The Object or Effect of Preventing, Restricting or Distorting Competition
The application of Article 101(1) to agreements, in particular by the Commission, was for
many years controversial – complaint that it was applied too broadly, catching agreements
that were not detrimental to competition at all (See Joliet The Rule of Reason in Antitrust
Law; American, German and Common Market Law in Comparative Perspective (1967, pp77-
106)
Agreements caught by Art 101(1) are void and unenforceable – unless they satisfy the
criteria in 101(3).
Critics argued that Article 101 should be applied to fewer agreements in order to avoid the
problem of delay, cost and uncertainty associated with the old system of notification of
agreements to the Commission for ‘negative clearance’ under Article 101(1) and/or
‘individual exemption’ under Art 101(3).
o These procedural problems no longer exist following the abolition of notification and
individual exemption by reg 1/2003
o Now the questions for undertakings and their professional advisors is whether their
agreements infringe article 101 as a whole.
Preliminary Comments
Many judgements of the EU courts that demonstrate that a contractual restriction does not
necessarily result in a restriction of competition
o The concept of restriction to competition is an economic one – so economic analysis is
needed to determine whether an agreement could have anti-competitive effect.
Relatively small class of agreements are considered by law to have as their
object the restriction of competition… for all others an analysis is needed.
An agreement must be assessed by taking into consideration the entire factual,
legal and economic context in which it operates (Societe Technique Miniere v
Maschinenbau Ulm Gmb)
o Because the commission now applies an economic approach (Bourgeois and Waelbroek
(eds) Ten years of effects based approach in EU competition Law (Bruylant 2012)) it takes
a much narrower view of what is meant by restriction of comp under art 101(1); and a
narrower approach to 101(3)
The Comm must adequately demonstrate that an agreement is restrictive of competition –
cannot just ‘rubber stamp’ its analysis
In a case under 101(1) the relevant market does not need to be defined where it is possible,
without such a definition, to show that an agreement restricts competition and affects trade
between Member States (this is different to the procedure in Article 102 for dominant position
abuse)
CJ stressed 101 aims to protect interest of competitors, consumers AND the structure of the
market and, in so doing, ‘competition as such’ (T-Mobile Netherlands 2009)
Just because an anti-comp agreement may be the most cost effective or least risking does not
preclude the application of 101 (Lundbeck v Commission 2016)
Horizontal and Vertical Agreements
101 capable of application to both H (undertakings at the same level of the market) and V
agreements (undertakings at different levels of the market)
o CJ in Consten and Grundig v Commission (V agreement)
, o Allianz v Hungaria – CJ said that vertical agreements are less harmful than horizontal but
they may still have anti comp object ‘when they have a particularly significant restrictive
potential’
In a Problem Question: Assuming we have an agreement between undertakings, then look first at
the object of the arrangement
‘Object or effect’ of Preventing, Restricting or Distorting Competition
‘Object of effect’ to be read disjunctively
o Alternative, not cumulative requirements.
o Societe Technique Miniere v Maschinenbau Ulm – CJ: to be read disjunctively; meaning
that where an agreement has as its object the restriction of competition it is
unnecessary to prove that it will produce anti-competitive effects: only if it is not clear
that the object of an agreement is to restrict competition is it necessary to consider
whether it might have the effect of doing so.
Commentators arguing that the distinction should be review in light of the
general trend away from formalistic application of competition law to a more
‘effects-based’ system (see Gerard ‘The effects based approach under article 101
TFEU and its paradoxes in Bourgeois and Waelbroeck Ten Years of effects based
approach in EU Comp law (Bruylant 2012) pp 18-42)
Not likely to actually change any time soon, many judgements have repeated iit
and continue to do so (See, Comp authority v beef industry development society
2008)
The Object and Effect
o Object: agreements that have as their object the restriction of competition
o Effects: agreements that have as their effect the restriction of competition.
Agreements That Have as Their OBJECT the Prevention, Restriction or Distortion of Competition
(i) Meaning of object
o ‘such coordination reveals in itself a sufficient degree of harm to competition’ (P
Groupement des Cartes Bancaires v Commission 2014 para 57)
Its purpose is to restrict competition
o The objective meaning and purpose of the agreement considered in the economic
context in which it is to be applied (Compagnie Royale Asturienne des Mines SA and
Rheinzinc GmbH v Commisson 1984)
o Not necessary to prove that the parties have the subjective intention of restricting
competition when entering the agreement (Compagnie Royale)
Beef industry – CJ rejected the argument that by acting to reduce capacity on
the Irish Beef market the parties had not acted with an anticompetitive purpose
or an intention to injure competition and consumer welfare, but rather with the
intention of rationalising the beef industry and so making it more competitive by
reducing overcapacity
Subjective intention may still be reliant in assessing whether the object of an
agreement is anticompetitive (Alliance Hungaria Biztosito Zrt 2013 para 37)
o Where agreement has anti comp objective, it doesn’t cease to be characterised as such
because it also has an alternative, lawful, purpose (P General Motors BV v Commission
2004 para 64)
The application of Article 101(1) to agreements, in particular by the Commission, was for
many years controversial – complaint that it was applied too broadly, catching agreements
that were not detrimental to competition at all (See Joliet The Rule of Reason in Antitrust
Law; American, German and Common Market Law in Comparative Perspective (1967, pp77-
106)
Agreements caught by Art 101(1) are void and unenforceable – unless they satisfy the
criteria in 101(3).
Critics argued that Article 101 should be applied to fewer agreements in order to avoid the
problem of delay, cost and uncertainty associated with the old system of notification of
agreements to the Commission for ‘negative clearance’ under Article 101(1) and/or
‘individual exemption’ under Art 101(3).
o These procedural problems no longer exist following the abolition of notification and
individual exemption by reg 1/2003
o Now the questions for undertakings and their professional advisors is whether their
agreements infringe article 101 as a whole.
Preliminary Comments
Many judgements of the EU courts that demonstrate that a contractual restriction does not
necessarily result in a restriction of competition
o The concept of restriction to competition is an economic one – so economic analysis is
needed to determine whether an agreement could have anti-competitive effect.
Relatively small class of agreements are considered by law to have as their
object the restriction of competition… for all others an analysis is needed.
An agreement must be assessed by taking into consideration the entire factual,
legal and economic context in which it operates (Societe Technique Miniere v
Maschinenbau Ulm Gmb)
o Because the commission now applies an economic approach (Bourgeois and Waelbroek
(eds) Ten years of effects based approach in EU competition Law (Bruylant 2012)) it takes
a much narrower view of what is meant by restriction of comp under art 101(1); and a
narrower approach to 101(3)
The Comm must adequately demonstrate that an agreement is restrictive of competition –
cannot just ‘rubber stamp’ its analysis
In a case under 101(1) the relevant market does not need to be defined where it is possible,
without such a definition, to show that an agreement restricts competition and affects trade
between Member States (this is different to the procedure in Article 102 for dominant position
abuse)
CJ stressed 101 aims to protect interest of competitors, consumers AND the structure of the
market and, in so doing, ‘competition as such’ (T-Mobile Netherlands 2009)
Just because an anti-comp agreement may be the most cost effective or least risking does not
preclude the application of 101 (Lundbeck v Commission 2016)
Horizontal and Vertical Agreements
101 capable of application to both H (undertakings at the same level of the market) and V
agreements (undertakings at different levels of the market)
o CJ in Consten and Grundig v Commission (V agreement)
, o Allianz v Hungaria – CJ said that vertical agreements are less harmful than horizontal but
they may still have anti comp object ‘when they have a particularly significant restrictive
potential’
In a Problem Question: Assuming we have an agreement between undertakings, then look first at
the object of the arrangement
‘Object or effect’ of Preventing, Restricting or Distorting Competition
‘Object of effect’ to be read disjunctively
o Alternative, not cumulative requirements.
o Societe Technique Miniere v Maschinenbau Ulm – CJ: to be read disjunctively; meaning
that where an agreement has as its object the restriction of competition it is
unnecessary to prove that it will produce anti-competitive effects: only if it is not clear
that the object of an agreement is to restrict competition is it necessary to consider
whether it might have the effect of doing so.
Commentators arguing that the distinction should be review in light of the
general trend away from formalistic application of competition law to a more
‘effects-based’ system (see Gerard ‘The effects based approach under article 101
TFEU and its paradoxes in Bourgeois and Waelbroeck Ten Years of effects based
approach in EU Comp law (Bruylant 2012) pp 18-42)
Not likely to actually change any time soon, many judgements have repeated iit
and continue to do so (See, Comp authority v beef industry development society
2008)
The Object and Effect
o Object: agreements that have as their object the restriction of competition
o Effects: agreements that have as their effect the restriction of competition.
Agreements That Have as Their OBJECT the Prevention, Restriction or Distortion of Competition
(i) Meaning of object
o ‘such coordination reveals in itself a sufficient degree of harm to competition’ (P
Groupement des Cartes Bancaires v Commission 2014 para 57)
Its purpose is to restrict competition
o The objective meaning and purpose of the agreement considered in the economic
context in which it is to be applied (Compagnie Royale Asturienne des Mines SA and
Rheinzinc GmbH v Commisson 1984)
o Not necessary to prove that the parties have the subjective intention of restricting
competition when entering the agreement (Compagnie Royale)
Beef industry – CJ rejected the argument that by acting to reduce capacity on
the Irish Beef market the parties had not acted with an anticompetitive purpose
or an intention to injure competition and consumer welfare, but rather with the
intention of rationalising the beef industry and so making it more competitive by
reducing overcapacity
Subjective intention may still be reliant in assessing whether the object of an
agreement is anticompetitive (Alliance Hungaria Biztosito Zrt 2013 para 37)
o Where agreement has anti comp objective, it doesn’t cease to be characterised as such
because it also has an alternative, lawful, purpose (P General Motors BV v Commission
2004 para 64)
