope of the Article if there was a possibility that the internal market could be affected by the agreement or concerted practice.

Furthermore, any type of price-fixing agreement is caught by the Article. An example of this case be seen in the IFTRA Rules for Producers of Glass Containers OJ^[8]case where rules of a glass manufactures association with a trader who was involved in fixed-pricing was deemed to fall within the scope of Article 101. Therefore, it is not just obvious restrictions that will be caught by the Act but even those were there would be a possibility of unfair competition taking place. Price fixing under Article 101 also extends to services, as exemplified in Dresdner Bank v Commission^[9],  and market sharing in any context, as identified in E.ON Ruhrgas v Commission.^[10] Prohibitions against fixed-pricing and market sharing has been largely welcomed by this Article as it these particular type of practices are viewed extremely seriously. This was stressed by Slaughter and May when it was stated that ‘secret price-fixing or market sharing cartels are viewed as hard-core infringements which will almost always be condemned.’^[11] Article 101 does, however, provide exemptions under subsection 3 if it can be shown that the agreement is beneficial to the internal market, and thus ‘improves production or distribution, promotes technical or economic progress or allows consumers a fair share of the benefit.’^[12]

Article 102 TFEU – Competition

Why was Article 102 introduced?

Article 102 of the TFEU prevents undertakings from those who hold a dominant position within the market from being abused.^[13] It was introduced to help control monopolies within the internal market whose primary objectives are to restrict competition in the private industry.^[14] As this has a detrimental effect upon society as a whole it is integral that prohibitions are placed on such unfair practices. Unlike Article 101, this Article applies to  unilateral actions so that a party may violate this Article even if they are found to be acting alone.^[15] This is important in ensuring that any imperfections in the internal market are being effectively regulated. If Article 102 was not in place, competition would be capable of being distorted as firms would be free to collude or merge with their competitors and place unnecessary restrictions on the market.^[16] Article 102 was, thus, introduced to prevent monopolies from being ‘free to act without any competitive restraints being exercised over their behaviour.’^[17] Arguably, both Articles 101 and 102 were introduced with the same goals in mind which were to preserve free competition within the internal market and prohibit any unfair practices from being undertaken.

Aims of Article 102 TFEU

The aim of Article 102 was to ‘protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources.’^[18] Although the provisions of Article 102 were contained within the original EEC Treaty (Treaty of Rome), these new provisions sought to clarify and modernise the law within this area so that the protection afforded to consumers was being more easily recognised.^[19] This was also identified by the Court of Justice in the case of Konkurrensverket v Telia Sonera Sverige^[20]when it was pointed out that the primary function of Article 102 is to ‘prevent competition from being distorted to the detriment of the public interest, individual undertakings and consumers, thereby ensuring the well-being of the European Union.’ Article 102 was, therefore, introduced so that the perceived threat to competition that was posed by those holding a dominant position within the market was capable of being combatted.^[21] Whilst the existence of a dominant position is not prohibited, the abuse of such a position is which seeks to ensure that healthy competition can be preserved.

Changes to the law

The main legal changes that was made by Article 102 was the application to private undertakings only and whilst the text of Article 102 largely resembles the text contained in the Treaty of Rome 1957 the language used is much more simplistic.^[22] It has been said that since Article 102 was implemented, the Commission and Court of Justice have been ‘more willing to presume anti-competitive effects when a competitor is excluded from the market.’^[23] This was also indicated in Commercial Solvents v Commission^[24] when Commercial Solvents was found to have abused its position in the market when it ceased to supply one of its drugs to Zoja. Hence, it was held by the court that ‘an undertaking which has a dominant position in the market in raw materials refuses to supply a customer, and therefore eliminates all competition on the part of this customer is abusing its dominant position.’^[25]

It is arguable whether the provisions of Article 102 have been extended too far in this case since there was no clarification by the court as to why they thought this amounted to an abuse of position. Still, the decision highlights the extent of the court’s powers when it comes to applying the extensive scope of Article 102. This is imperative in ensuring that free competition is not stifled, yet it must also be ensured that unnecessary restrictions are not being placed on traders. It appears that Article 102 has placed the onus on courts and authorities to strike a balance between ‘competition on the merits and unlawful conduct’^[26] yet whether this is an accepted approach is arguable. This is because the courts are left with the challenging task of interpreting Article 102 in each individual case and making a decision based on the particular facts. Still, provided that the objectives of Article 102 are always being adhered, free competition will be maintained.

Bibliography

Legislation

Article 101 of the Treaty on the Functioning of the European Union

Article 101 of the Treaty on the Functioning of the European Union

Case Law

Commercial Solvents v Commission Cases 6 and 7-73, 6 March 1974

Dresdner Bank v Commission Case T-44/02 OP, [2006] ECR II-3567

E.ON Ruhrgas v Commission Cases T-360/09, EU:T:2012:332

Gas Insulated Switchgear Case COMP/F/38.899, 24 January 2007

IFTRA Rules for Producers of Glass Containers OJ [1974] L 160/1

Konkurrensverket v Telia Sonera Sverige Case C-52/09, [2011] ECR I-527, para 22

Text Books

Catherine Bernard and Steve Peers. European Union Law (Oxford University Press, 2014)

Chris Turner and Tony Storey. Unlocking EU Law (Routledge, 2014)

Ida E Wendt. EU Competition Law and Liberal Professions: an Uneasy Relationship? (Martinus Niijoff Publishers, 2012)

Pablo Ibanez Colomo. ‘Making Sense of a Perpetual Controversy’ (2014) LSE Law, Society and economy Working Papers, 4 accessed 12 February 2016

Renato Nazzini. The Foundations of European Union Competition Law: The Objective and Principles of Article 102 (OUP Oxford, 2011)

Richard Whish and David Bailey. Competition Law (Oxford University Press, 2015)

TP Kennedy, Dermot Cahill, Vincent Power and Niamh Connery. European Law (OUP Oxford)

Walter Frenz. Handbook of EU Competition Law (Springer, 2015)

Journal Articles

Commission Guidelines on the application of Article 81(3) [now Article 101 (3) of the Treaty (Art 101 (3) Guidelines) (OJ [2004] C101/97, para 13

European Commission. ‘Guidelines on the Application of Article 81 (3)’ EC, para 47

Field Fisher Waterhouse. ‘EU Competition Law: Article 101 and 102’ (2010) 4 accessed 11 February 2016

Slaughter and May. ‘An Overview of EU Competition Rules’ (2011) accessed 11 February 2016