Article 102 of the Treaty on the Functioning of the European Union recognises abuse of any shape or form if one or more undertakings belonging to the internal market of the European Union, manipulate their power in order to hold the position of dominance within the above referred internal market or a substantial part of it. When navigating through complex legal matters like these, seeking expert advice is very much essential. That is where law dissertation help can provide the best support in understanding the intricacies of EU competition law Article 102 of TFEU takes the liberty to define the term ‘abuse’ as has been mentioned hereunder:
1. The practice of imposing unfair trading conditions which shall include the imposition of unfair purchase or selling price, but not exhaustive of that clause.
2. The practice of limiting or conditioning products with intent to impose prejudice against customers.
3. The practice of different terms and conditions pertaining to an equivalent transaction for different trading parties, imposing an environment of competitive disadvantage.
4. The practice of imposing additional terms or conditions pertaining to a trading contract, which have no commercial usage or purpose whatsoever.
Thus, article 102 of the TFEU solely aims at restricting the act of monopoly and upholds the environment of the internal market of the EU by discarding the traces of competitive disadvantage. By limiting the acts of undertakings in an internal market, article 102 and the EU commission places a strict restriction on the economical activities of different companies from attaining complete anarchy.
In the abovementioned case matter, ACME limited and Coyote GmbH, is two undertakings of EU, involved in the trading of Bur Oak. In the case of Hofner & Elser, it has been mentioned that undertaking can be defined as every entity engaged in an economic activity. Also, in the case of Pavlov, it was mentioned that economic activity can be defined an activity of offering goods and services within a market. Thus, as per the definition, ACME limited and Coyote GmbH comes under the purview of the article 102 of TFEU herein.
Again, as per the terms of the article 102 of TFEU, the economical activity of the undertakings, need to have an effect on the internal market of the member states. In the case of Commercial Solvents, it was held that if the conduct of the undertaking brings any alteration within the internal market of a member state, it shall be considered as affecting the trade between two member states. Herein, ACME Limited is registered in the Republic of Ireland and Coyote GmbH is a Germany Company. Both of their trading system, if abused by any one of the partners, shall have an effect on the trading between member states.
The position of dominance can be easily be traced by the market share possessed by a particular undertaking. As it has been held under the case of United Brands, the position of dominance shall be measured by the yardstick of economical strength enjoyed by a particular undertaking, where it can prevent effective competition being maintained within an internal market. As has been mentioned in the given case matter, Coyote GmbH has 42% EU-wide market share in the Bur Oak industry. Also, Coyote GmbH in trade with another German Company grows and supplies 80% of the Bur Oak seeds and seedling in the EU-wide market. Again, both of these companies have a contract not to license other companies to sell the Bur Oak seeds in the EU market. Thus, from the above referred situation along with the judgment of the United Brands, where it was held that a company having a market share in the rage of 40% to 50% shall be considered dominant, it can be deduced that Coyote GmbH holds the position of dominance in the EU market.
According to the given case herein, Coyote has retained a local company named HS Limited, registered with the Republic of Ireland and for the purpose of selling Bur Oak to ACME Limited, Coyote has imposed unfair purchase price which is triple the previous price which is in violation of sub clause (1) of the article 102 of TFEU and also, Coyote has imposed several prejudiced guidelines for the distributers only for the Republic of Ireland, which again violates sub clause (3) and (4) of article 102 of TFEU.
Thus, the main three elements, based on which EU Commission can hold Coyote in breach of article 102 of TFEU are as follows:
1. The dominant undertaking, deliberately taking part in predatory actions, creating anti-competitive foreclosure, prejudiced against customers.
2. That the dominant undertaking deliberately intends consumer harm.
Thus, it can be concluded from the abovementioned analysis that, in case EU Commission investigates, they shall find Coyote GmbH in violation of article 102 of the TFEU herein.
Article 101 of the TFEU herein prohibits the existence of any agreement between two undertakings that might disrupt the free competition within the internal market of a member state of the European Treaty.
Again, as per article 102 of TFEU, it defines the abusive power of a dominant undertaking to disrupt the free competition in the internal market by imposing unfair purchase price or unfair terms and conditions that is prejudiced to particular customers and preach the practice of different terms and conditions pertaining to an equivalent transaction for different trading parties, imposing an environment of competitive disadvantage and/or imposing additional terms or conditions pertaining to a trading contract, which have no commercial usage or purpose whatsoever.
According to the abovementioned articles of the TFEU and the given case matter herein, the ACME Limited shall have, as per the investigation conducted by the EU Commission, several grounds to challenge the conduct of the HS or Coyote or both of them. The grounds have been mentioned hereunder:
a) Coyote GmbH has a prejudiced agreement with HS Limited that expressly states that HS Limited shall only sell the Bur Oak to those customers who will agree to the term of not selling the unprocessed Bur Oak to anyone within the boundary of the Republic of Ireland and Coyote GmbH only has this prejudiced agreement in respect of the distributers of Ireland and no other member states. Herein, the existence of agreement between Coyote and HS Limited shall come under the purview of Vertical Agreement.Thus, it clearly violates the terms of article 101 of TFEU herein.
b) HS Limited, as a distributor of Coyote GmbH, has been asked to maintain a minimum price list with ACME Limited as a renewed sales strategy in respect of the new recession herein, whereas the current price list is triple of the previous price. Thus, as it was held in the case of Hoffman- La Roche, Coyote GmbH, through HS Limited has expressly imposed an unfair purchase pricing which shall affect the free competition within the internal market of the EU, given the circumstances that ACME Limited has a clear disadvantage in exporting the same Bur Oak from any other company outside of the EU. And within the market of the EU, Coyote holds the dominant position, thus in order to retain their previous business of producing Wooden Beams, with no compromise to the quality of the same, ACME Limited has no other resource than to avail the Bur Oak from Coyote and its distributer HS Limited.
Thus, based on the abovementioned grounds, ACME Limited shall have the liberty to challenge the conduct of the Coyote GmbH and HS Limited, as the distributer has an agreement with Coyote which is in violation of article 101 of the TFEU.
No, the answer would not have changed, if Coyote establishes a subsidiary within the Republic of Ireland, instead of HS Limited. In that case, ACME Limited would have directly challenged Coyote under article 102 of the TFEU unlike in this situation, where ACME Limited has to challenge HS Limited and Coyote together as HS Limited is acting as a distributor on behalf of Coyote GmbH.
According to TFEU, there are three layers of remedies that ACME Limited can avail before the National Courts. One, coercive measures under article 266 of TFEU, second, declaratory under article 264 of the TFEU and the third being the constitutive action as per the law of the land which shall vary from one member state to another.
However, the action committed by an undertaking in violation of article 101 and 102 of the TFEU competition law accordingly brings on several other remedies. The remedies that can be attained by ACME are as follows:
1. In case of violation of article 101(1) and 101(3) of TFEU, the EU commission address appropriate measures under article 105 of TFEU, may impose fine under article 23 of Regulation 1/2003/EC and periodic penalty under article 24 of Regulation 1/2003/EC.
2. In case of violation of article 102 of the TFEU, the EU Commission may itself initiate proceeding for the infringement of the same in response to a complaint filed by the grieved undertaking. Again, appropriate measures under article 105 of TFEU to be imposed in this case as well and impose fine under article 23 and 24 of the Regulation 1/2003/EC.
Article 101 of TFEU expressly prohibits the existence of any agreement between member states that can be disruptive of the internal market free competition environment. In the abovementioned case problem, it has been seen that Coyote is in negotiation with Marie-Anne (MA) for the purpose of selling Bur Oak. However, Coyote imposes a condition that if MA should buy Bur Oak from Coyote, she needs to buy all her supplies of elm and ash wood from Coyote as well in exchange of a discount. And if, MA refuses to buy the supply of elm and ash wood, Coyote shall refuse to sell Bur Oak to MA as well.
Although there is no existence of any agreement between the undertakings, MA has noticed that the prices of Bur Oak of Coyote and that of US Forestry Firm and Norwegian wood supplier have a similar rate increase and decrease pattern which is suspicious as MA has these two companies as alternative to Coyote.
Thus, MA only can challenge Coyote if the refusal to sell Bur Oak to MA originates from an agreement with another company or companies or if the refusal to sell Bur Oak unless MA meets with their terms shall violate article 101, if there exists an intention on part of Coyote to restrict the free competition within the internal market of EU.
In this case, there exists no such agreement between the undertakings of Coyote and Norwegian Wood supplier and US Forestry, only an assumption that MA derives from the statistics of pattern from the market price rate. Thus, it would be difficult for MA to establish a certain ground to challenge Coyote under article 101 of TFEU.
However, if MA can establish the existence of an illegitimate cartel which points out to the informal golf meeting between these undertakings where Coyote orally proposes the other two undertakings not to undercut, it shall be regarded as a violation of article 101 of TFEU of free market competition and MA shall have enough grounds to challenge Coyote.
In case of an EU investigation, the Norwegian Wood Supplier shall invoke many practical EU procedures. In the abovementioned cases, the Norwegian Wood Supplier shall invoke the rule of not agreeing to any price alteration that would benefit Coyote in any manner. As there is not existence of an agreement, the Norwegian Wood Supplier can resort to that argument. However, article 101 of TFEU covers the possibility of existence of any unfair trade practice as has been enumerated in the judgment of Dresdner Bank v Commission.
Thus, the only legal resort Norwegian Wood Supplier shall have in this case is to apply the exemption under sub clause 3 of article 101 of the TFEU where the company has to showcase that the assumption of parallel increase and decrease of rate has been in beneficial terms of the internal market and no prejudice has been done against any customer in this process and aims to promote production and distribution for the economical and technical progress and also provides the customers with a fair share of benefit as well.
Article 34 of the TFEU states that any quantitative restrictions which have been imposed on the imports shall be prohibited between any member states and also includes any equivalent measures imitating such quantitative restriction to be in violation of article 34 of TFEU as well. Thus, in the terms of article 34 of TFEU, there are two elements which need to be discussed before the crust of this article can be dissected in reference to the decision in Keck and other subsequent decisions of the CJEU herein. The two main elements of article 34 of TFEU are as follows:
As has been interpreted by Geddo, quantitative restriction can be defined as the measures which encompass total or partial restraints in the process of import or export of goods between two member states. Thus, the main aim of article 34 is to promote free movement of goods, without any kind of discriminatory market restrictions. The tenet of article 34 of TFEU, which is quantitative restriction, shall exist in connection with the community need as well.
It has been seen from the terms of article 34 of TFEU that, the restriction is not only for the quantitative restriction but also includes any equivalent measures which shall have the same effect of the quantitative restrictions herein. However, the broad interpretation and the usage of vague words have made article 34 of TFEU even more difficult in upholding the spirit of free movement and maintain a market of free competition and the same can be observed from the perspective of several judgments of CJEU which has shaped and gave article 34 of TFEU the form that has been in operation in the recent times.
The perimeter of ‘Measures Equivalent to Quantitative Restriction’ (MEQR) was first defined in the case of Roi v. Dassonvile, where it was stated by the CJEU that all the trading rules which shall pose as a hindrance or an obstacle in the face of intra community trade, would be considered to be MEQRs. Although the decisions in the abovementioned case had a broad perspective, it was considered as ‘audacious’ as it restricts the arena of the economical competency of the member states way too much.
However, the above referred case is not the only example in dealing with the MEQRs. Again, in the case of Duphar, despite the imposition of restrictive measures, it was considered by the CJEU that those measures fall outside of the ambit of article 30 of the TFEU, for being non-discriminatory. However, again in the case of Cassi de Dijon, it was held that the broad perspective of restrictive measures laid down in the case of Dassonville to even non-discriminatory restrictions stand valid.
Although previously, the courts and the CJEU have tried to limit the scope of article 34, the attempt has not been very successful and most of the judgments followed the precedent set by the Casss. The excessive justification of the rules made by the member states fell foul on the article 34. Thus, in order to not make States to be conservative in making regulations, the CJEU passed the judgment of Keck which is considered to be a step away from the decisions of the previous case laws. The judgment of Keck approached a narrower path to the question of MEQRs and thus, made a little way to impose regulatory prohibitions by the member states herein.
Although the decision of Keck was not overruled, it was stated that the decision made in the case of Keck cannot be a leading legal test for the purpose of imposing article 34. The limitation was again exempted in the case of Commission v. Italy where it was held that prohibition regarding selling arrangement shall again follow the marks of the decisions made in the earlier case laws such as Dassonvile and Cassie.
Thus, it can safely concluded that even though the courts have provided some prohibitions, they often tend to embrace a much wider scope of article 34 and its restrictions which makes it difficult for the Member States to be protective of regulations imposed in their own market and set their own policies.
Article 34 of the TFEU prohibits any restrictions imposed on the trading coordination between two member states, of whatsoever manner and form. Again, the restrictions under the purview of article 34 of TFEU also covers any measures equivalent to the quantitative restrictions imposed on the import trading between the member states as well.
The wordings of article 34 of TFEU in respect of the imposition of restrictions is quite vague and thus over the course of time, this article of TFEU has attracted many case laws which has set the precedent for deciding any factor under article 34 of TFEU. One of the earliest case laws in this matter is the case of Roi v. Dassonville where the CJEU embraced the widest scope of the term restriction under article 34 of TFEU and stated that any trading rules enacted by any Member States that shall, directly or indirectly, causes hindrance in the scope of intra trade community, that shall come under the purview of imposed restrictions or equivalent measures thereof.
Again, after being startled by the case of Duphar, the seeds of wider approach to the term restriction were again implemented by the CJEU in the case of Cassie de Dijon, where the court upheld the spirit of wider approach to prohibiting the restrictions that ought to be implemented by the member states to affect the intra-trade community.
The abovementioned decision pertaining to the case laws were upholding by the CJEU in order to maintain a free market competition. However, in order to uphold the spirit of the free competition market, CJEU has considerably ignored the needs of the Member States policies and regulations and the abovementioned precedents only made the Member States cautious of their intra-trade community and also some of the Member States resorted to embrace a more of a conservative view regarding the policies and regulations for the internal market herein.
Thus, to limit the scope of article 34 of TFEU and provide a little liberty to the Member States to make new policies and regulations, the courts passed the decision of Keck where the CJEU made a test of discrimination between the ‘product rules’ and ‘selling arrangements’ and also provided that for non-discriminatory restrictions, the Member State shall not be responsible under article 34 of the TFEU.
Following the decision of Keck, several other decisions were passed in the cases of Morellato case or Alfavita case. Although, the test of discrimination, laid down in the case of Keck was criticized later, the same was not overruled. The test of discrimination as has been laid down in the case of Keck, has been a leading path for the CJEU to uphold a striking balance between the Member States regulation and freedom to move goods.
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Council of the European Union; ‘Council Regulation (EC)’ No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (Text with EEA relevance)
Höfner and Elser v Macrotron GmbH; (1991) Case C-41/90, [1991] ECR I-1979
Pavel Pavlov and Others v Stichting Pensioenfonds Medische Specialisten; Joined cases C-180/98 to C-184/98; European Court Reports 2000 I-06451
Commercial Solvents Corporation v Commission of the European Communities; Joined cases 6 and 7-73; European Court Reports 1974 -00223
United Brands Company and United Brands Continentaal BV v Commission of the European Communities. Chiquita Bananas. Case 27/76. European Court Reports 1978 -00207
F. Hoffmann-La Roche & Co. Ltd vs Geoffrey Manners & Co. Pvt. Ltd on 8 September, 1969; 1970 AIR 2062, 1970 SCR (2) 213
Dresdner Bank v Commission; Cour d'appel d'Aix-en-Provence – France; ‘Brussels Ήonvention’ of 27 September 1968 - Action paulienne Donation of legal ownership of immovable property - Article 16 (1). Case C-115/88. European Court Reports 1990 I-00027
Case 2/73 Geddo v Ente Nazionale Risi 1971 ECR 865
Case 8/74 Procurer du Roi v Dassonville 1974 ECR 837
Case 238/82 Duphar BV et al v The Netherlands 1984 ECR 523
Case 120/78 Rewe-Zentral AG v Bundesmonopolverwaltung fur Branntwein (Cassis de Dijon) 1979 ECR 649
Case C-267 and 268/91 Criminal Proceedings Against Keck and Mithouard 1993 ECR I 6097
Case C 110/05 Commission v Italy 2009 ECR I 519
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