Relaxing whilst doing Competition Law is not an Oxymoron

Ugly -at first sight- but interesting (on nullity under EU competition law)

with 2 comments

Some time ago Nicolas Charbit (Concurrences) asked Luis Ortiz Blanco and myself to write a foreword for a special issue of e-Competitions on “Nullity/Voidness”.

Yes, at first I had the same reaction you just had; kinda  “What?? Wasn’t there a less sexy topic? I bet they asked us because no one else wanted to do it!”. But we accepted the offer (partly because it was for Concurrence, and partly because we still haven’t learnt to say no). Then we started thinking about it. For some time our only thought was mainly “damn, damn, damn, why did we accept to do this?“.

But when we really undertook to work on this foreword (the weekend before the tenth deadline expired), we realized the reason why the theme of nullity does not rank high in the list of preferred topics of EU competition law commentators. Reflecting upon it requires an excursion into “terra incognita”. Making sense out of the various intellectual riddles that arise with regard to nullity/voidness requires not only a knowledge of competition law principles, but also a mastering of general principles of contract law, as well as of comparative law, that are all too rare in our narrow discipline. In other words, we found out that the topic demands not a foreword but a doctoral dissertation. In spite of the appearances, it’s as interesting as it is important.

In our view, the most interesting issues concern so-called “fruit agreements”, that is, agreements distinct from the one found in breach of the competition rules but that are instrumental to realise the profits sought therewith (e.g. the agreements between a company participating in a cartel and its customers). It is clear that a given anticompetitive clause within an agreement shall be deemed void. It is also well-established that the nullity of such given clause can possibly extend the nullity to the rest of the agreement of which it is part provided that the two are not severable, and that whether a given clause is severable from an agreement is to be decided by national courts in the light of the applicable legislation in each Member State and of the specific features of each agreement. And whereas the practical application of these principles may give rise to divergent results, the situation –at the level of EU law principles- is fairly satisfactory.

What is less satisfactory is the uncertainty surrounding the validity of agreements which do not directly breach the competition rules but which stem –and actually put into practice- another agreement that does. The case law of the European Courts states, on the one hand, that the “the nullity referred to in Article [101](2) (…) is capable of having a bearing on all the effects, either past or future, of the agreement” (Courage v Crehan, para. 22) and, on the other hand, that “[t]he consequences of such nullity for other parts of the agreement, and for any orders and deliveries made on the basis of the agreement, and the resulting financial obligations are not a matter for community law. Those consequences are to be determined by the national court according to its own law” (Kerpen & Kerpen, para. 12). In other words, EU law purports to deal with the nullity of the effects of the anticompetitive agreement, but not with the vehicles (ensuing contracts) that carry out such effects. Does this make sense?

Those interested in finding out our view on this issue, and on a few others, can read the full foreword here: Foreword eCompetitions Nullity/Voidness  (It’s only 5 pages long; not long enough to bore you to death).

The rest of the special issue is available here.

Have a great weekend!

Written by Alfonso Lamadrid

9 November 2012 at 6:39 pm

Posted in Journals

2 Responses

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  1. as I am sure Luis remembers, in one of the TAA/TACA decisions, it was provided that the other party to the ‘fruit agreement’ should be given an opportunity to terminate the agreement on the grounds that its terms would have been determined at least in part by the upstream ‘cartel’ agreement. The potential ramifications presumably extend to ‘fruit agreements’ entered into with dominant undertakings which may have unlawfully raised barriers to entry.

    David Wood

    14 November 2012 at 3:53 pm

  2. I am very impressed, David! Excellent memory.

    Here is the relevant article in the TAA Decision (1994):

    Article 5

    The undertakings to which this Decision is addressed are hereby required, within a period of two months of the date of notification of this Decision, to inform customers with whom they have concluded service contracts and other contractual relations in the context of the TAA that such customers are entitled, if they so wish, to renegotiate the terms of those contracts or to terminate them forthwith.

    Luis Ortiz Blanco

    14 November 2012 at 5:24 pm

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