Reinvigorating the Role of Article 101(3) Under Regulation 1/2003
| Author | David Bailey |
| Position | Visiting Professor of Law, King's College, London |
| Pages | 111-144 |
REINVIGORATING THE ROLE OF ARTICLE 101(3)
UNDER REGULATION 1/2003
D
AVID
B
AILEY
*
Regulation 1/2003
1
transformed the enforcement of competition law in the
European Union.
2
In May 2004, it swept away the system of notification of
agreements to the European Commission for authorization that had existed for
over 40 years.
3
It established the current system that requires firms to decide
for themselves whether their agreements comply with EU law. The purpose of
this essay is to examine how well this system has operated in one particular
respect, namely the application of Article 101(3) of the Treaty on the Func-
tioning of the European Union (TFEU). Article 101(3) provides a defense for
agreements, restrictive of competition in breach of Article 101(1), that create
objective economic benefits.
4
In April 2009, the Commission reviewed the first five years of Regulation
1/2003 and concluded that there had been “[n]o major difficulties” encoun-
tered with the direct application of Article 101(3).
5
Five years later, in July
2014, the Commission reported that “[t]he EU competition rules have to a
large extent become the ‘law of the land’ through-out the EU.”
6
This essay
will evaluate whether Article 101(3) TFEU has become the “law of the land”
in the European Union. It will argue that Article 101(3) has been considered
by the Commission, national competition authorities (NCAs), and national
* Visiting Professor of Law, King’s College, London.
1
Council Regulation No. 1/2003, 2003 O.J. (L 1) 1, 1–7 [hereinafter Regulation 1/2003]
(explaining the implementation of the rules on competition in Articles 101 and 102 of the Treaty
on the Functioning of the European Union).
2
See generally E
UROPEAN
C
OMPETITION
L
AW
A
NNUAL
2000: T
HE
M
ODERNISATION OF
EC
A
NTITRUST
P
OLICY
(Claus-Dieter Ehlermann & Isabela Atanasiu eds., 2001).
3
Council Regulation No. 17, 1959–1962 O.J. S
PEC
. E
D
. 87 [hereinafter Regulation 17].
4
Consolidated Version of the Treaty on the Functioning of the European Union art. 101(3),
2012 O.J. (C 326) 47, 88 [hereinafter TFEU].
5
Eur. Comm’n, Report on the Functioning of Regulation 1/2003, at 49, COM (2009) 206
final (Apr. 29, 2009) [hereinafter Regulation 1/2003 Report].
6
Eur. Comm’n, Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements
and Future Perspectives, COM (2014) 453 final, ¶ 23 (July 9, 2014).
111
112
A
NTITRUST
L
AW
J
OURNAL
[Vol. 81
courts,
7
but in virtually all cases the defense was held not to be applicable.
The cases in which Article 101(3) has been applied
8
are so rare that one com-
mentator has lamented that we are experiencing the “slow death of Article
101(3),” in the sense that Article 101(3) has seldom been the subject of formal
decisions.
9
This essay will argue that it is in the public interest for the Commission, in
particular, to make decisions that apply Article 101(3). Carefully chosen cases
that lead to well-reasoned positive decisions under Article 101(3) would be an
important and welcome development at a time when there are misgivings
about the standard of proof under Article 101(3).
10
Undertakings may be less
skeptical of the evidentiary demands under Article 101(3)
11
if and when there
are examples of those demands being met in individual cases. It is to be hoped
that the next ten years of Regulation 1/2003 will feature some decisions and
informal guidance upholding the defense in Article 101(3). Such decisions
and guidance would contribute to the proper development of the law, policy,
and practice under Article 101(3) in individual cases.
I. INTRODUCTION TO ARTICLE 101 TFEU AND THE
APPLICATION OF ARTICLE 101(3) PRIOR TO
REGULATION 1/2003
This Part will briefly consider the procedural regime that existed for the
application of Articles 101 and 102 from 1962 to 2004.
12
It is intended to
7
Importantly, and as discussed in greater detail below, Regulation 1/2003 also introduced a
decentralized system of enforcement in which not only the Commission, but also courts of EU
Member States and (with certain qualifications) NCAs, are empowered, and sometimes are re-
8.
8
As discussed in greater detail below, until the date of writing, the European Commission
had not taken any decisions under Regulation 1/2003 that declared Article 101(1) inapplicable to
agreements that satisfied the criteria of Article 101(3). National courts have heard some cases
involving the application of Article 101(3), but there have been very few judgments on that
provision. See infra Part IV.B. NCAs’ contribution to the law under Article 101(3) has also been
very limited, in part because they do not have the power to adopt formal decisions under Article
101(3). See infra Part III.B.
9
Alfonso Lamadrid, The Slow Death of Article 101(3), C
HILLIN
’ C
OMPETITION
(Oct. 28,
2011, 12:31 PM), chillingcompetition.com/?s=slow†eath.
10
See Paul Lugard & Leigh Hancher, Honey, I Shrunk the Article! A Critical Assessment of
UR
. C
OMPETITION
L. R
EV
.
410, 416, 419.
11
See Eur. Comm’n, Guidelines on the Application of Article 81(3) of the Treaty, 2004 O.J.
(C 101) 97, 99–100 [hereinafter Article 101(3) Guidelines].
12
Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU) were
Foreign & Commonwealth Office, A Comparative Table of the Current EC and EU Treaties as
Amended by the Treaty of Lisbon 11 (Jan. 2008), gov.uk/government/uploads/system/uploads/
attachment_data/file/228835/7311.pdf.
2016]
R
EINVIGORATING THE
R
OLE OF
A
RTICLE
101(3)
113
provide a historical comparison for the way in which Article 101(3) has, and
has not, been applied since Regulation 1/2003.
A. A
RTICLE
101 TFEU
Article 101 has three paragraphs.
13
Article 101(1) provides that agreements
that have as their “object or effect” the restriction of competition are prohib-
ited.
14
It is well-established case law that the words “object or effect” in Arti-
cle 101(1) are disjunctive, not conjunctive: if an agreement reveals a sufficient
degree of harm to competition, it restricts competition by “object” and there is
no need to examine its effects.
15
Otherwise, the agreement will fall under Arti-
cle 101(1) only if it can be shown in light of the particular facts of the case
that the agreement has the effect of appreciably restricting competition.
16
It is always possible, however, that an agreement that falls within Article
101(1) can benefit from the defense provided for in Article 101(3). There is
no such thing as per se illegality in EU law. Article 101(3) contains four
conditions: first, the agreement must create efficiencies; second, the benefit of
the efficiency gains must be passed on to consumers; third, the agreement’s
restrictions of competition must be indispensable to the attainment of the effi-
ciencies; and, fourth, the agreement must not eliminate competition.
17
These
conditions are cumulative. They are designed to ensure that the procompeti-
tive benefits of an agreement outweigh the extent to which it restricts
competition.
Article 101(3) can be applied in individual cases or to categories of agree-
ments by way of a so-called block exemption regulation.
18
In individual cases,
the burden of proof under Article 101(3) lies on the parties to the agreement in
question.
19
When an agreement is covered by a block exemption regulation,
however, the parties are relieved of the burden of proving that their agreement
satisfies the conditions of Article 101(3); they only need to show that the
agreement meets the requirements of the block exemption.
13
TFEU, supra note 4, arts. 101, 102, at 88–89.
14
Id. art. 101(1), at 88.
15
Case C-345/14, SIA “Maxima Latvija” v. Konkurences Padome, ECLI:EU:C:2015:784,
¶ 18 (ECJ Nov. 26, 2015); Case C-67/13, Groupement des Cartes Bancaires v. Comm’n,
ECLI:EU:C:2014:2204, ¶¶ 49–52 (ECJ Sept. 11, 2014).
16
Joined Cases 56 & 58/64, ´
Etablissements Consten S.`a.R.L. & Grundig-Verkaufs-GmbH v.
Comm’n, 1966 E.C.R. 299, 342. The EU courts have repeatedly reaffirmed this position. See,
e.g., Joined Cases C-501, 513, 515, & 519/06 P, GlaxoSmithKline Servs. Unltd. v. Comm’n,
2009 E.C.R. I-9291, ¶ 55.
17
TFEU, supra note 4, art. 101(3), at 88–89.
18
The current block exemption regulations are available at ec.europa.eu/competition/antitrust/
legislation/legislation.html.
19
See Regulation 1/2003, supra note 1, art. 2, at 8.
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