Economic Globalisation and Competition

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1. Introduction

Competition is a vital mechanism of the market economy and is an efficient means of guaranteeing consumers a level of quality in terms of the value and price of products and services. Economic globalization has increased volatile growth within international trade and as a result in subject of competition law.

Article 81(1) of the EC Treaty ‘prohibits agreements between undertakings; decisions by associations of undertakings and concerted practices which may affect trade between Member States and which prevent restrict or distort competition’. These agreements shall be void according to 81(2). However, the agreements which satisfy the conditions set out in article 81(3) EC shall not be prohibited, no prior decision to that effect being required.

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1.1. Anti-Competitive Agreements

Article 81 of the EC Treaty, prohibiting anti-competitive agreements, must be considered in relation to all commercial agreements with a probable EU cross-border impact. The Horizontal and the Vertical agreements are the agreements, which are relevant for the purposes of the application of the competition rules. Horizontal agreements are those between undertakings operating at the same level of production or marketing, while vertical agreements are those completed between undertakings operating at different economic levels. Under EC Competition Law, restrains included in vertical agreements are regarded as not as much damaging than those included in horizontal agreements.

In Consten and Grundig v Commission the European Court of Justice considered that Article 81(1) EC applies not only to horizontal agreements but also to vertical agreements. The later decisional practice of the Commission on the treatment of vertical arrangements under Art 81(1) and 81(3) EC, and the case law of the Community Courts, have been one of the most controversial and severely criticized aspects of Community competition policy. These agreements are very important for the functioning of the economy. Commercial agreements may be exempted from the application of article 81(1) under article 81(3).

1.2. The Vertical Block Exemption Regulation

However, there is a ‘safe harbour’ for undertakings: the Vertical Block Exemption Regulation 2790/1999. Safe harbours exist for certain agreements including restrictions providing conditions are met so that agreements falling within the terms of the Regulation are exempt from the application of Article 81(1) EC guaranteeing the enforceability of the agreement and granting protection from antitrust prosecution. Thus, if undertakings wish to be certain that their vertical agreements are in line with EC competition law, they should agree on clauses within the scope of the Regulation.

Outside this safe harbour, the European Commission’s Notice Guidelines on Vertical Restraints are a helpful guide for the assessment under Art 81(3) EC and are explaining the application of Regulation 2790/1999 and the Commission’s approach to vertical restraints. The Guidelines on Vertical Restraints sets out the principles for the assessment of vertical agreements under Article 81,

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