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Article 81(2) ‘Any agreement or decisions prohibited pursuant to this article shall be automatically void.’
S agrees not to appoint another distributor in D’s territory and to not supply goods itself in that
territory. Therefore, D is the only outlet for goods in the territory (excluding passive sales from
elsewhere)
S commonly requires D not to sell competing products and meet sales targets.
S agrees not to appoint another distributor in D’s territory but retains the right to sell the goods in D’s
territory himself.
2
Does
agreement
infringe article
81 or the
chapter I
prohibition?
1
Requirements to infringe:
• Agreements:
o State whether the agreement is:
Formal
Informal
Non-binding
Verbal
o Look at terms of the agreement – look out for “D buys from S” and “D can
resale”.
State that the two undertakings (companies) are independent of each other
3 Which may affect trade to an appreciable extent (NAOMI) between member states
(article 81) or UK (Ch.I)
For example:
• only one distributor for an area – therefore only 1 route between UK and an MS
Is the relevant agreement/decision/practice alters or has the potential to alter the natural
flow of trade between member states.
NB – look for hint in the question – normally told to discuss either EC or UK or both?
The following list if from Art.81(1).. if within here then term is OBJECT:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of such contracts.
2
2. Breach of article 81: (i.e. affects trade between member states)
consequence
of a. 81(2) says offending term is void. Agreement is void unless term can be severed which is unlikely.
infringement So agreement is unenforceable.
b. EC commission can fine the parties up to 10% of worldwide turnover under article 23 of
regulation 1/2003 for both parties
c. EC shall order the parties to cease infringing activities and investigate parties
d. As article 81 is directly effective, third parties suffering loss from infringement can bring claims for
damages and / or injunctions in national courts.
NB – beware – where S is trying to stop a D selling outside of his exclusive area – can be used as
defence by D because if agreement is VOID then he can continue breaching the ban… should
inform client not to sue D.. advice would be to renegotiate the terms.
b. Office of Fair Trading (NCA) OFT can fine parties up to 10% of worldwide turnover.
c. Third parties suffering loss from infringement can bring claims for damages.
d. Directors of offending companies can be disqualified for up to 15 years under the s.9A
Enterprise Act 2002.- but only if OFT get involved.
3
Avoidance methods:
1 Severance
If there are many terms that need to be severed then this option is not available.
Para 1 says agreements do not fall under 81(1) if effect on trade is not appreciable.
Para 4 says that if notice applies, the commission will not initiate proceedings or a fine.
- DISADVANTAGE – this is only a notice – non binding
2. if undertakings are competitors then neither has an individual market share exceeding
10% of relevant markets affected by agreement, or
NB – Making this less advantageous than the BLOCK EXEMPTION because the
% is lower.
3. Para 11 states the agreement must not contain any ‘hardcore’ restrictions which are:
if horizontal:
price –fixing
limiting output/sales
allocation of markets or consumers
if vertical:
3 NAAT
NOT strictly an avoidance technique… simply indicates which jurisdictional law applies.
5
Avoidance methods:
1 Severance
If there are many terms that need to be severed then this option is not available.
The APPRTECIABILITY test is used in the UK. Essentially the same as NAOMI criteria:
Para 1 says agreements do not fall under 81(1) if effect on trade is not appreciable.
Para 4 says that if notice applies, the commission will not initiate proceedings or a fine.
- DISADVANTAGE – this is only a notice – non binding
2. if undertakings are competitors then neither has an individual market share exceeding
10% of relevant markets affected by agreement, or
NB – Making this less advantageous than the BLOCK EXEMPTION because the
% is lower.
3. Para 11 states the agreement must not contain any ‘hardcore’ restrictions which are:
if horizontal:
price –fixing
limiting output/sales
allocation of markets or consumers
if vertical:
3 NAAT
NOT strictly an avoidance technique… simply indicates which jurisdictional law applies.
Article 82: ‘Any abuse by one or more undertakings of a dominant position within the common
market or in a substantial part of it shall be prohibited as incompatible with the common
market insofar as it may affect trade between Member States.’
Such abuse may, in (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading
particular, consist in: conditions
(b) limiting production, markets or technical development to the prejudice of consumers
(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage
(d) making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage,
have no connection with the subject of the contracts.
2. of a dominant position?
(b) Geographic market – Test – to what extent are trading conditions the same?
⇒ Smaller area the more unique the product eg Haggis
Can affect consumers, such as high prices or limiting supply, or competitors such as
predatory pricing.
5. Consequences:
Same as Art 81.
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(a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions
(b) limiting production, markets or technical development to the prejudice of consumers
(c) applying dissimilar conditions to equivalent transactions with other trading parties,
thereby placing them at a competitive disadvantage
CLAUSE WHY ANTI-COMP? DOES B/E DEAL WITH THE ISSUE ADVICE TO CLIENT
Export Ban Depends on whether active of 1. Amend so that any reference to the
passive: internet/email is removed
- Active = D goes to C
- Passive = C goes to D (internet)
IF passive:
NOT allowed under Art 4(b)
IF active:
Allowed only if territory of another
exclusive disti OR if supplier
reserved for itself
Not to sell competing Non Compete obligation Art 5(a) 1. Limit to less than 5 years
products
8
TM then they could potentially lose out
as unable to sell due to injunctions etc.
Restraint of trade Non compete obligation Art 5(b) 1. Amend – reduce the time frame to 1
year to comply with Art 5(b)
minimum. MUST be competing
goods