LAST MAY, the English Court of Appeal gave judgment in a landmark European Union competition law case, Crehan v Inntrepreneur Pub Company (CPC), (1) in which Bernard Crehan, a pub operator, became the first person in the United Kingdom to win damages for breach of Article 81 of the European Community Treaty.
A TALE OF TWO PUBS
In the early 1990s, Crehan leased two pubs in Staines, Middlesex, west of London, from the pub company Inntrepreneur with a beer tie-in. He ran The Cock Inn from July 1991 until November 1992, and The Phoenix from July 1991 until March 1993 before surrendering the leases. During those periods he was forced by the restrictive leases to buy "specified beers" from brewer Courage Ltd. at prices set by Courage and to sell beer at 1.50 [pounds sterling] a pint, while local competitors sold theirs for 1.10 [pounds sterling]. Crehan claimed that he ran up debts of more than 100,000 [pounds sterling], including arrears of rent to Inntrepreneur and unpaid debts to Courage for beer supplies.
Courage and Inntrepreneur brought proceedings against him for these unpaid debts. Crehan counter-claimed, joining Inntrepreneur and claiming damages as a set-off against what he owed. He alleged that the terms of the leases and the beer tie breached Article 81 of the European Communities Treaty, which prohibits agreements "which might 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: (1) directly or indirectly fix purchase or selling prices or any other trading conditions."
At a preliminary hearing, although the judge (Carnwath, J.) found that the lease and beer ties caused losses to Crehan, he held that they did not infringe Article 81 and dismissed the counter-claim. Crehan appealed to the Court of Appeal (Morritt, Schiemann and Mance, L.JJ.), which affirmed, feeling bound by English law that a tenant who participates in an illegal contract is precluded from claiming damages when the claim is based on that illegality. But that court made a reference to the European Court of Justice of whether a national court is obliged as a matter of European Community law to award damages to an injured person protected by EC law. (2) The effect of the ECJ decision was that Crehan might have a claim for damages against Inntrepreneur--there should not be "absolute bar"--but that there were substantial questions regarding the economic and legal context of the parties and their respective bargaining powers that needed to be decided by the national court. (3)
Following the ruling of the ECJ, Crehan's appeal was allowed and the matter was remitted to a designated High Court judge, Mr. Justice Park. (4) The judge declared that two conditions flowing from the European Court of Justice case, Delimitis v Henninger Brau AG, had to be satisfied in order for Crehan to succeed. In Delimitis, that position and the first condition was set out as follows:
A beer supply agreement is prohibited by [Article 81(1)] of the EEC Treaty if two cumulative conditions are met. The first is that, having regard to the economic and legal context of the agreement at issue, it is difficult for competitors who could enter the market or increase their market share to gain access to the national market for the distribution of beer in premises for the sale and consumption of drinks. The fact that, in that market, the agreement in issue is one of a number of similar agreements having a cumulative effect on competition constitutes only one factor amongst others in assessing whether access to that market is indeed difficult. (5) Mr. Justice Park decided that this first Delimitis condition was not satisfied as there was insufficient evidence that the...