Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) (ex-Article 81(1) of the Treaty Establishing the European Community (TEC)) prohibits all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between European Union (EU) countries and which have as their object or effect the prevention, restriction or distortion of competition. As an exception to this rule, Article 101(3) TFEU (ex-Article 81(3) TEC) provides that the prohibition contained in Article 101(1) TFEU may be declared inapplicable in case of agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefits, and which do not impose restrictions which are not indispensable to the attainment of these objectives and do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products concerned.
The assessment under Article 101 TFEU thus consists of two parts. The first step is to assess whether an agreement between undertakings that is capable of affecting trade between EU countries has an anti-competitive object or actual or potential anti-competitive effects. Article 101(3) TFEU becomes relevant only when an agreement between undertakings restricts competition within the meaning of Article 101(1) TFEU. In the case of non-restrictive agreements there is no need to examine any benefits resulting from the agreement. The Commission guidelines on vertical restraints,horizontal cooperation agreements and technology transfer agreements contain substantial guidance on the application of Article 101(1) TFEU to various types of agreement.
The second step, which becomes relevant only when an agreement is found to be restrictive of competition, is to determine the pro-competitive benefits produced by that agreement and to assess whether these pro-competitive effects outweigh the anti-competitive effects. The balancing of anti-competitive and pro-competitive effects is conducted exclusively within the framework laid down by Article 101(3) TFEU. The present guidelines examine the four conditions of Article 101(3) TFEU:
fair share for consumers;
indispensability of the restrictions;
no elimination of competition.
Given that these four conditions are cumulative, it is unnecessary to examine any remaining conditions once it is found that one of them is not fulfilled. In individual cases it may therefore be appropriate to consider the four conditions in a different order. For the purposes of these guidelines, it is considered appropriate to invert the order of the second and the third condition and thus deal with the issue of indispensability before the issue of pass-on to consumers. The analysis of pass-on requires a balancing of the negative and positive effects of an agreement on consumers. It should not include the effects of any restrictions that already fail the indispensability test and are, for that reason, prohibited by Article 101 TFEU.
Article 101(3) TFEU does not exclude a priori certain types of agreement from its scope. As a matter of principle, all restrictive agreements that fulfil the four conditions of Article 101(3) TFEU are covered by the exception rule. However, severe restrictions of competition are unlikely to fulfil the conditions of Article 101(3) TFEU. Such restrictions are usually blacklisted in block exemption regulations or identified as hardcore restrictions in Commission guidelines and notices. Agreements of this nature generally fail (at least) the first two conditions of Article 101(3) TFEU. They neither create objective economic benefits nor benefit consumers.
The present guidelines are non-binding and without prejudice to the case law of the Court of Justice and the Court of First Instance concerning the interpretation of Article 101(1) and 101(3) TFEU or to the interpretation that the EU courts place on those provisions in the future.application details click here
According to Article 1(1) of Regulation (EC) No 1/2003, agreements which are caught by Article 101(1) TFEU and which do not satisfy the conditions of Article 101(3) TFEU are prohibited. According to Article 1(2) of Regulation (EC) No 1/2003, agreements which are caught by Article 101(1) TFEU but which satisfy the conditions of Article 101(3) TFEU are not prohibited, no prior decision to that effect being required. Such agreements are valid and enforceable from the moment that the conditions of Article 101(3) TFEU are satisfied and for as long as that remains the case. for more infomation on Applications contact us.