Critically analyse the decentralisation of Article 81

In these situations an exemption can be granted if the effects of the anti-competitive behaviour are outweighed by the economic benefits to consumers. An exemption can only be granted under specific circumstances and can be revoked at any time.  There are two ways in which an exemption can be obtained.  Firstly, an undertaking that has entered into an anti-competitive agreement could make a formal application to the Commission pursuant to the regulation formerly known as 17/62, which the Commission would then have individually reviewed and decided upon.  Alternatively, an agreement can be made to comply with one of the block exemption regulations already specified by the Commission.

Block Exemption Regulations were introduced as a solution to the massive amount of time and effort that the Commission were spending on investigating, reviewing and deciding upon each individual application for exemption.  The aim of block exemptions was to reduce the amount of time it took to deliver a decision, therefore making the process far more efficient and certain.  This process consisted of the undertakings themselves assessing whether their own agreements fell into a block exemption regulation specified by the Commission.  The obvious advantage of this process was that if the agreement satisfied the terms of an existing block exemption then there was no need to concern the Commission with an application.  Therefore, it was only the agreements that did not satisfy a block exemption that had to be individually applied for.    However, there are occasions when an agreement that appears to fall within the requirements of an exemption is still of a restrictive nature.  In this case, the Commission would individually review the application and take necessary action. For example, in the case of Volkswagen AG and Others the Commission held that Volkswagen could not rely upon Regulation 123/85 as the effect would be to restrict competition, even though the regulation allows for selective distribution.

An exception to the prohibition of Article 81 are those agreements which satisfy the de minimus presumption, presented in the amended 1997 Notice on Agreements of Minor Importance.  This presumption allowed for agreements between undertakings to take place as long as they did not interfere with the process of Article 81.  Therefore, it was presumed that if the market share of all the  undertakings involved did not exceed between 5-10% then it was of minor importance and was of no danger to the area of the common market affected by the agreement.

The introduction of Regulation 1/2003 which was implemented in May 2004 has revolutionised the enforcement of EU competition law by decentralising the decision making powers and favouring direct applicability and self-assessment.  The regulation proposed that national courts and national competition authorities be appointed the power to apply Article 81 (3) which previously could only be implemented by the Commission.  The main incentive for this modernisation was that the Commission could not cope with the amount of applications for exemptions, which inevitably led to delays and uncertainty.  Due to these delays the Commission would avoid giving formal decisions as they were impractical and instead sent out comfort letters to inform undertakings of the legality of their agreements. The system was expected to suffer further once the Community was enlarged, therefore the decentralisation of power would allow the Commission to simply concentrate its time and efforts onto the more important cases affecting public interest, such as the investigation of cartels and abuse of dominance.  It was also expected that disputes could be settled more efficiently and delays in court proceedings would be reduced.  Furthermore, it was argued that national competition authorities and national courts were in a better position to assess matters in their own member state as they were likely to be more familiar.  However, the direct applicability of Article 81 also leads to the inevitable risk that European competition law will be applied inconsistently and incoherently.  This danger is increased due to the fact that European law is a complex area which requires considerable knowledge and consideration when being applied.  National courts are unlikely to be specialised in this area or to have an extended knowledge of how European law is applied by the Commission.  There was also the fear that national courts would have enough power to independently develop competition law which would lead to a loss of control and influence by the Commission.   Furthermore, national courts are often overloaded with cases, therefore there is a risk that they will simply not have enough time to deal with each one effectively and due to the nature in proceeding they will have difficulty in application. Ultimately, there are many aspects of the decentralisation that will lead to legal uncertainty due to issues such as undertakings procedural rights being left unspecified.

There were a number of solutions suggested for these problems before the decentralisation was approved.  It was suggested that specialist courts should be introduced to deal specifically with competition law and Article 81 and that these courts should have specially trained judges and supervision. They would also be given notices and block exemptions to guide their applications.  However, it was eventually decided that decentralisation would be more beneficial than detrimental.  It was held that the direct applicability would substantially increase protection for undertakings that find themselves as victims of restrictive practice.  Finally, it would allow simultaneous application of national and EU competition law as “whenever an national competition authority applies national competition law in cases where Member States are affected, they must also apply EU competition rules” however, national law may be applied more strictly than EU law when required.

Whilst Article 81 deals with prohibiting anti-competitive behaviour, it is Article 82 which prohibits abuse of a dominant position in the common market.  Article 82 states that “Any abuse by one or more undertakings of a dominant position...shall be prohibited as incompatible...so far as it may affect trade between member states”, therefore concerning itself with the abusive conduct of individual undertakings.  A dominant position is defined as “A position of economic strength enjoyed by an undertaking which enables it to hinder the maintenance of effective competition” and market share is an indication of an undertakings dominance.  An undertakings ability to maintain strength over a period of time with a large market share is evidence of market dominance. The bigger the market share, the more dominant an undertaking is considered to be, as was shown in the case of Hoffman, where it was found that the companies market share of 75% evidenced that they controlled the the market as opposed to the case of United Brands, in which it was found that a 40% market share did not “permit the conclusion that UBC automatically controls the market”.  There are a number of ways that an undertaking can abuse its position of dominance, such as the imposition of unfair purchase prices which is declared excessive when “it has no reasonable relation to the economic value of the product supplied”. Abuse of a dominant position was found in the case of Tetra-Pak, in which it was found that prices charged had no relation to ordinary market conditions and that they were simply discriminating in Italy where they held market dominance.  

In conclusion, the decentralisation of EU competition law will inevitably lead to a risk of inconsistent application and a decline in central guidance from the Commission as they will have very little influence over the process in national courts.  These factors will affect undertakings self assessment due to uncertainty over how Article 81 (3) will be applied and lack of guidance.  However, any disputes over the legality of agreements will be dealt with quickly and efficiently, which should promote confidence and certainty in undertakings.

                                                        BIBLIOGRAPHY

BOOKS

• Vincenzi,C & Fairhurst,J. Law of the European Community. 3rd Edition,Longman.

WEBSITES

CASE LAW

• The Community v Volkswagen AG and Others (Case IV/35.733) (1998)
• United Brands Co v Commission (Case 27/76)
• Hoffman La Roche v Commission (Case 85/76)
• Tetra-Pak International SA v Commission (Case T83/91)