Application of article 101 TFEU: anticompetitive agreements
Article 101 of the Treaty on the Functioning of the European Union (TFEU) prohibits anticompetitive agreements, which are:
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 internal market.
Article 101(1) TFEU lists a non-exhaustive list of prohibited practices:
- directly or indirectly fix purchase or selling prices;
- limit or control production, markets, technical development or investment;
- share markets or source of supply;
- apply dissimilar conditions to equivalent transactions with other trading parties;
- make the conclusion of contracts conditional on acceptance of unrelated obligations.
Article 101 applies only to ‘undertaking’, which is defined broadly by the Court of Justice and can be extended to any legal or natural person engaged in an economic or commercial activity. Therefore, this concept includes individuals, partnerships, corporations, limited partnerships, trusts, charities, co-operatives, nationalised firms, state-owned commercial organisations and non-profit making organisations.
Article 101 requires an appreciable effect on trade between Member States in order for the Commission to have jurisdiction. Otherwise, then national competition rules are likely to apply. The regime extends to agreements, decisions and concerted practices concluded between undertakings which are not located in the EU, but which have an effect and affect trade between Member States.
To come within the scope of article 101 there must be two or more undertakings involved. Agreements made between companies within the same corporate group will generally not be caught by the competition rules, since they are considered as part of the same economic entity.
The term ‘agreement’ is widely construed and includes not only written agreements, but also oral agreements, whether they are or not intended to be legally binding. Informal agreements are also caught, it is sufficient that the undertakings have expressed their joint intention to conduct the market in a specified way.
This way, according to EU case law, four elements must be presented for the prohibition in article 101(1) to apply:
- The existence of an agreement or concerted practice between two or more undertakings;
- which has as its object or effect the prevention, restriction or distortion of competition;
- an appreciable effect on competition; and
- an appreciable effect on trade between Member States.
Article 101(2) TFUE provides that agreements prohibited by article 101(1) TFEU shall be automatically void and unenforceable without there being a need for prior finding by the Commission that the agreement breaches article 101. The Commission’s view is that practices listed in article 101(1) TFEU are ‘hard-core’ and may be presumed to have negative market effects.
Even if an agreement is caught by Article 101(1), it may benefit from an exception under Article 101(3). Therefore, an agreement may be allowed if it:
- has more positive than negative effects;
- is not concluded between competitors;
- involves companies with only a small combined share of the market;
- is necessary to improve products or services, develop new products or find new and better ways of making products available to costumers.
EU Commission Manuscript. The EU Explained: Competition.