Article 81 of the Treaty Establishing the European Community

Article 81 of the Treaty establishing the European Community prohibits cartels and other agreements which could disrupt free competition in the European Economic Area's common market. [http://eur-lex.europa.eu/Notice.do?val=262491:cs&lang=en&list=262491:cs,262487:cs,&pos=1&page=1&nbl=2&pgs=10&hwords=article%2081~&checktexte=checkbox&visu=#texte Article 81] reads,

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those which::(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. Any agreements or decisions prohibited pursuant to this article shall be automatically void.

3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of::any agreement or category of agreements between undertakings,:any decision or category of decisions by associations of undertakings,:any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not:::(a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives;::(b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

Businesses who infringe these rules can be subjected to large fines by the European Commission or national competition authorities.

Prison is not available as a punishment under Article 81 itself.Some countries within the European Union have laws that impose criminal sanctions, including prison, for participation in anti-competitive agreements or practices.

Undertakings

Under EC law cartels are banned by Article 81 EC. Art. 81 EC makes clear who the targets of competition law are in two stages with the term agreement "undertaking". This is used to describe almost anyone "engaged in an economic activity", ["Hoefner v Macroton GmbH" [1991] ] but excludes both employees, who are by their "very nature the opposite of the independent exercise of an economic or commercial activity", [per AG Jacobs, "Albany International BV" [1999] ] and public services based on "solidarity" for a "social purpose". ["FENIN v. Commission" [2004] ]

Collusion

Undertakings must then have formed an agreement, developed a "concerted practice", or, within an association, taken a decision. Like US antitrust, this just means all the same thing. According to Advocate General Reischl in "Van Landewyck" [1980] ["Van Landewyck" [1980] ] there is no need to distinguish an agreement from a concerted practice, because they are merely convenient labels. Any kind of dealing or contact, or a "meeting of the minds" between parties could potentially be counted as illegal collusion. Covered therefore is a whole range of behaviour from a strong handshakes, written or verbal agreement to a supplier sending invoices with directions not to export to its retailer who gives "tacit acquiescence" to the conduct. ["Sandoz Prodotti Farmaceutica SpA v. Commission" [1990] ]

This includes both horizontal (e.g. between retailers) and vertical (e.g. between retailers and suppliers) agreements, effectively outlawing the operation of cartels within the EU. Article 81 has been construed very widely to include both informal agreements (gentlemen agreements) and concerted practices where firms tend to raise or lower prices at the same time without having physically agreed to do so. However, a coincidental increase in prices will not in itself prove a concerted practice, there must also be evidence that the parties involved were aware that their behaviour may prejudice the normal operation of the competition within the common market. This latter subjective requirement of knowledge is not, in principle, necessary in respect of agreements. As far as agreements are concerned the mere anticompetitive effect is sufficient to make it illegal even if the parties were unaware of it or did not intend such effect to take place.

Trade between Member States

Article 81 states that agreements that fall under it should affect "trade between Member States". This has been interpreted in a non-restrictive way, for example, several agreements amongst firms with no production in the EU have been considered to affect trade between Member States. In the "Webb-Pomerene" case, EU law was applied to a US cartel with no production in the EU [Cavicchioli, F.(2000):"The Application of EC Competition Law to Non-European (U.S.) Corporations". Master Thesis. University of Georgia School of Law.] .

Exceptions

Exemptions to Article 81 behaviour fall into three categories. Firstly, Article 81(3) which creates an exemption where the practice is beneficial to consumers e.g. by facilitating technological advances (efficiencies), but without restricting all competition in the area. In practice very few official exemptions were given by the Commission and a new system for dealing with them is currently under review. Secondly, the Commission has agreed to exempt 'Agreements of minor importance' (except those fixing sale prices) from Article 81. This exemption applies to small companies, together holding no more than 10% of the relevant market in the case of horizontal agreements and 15% in the case of vertical agreements (the "de minimis" condition). In this situation as with Article 82 (see below), market definition is a crucial, but often highly difficult, matter to resolve. Thirdly, the Commission has also introduced a collection of block exemptions for different types of contract and in particular in the case of vertical agreements. These include a list of contract terms which will be permitted and a list of those which are banned in these exemptions (the so-called "hardcore restrictions").

ee also

*Competition law
*United States antitrust law

Notes