Competition law has become an important aspect for the growth of economy and
efficiency, to eliminate concerted practices, monopolization and thereby promote
and sustain competition in the market. European Union (EU) is an amalgamation of
27 countries. EU focuses on economic integration of all its member-states and
strives to achieve a healthy common market which offers free movement of goods
and services and a wide variety of choices for consumer's benefit.
US aims to promote a free market and consumer welfare. It can be rightly said
that EU and US both share common goals within their areas of operation under
their respective legislations namely under Art.101 and 102 of Treaty on the
Functioning of the European Union (TFEU) and under Ss.1 and 2 of Sherman Act,
1890, S.5 of Federal Trade Commission Act, 1914. It is worth noting that the
Court functions within a different institutional framework in EU than the
Supreme Court does within US.
An undertaking, involved into price-fixing, bid rigging, market division and
other such concerted practices that results into prevention, restriction or
distortion of competition in the market are considered to be in violation of the
aforesaid legislation in their respective jurisdictions with or without a
justification. One can argue that EU laws prohibiting certain anti-competitive
acts, in a manner implies 'per-se' illegality.
However, instead of the term
'Per-Se' the terms used are 'Restriction by Object'. It can be rightly said that
competition laws of EU and US have significant roles to play and a specific
agenda to maintain the competitiveness in their respective markets. In this
essay I will argue about how EU laws have a similar yet different approach over
anti-competitive conduct by undertakings. Firstly, by understanding what are
cartels. Secondly by evaluating the difference between per-se and restriction by
object. Thirdly, I will argue about its viability/feasibility in the real world
and fourthly, conclude that EU does have a per-se illegality comparable to US
The term Cartel is defined under the Directive 2014/104/EU as follows:
means an agreement or concerted practice between two or more
competitors aimed at coordinating their competitive behaviour on the market or
influencing the relevant parameters of competition through practices such as,
but not limited to, the fixing or coordination of purchase or selling prices or
other trading conditions, including in relation to intellectual property rights,
the allocation of production or sales quotas, the sharing of markets and
customers, including bid-rigging, restrictions of imports or exports or
anti-competitive actions against other competitors.
In other words, when two or more competitors belonging to the same market come
together to synchronize their actions for their economic gain, at the cost of
consumers they are said to have formed a cartel. For instance, if A, B, C are
wholesalers of onions, they decide to hold the supply of onions in the market
for the time being, so that the demand for onions rise and consequently
increases the price as well. This is evidently a cartel/agreement restraining
the trade by restricting output.
Per Se Rule And Restriction By Object/Effect:
Per se rule is a method of analyzing the legality of an alleged agreement
between the market competitors/rivals. In US, it is addressed as naked Cartel,
such anti-competitive acts are considered illegal per se i.e., they are
conclusively presumed that such acts are distorting competition and restraining
trade in the market. It includes all concerted practices by competitors
(explicit or tacit) involving price-fixing, market division, output restriction,
bid rigging, etc. Often horizontal agreements fall under per se rule while
vertical agreements fall under Rule of Reason (i.e. a cartel like behavior but
there are justifications for that behavior).
A naked cartel prima facie
restraints trade, distorts competition and the court refuses to entertain any
justification or waste time on hearing such matters, they are directly penalized
for their unlawful acts either by way of imprisonment, fines or both once the
facts are established. Compensation for damages is also awarded for the
losses sustained by the complainant/victim.
In EU, it can be argued that the rule of Restriction by Object is similar to
that of per se rule. It is a test to evaluate the true object behind an
arrangement/agreement between the competitors. It is pertinent to note that
intention of the parties here is immaterial while the resulting consequence of
such agreement is given more consideration.
In the case of Consten SàRL and
Grundig-Verkaufs-GmbH v Commission
, (1966), it was observed by the CJ that there
is no need to take account of the effects of an agreement if its object is to
restrict competition. Therefore, it shows that restriction by object is as
good as per se illegality. All such agreements that are sufficiently injurious
to the proper functioning of the market are prohibited by law and the defaulting
parties are subjected to heavy fines/penalties.
The EU laws have a key feature that varies from that of US laws such as EU under
Art.101(3) offers exemption (individual and block) to those agreements and
concerted practices that distort competition but also contributes to
production/distribution and benefits the consumers. Such cartels/agreements
are excused from bearing the repercussions of unlawful collusive acts.
exemption is however absent in the US laws. US has adopted the 'Rule of Reason'
instead wherein certain agreements are not assumed to be restraining
trade/competition but are assessed on its legal and economic context under rule
of reason. It can be said that under Art.101(3) and Rule of Reason, the court
weighs the anti and pro-competitive effects of such concerted practices to
determine its legality.
Therefore, when comparing the two competition
systems/laws it can be rightly said that there exist common objectives and are
similar to an extent but EU offers some relaxation/exemption for valid purposes
and valid cooperation. This is mainly because as mentioned earlier EU places key
importance on integration of member states and sustaining a healthy competition
within the markets of these member states posing as one big single-market.
monitors/regulates anti-competitive behavior of undertakings that are likely to
deter competition in Europe. Whereas, US often considered as the father of
competition law owing to its early origin adopts a very straight forward
approach. There is no grey area when it comes to unlawful anti-competitive
conduct. Per-se rule certainly is a conducive tool to determine the
anti-competitive conduct and saves time and resources.
It has been observed that the meaning of Art.101(1) is extremely broad and thus
it becomes challenging to ascertain which acts will be considered
anti-competitive and which not. Especially the producers/market players are
under constant fear with regards to what might bring them under radar for
In the case of STM, the CJ clarified that the words object or effect
Article 101(1) are not cumulative but are alternative conditions. There is a
need to evaluate the precise purpose of the agreement in the economic context,
whether all or some clauses are likely to deter/distort/prevent/restrain
competition in the market. Only if these clauses shows its detrimental effects
on the market sufficiently, the agreements are called restrictive by object. The
court reiterates that to identify the agreements restrictive by object, one
needs to read its provisions carefully to assess its object.
Often the viability of Art.101(1) is questioned for it turns blind-eye even to
those arrangements with pro-competitive effects. In a famous case of Consten v.
(1966), an exclusive distribution agreement (vertical agreement) between
the parties for Grundig electronic products was held to be unlawful and
The parties disagreed that the agreement had any restrictive
element and claimed that it boosted competition in the market instead. Though it
was argued that the Commission must take into account the effects of such
arrangement rather than jumping to conclusion, the Commission refused to take
note of these arguments and maintained its stand that Grundig gave a monopoly to
Consten in France and its object itself was restricting the competition, an
assessment of effect was unnecessary.
It can be seen from above, the decision was more or less similar to per-se
illegality, wherein the court refused a pro-competitive justification. The
ambiguity of competition laws has led to serious apprehensions with what is
permissible and what is not. Often the associations of market players try to
create bylaws explicitly and time and again communicates the same with the
authority to keep a check if they are in conformity with the laws to avoid
There are a number of possibilities wherein the market players
are permitted to come and operate together provided their aggregate market share
is below a permissible percentage. If the arrangement is likely to cause
monopolization the same is then prohibited under law.
Thus, it's important for
the competitors to play by the rules or face the consequences. Lately, the per
se rule has also been critiqued by many scholars and economists stating that
though it saves time and resources, at times it becomes essential to
understand/evaluate the true nature of an agreement before labelling it per-se
illegal or restricted by object.
In landmark cases of Standard Oil Co. v. United States
(1911) and United States
v. American Tobacco Co
. (1969), the court was of the view that the broad
interpretation of Sherman Act would only lead to a ruckus that there would
hardly be any agreement or contract among the businessmen that does not directly
or indirectly affect or possibly restrain commerce. There were some strong
apprehensions with regards to application of reasonableness for adjudicating
some cases under S.1 of Sherman Act. Therefore, Supreme Court cemented this idea
that at least some agreements would not be found automatically in violation of
Sherman Act but now would be assessed under some sort of reasonable
In Continental TV, Inc. v. GTE Sylvania
(1977), the Supreme Court held that
location restrictions were widely used and had no deleterious effect on
competition. The application of per se rule was the incorrect standard and
thereby reversed the order by stating it should have been assessed under rule of
It's important to note that mere mimicking the actions/decisions of market
competitors does not imply collusion/concerted practice. To remain competitive
in the market it is the most basic rule to change its stance and act according
to its competitors so that consumers do not choose competitors' products over
its own. These are unilateral conduct often observed in oligopoly markets and it
would be highly unsatisfactory to label it per-se illegal.
To conclude, it can be rightly said that EU does have a system of per-se
illegality that can be compared to US antitrust laws i.e., the Restriction by
Object. This is by far the closest comparison that could be found between the
two jurisdictions. Once the cartel's anti-competitive object is established the
undertakings/all members of the cartel are held liable to bear the consequences
and pay hefty fines.
Per-se rule and Restriction by Object undoubtedly serves to
be a time-saver, where the naked cartels (prima-facie) can be cornered and the
guilty can be held accountable, thereby saving court's time and effort.
reiterate, the EU as well as US laws play a significant role in conserving a
free market and promote competition for the benefit of the consumers at large.
Although their goals align, their modus operandi slightly differs with regards
to available exemptions. It can be said that even US is now shifting from its
rigid stand of per-se rule to the rule of reason to validate certain acts which
cannot be overlooked for the sake of competitors and other rationale. The
competition laws are little ambiguous, it could certainly use better clarity and
timely update for better enforcement.
- Jones, Sufrin, and Dunne EU Competition Law (Chapter 5
- Gavil et al - Antitrust Law in Perspective Cases
- Hovenkamp - Federal Antitrust Policy
- Global Competition David J. Gerber
- Consten SàRL and Grundig-Verkaufs-GmbH v Commission, (1966
- Consten v. Grundig (1966)
- Standard Oil Co. v. United States (1911)
- United States v. American Tobacco Co. (1969)
- Continental TV, Inc. v. GTE Sylvania (1977)
- Sherman Act, 1890
- Federal Trade Commission Act, 1914
- Treaty on the Functioning of the European Union (TFEU)
- Directive 2014/104/EU of the European Parliament and of the
Directive 2014/104/EU of the European Parliament and of the Council.
- Jones, Sufrin, and Dunne EU Competition Law (Chapter 5)
- Jones, Sufrin, and Dunne EU Competition Law (Chapter 5)
- Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877, 887
- Jones, Sufrin, and Dunne EU Competition Law (Chapter 5)
Award Winning Article Is Written By: Ms.Shilpa Sodhi
Authentication No: FB203043885016-02-0222