This article takes an overview into the European regulation for Horizontal agreements.
The first part of this article introduces the Article 101 of the Treaty on the Functioning of the European Union and two of the conducts that are incompatible with the Interior Market: price fixation and market limitation. The second part of the article covers the rest of the prohibited conducts of the Article 101. This last part will be published next week.
Article 101 (previously Article 81) of the Treaty on the Functioning of the European Union bans agreements between companies, company associations decisions and agreed practices which impede, restrict or distort competition in the market. This behavior is known by the generic name of horizontal agreements or practices. They are considered incompatible with the market because of their distortive nature.
However, Article 101.3 of the Treaty allows these horizontal agreements as long as they comply with a series of conditions.
The body responsible for determining the invalidity, or not, of agreements and, therefore, the application of these articles is the European Commission.
In the first part of Article 101 conduct considered incompatible with the Interior Market is indicated;
- Fixing prices or other transactional conditions
- Limiting or controlling production, the market, technical development or investments
- Limiting or apportioning markets or sources of supply
- Discrimination liable to render competitive disadvantage
- Obligation to accept products and supplementary services and exclusive agreements
I.- FIXING PRICES OR OTHER TRANSACTIONAL CONDITIONS
Competition through pricing is the most visible method of competition between companies within the same market.
There are frequently important differences in the prices of the same product in different Member States. These price differences are owed to varying factors.
1.- Restrictive Competition Conduct related to Pricing
Conducts susceptible to restricting freedom of pricing and therefore considered null by the Commission are very variable.
2.- Influence of National Regulation
Competition rules established in the Treaty are applied throughout the whole EC.
3.- Discounts
Establishing discounts applicable to a group of competitors in the same market is nothing more than another way of fixing or regulating prices.
4.- Neutral Agreements or ‘de minimis’
Article 101.1.a not only bans price fixing but also any conditions of procurement; transport, methods of deferred payment, interests or guarantees.
Not all agreements related to conditions of sale or purchase of products are contrary to competition.
II.-LIMITING OR CONTROLING MARKETS OR SOURCES OF SUPPLY
This type of behavior is expressly forbidden in Article 101, Points b and c.
1.- Quota Distribution
These agreements allow the quantity of goods or services that competitors produce or offer in a market to be controlled.
2.- Geographical distribution of the market
There are different ways of distributing a geographic market;
a) Market distribution within the EC
b) Agreements which limit or control imports in the EC
c) Co-operation in exporting outside the Community
3.-Information Exchange Agreements
It is difficult to analyse these agreements. A regular exchange of information can form part of conduct which tend to distort the mechanisms of price fixing or other normal conditions in a free and open market.
4.- Joint Sales and Purchasing Organizations
4.1.- Joint Sales; suppliers can rely on only one company or create a joint company to economise marketing costs and avoid duplication of costs of individual sales.
4.2.- Joint Purchasing; Purchase agreements are focused on the accrual of orders to obtain better prices. This is different joint sales where a joint company is not required.
5.- Sharing clients and collective selection of clients and suppliers
Agreements between competitive producers who look for the division of clients or supply of certain exclusive distribution channels, normally in exchange for the distributors to only buy from these producers, infringes Article 101.
Santiago Nadal
