Until the European Commission started to fine big cartels some 10 years ago, it can be said that all the European Competition Law was just sand in the gears of the European economy. Who could honestly say that all the prohibitions issued by the European Commission regarding distribution or, in general, vertical agreements added anything to the welfare of European consumers and the functioning of the European market in a competitive way? This is not only my view:
for about a decade EEC antitrust policy almost exclusively consisted of a fight against vertical agreements in defense of the paramount integration objective[1].
The sad thing is that it did not help to build an integrated market. In fact, it probably disincentived national firms to go abroad for fearing of losing a comfortable position in its home market. But in the way, the whole competition law system (Ordnung) created under the ordoliberal model was for grabs.
This ordoliberal model can be resumed as follows: Art. 101.1 must be interpreted in a very restrictive way including primarily hard core cartels. Therefore, 101.3 must be interpreted also in a very restrictive way: only the cartels that fulfill this four requirements are to be awarded with an authorization
Only such a comprehension of art. 101.1 can be rational. How could a system of individual authorization by the European Commission be manageable if any agreement having potential effects on competition (understood as any limit on the autonomous design and implementation of a firm strategy in the market) had to be previously authorized by the Commission in order to be considered valid? German Ordoliberals were not so stupid.
But, market integration zealots entered the picture. And they wrongly believed that private barriers to trade are essentially comparable to public barriers. They forgot what was competition Law all about: to control market power. Grundig had no market power and, therefore, his contracts with Consten or, for that matter, with anyone else, should have been of no concern to the competition authorities.
It took the European Commission 40 years to understand it. In September 2005, Commissioner Kroes said she was “convinced that the exercise of market power must be assessed essentially on the basis of its effects in the market, although there are exceptions such as the per se illegality of horizontal price fixing”[2]. Only in 2010 were finally suppressed any limits to the freedom of car manufacturers to contract with its distributors as it pleases to them. But the story is not over. Pharmaceutical Companies are not allowed to control the distribution of its products; a manufacturer is not allowed to protect his brick and mortar retailers against on-line distribution. Abuse of dominance cases and collusive agreements are not treated the same way although they should since both pose problems of market power (attained through the agreement in art. 101 cases); exchange of information is equated with infringement by object and with a cartel…
The European Commission cannot go a long way further because the Grundig jurisprudence is still alive. The Commission is, of course, guilty since Grundig and its progeny was a victory for the Commission and a defeat for the economic approach and the Advocate General. Obviously, the Commission could not anticipate that the European Court would never overrule its precedents.
We do not need a more economic approach. We have got very much (bad) economic reasoning in the Court Judgments and Commission Decisions. What we need is a better legal approach, which means an economically educated legal reasoning consistent with the fundamental principle of EU Law: freedom.
[1] Giocoli, Nicola, Competition vs. Property Rights: American Antitrust Law, the Freiburg School and the Early Years of European Competition Policy (May 1, 2007). Journal of Competition Law and Economics, 2009. Available at SSRN: http://ssrn.com/abstract=987788
[2] Apud, GERADIN, Is the Guidance Paper on the Commission’s Enforcement Priorities in Applying Article 102 TFEU to Abusive Exclusionary Conduct Useful?
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