Keenan and Riches’BUSINESS LAW

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Chapter 7Introduction to the law of contract

Article 82 prohibits the abuse of a monopolistic posi-
tion by an organisation within the EC. Practices which
might be considered abuses include imposing unfair
buying or selling prices. Responsibility for enforcing
these provisions rests with the European Commission.


The European Commission also has the power to
control mergers with a Community dimension under an
EC Merger Control Regulation which came into force in


  1. A merger will come within the terms of the EC
    Regulation if both:
    (a) the aggregate worldwide turnover exceeds 5 billion
    euros; and
    (b) at least two of the parties have a community turn-
    over in excess of 250 million euros unless each of
    the undertakings makes more than two-thirds of
    its turnover in the same member state.
    Mergers falling within the threshold must be notified
    to the Commission within a week of the conclusion of
    the agreement to acquire control. The Commission must
    decide within a month of notification whether to launch
    a full investigation, which must be completed within a
    further four months. If the Commission concludes that
    the merger will significantly impede effective competi-
    tion in the whole or part of the EC, it must be blocked.


UK competition law
Competition Act 1998
The CA 1998 introduced two prohibitions which are
largely based on the prohibitions operating at European
level under Arts 81 and 82.
Chapter I prohibition
The first prohibition, the Chapter I prohibition, is based
on Art 81. It prohibits agreements which have the object
or effect of preventing, restricting or distorting competi-
tion in the UK. The anti-competitive nature of the agree-
ment will be judged according to its effects or intended
effects on competition. The Act sets out illustrative ex-
amples of agreements to which the prohibition applies:

245

by a block exemption. The case was referred to the
European Court of Justice (ECJ) which ruled that parties
to an agreement that breaches Art 81 may bring a claim
in domestic courts for breach of Art 81. The High Court
held that, in order to establish a claim under Art 81, two
conditions must be satisfied: first, having regard to the
legal and economic context of the leases, it was difficult
for businesses to enter the market or increase their
market share; and, second, if there was a network of
similar leases, this had contributed to sealing off the
market. The court found that the first condition had not
been breached. The enactment of the Supply of Beer
(Tied Estates) Order 1989 (SI 1989/2390) had led to the
break-up of the breweries’ tied estates and a significant
number of previously tied pubs had been sold. It was not
difficult for newcomers to enter the market or for exist-
ing participants to increase their market share. The beer
ties did not infringe Art 81 and C’s claim therefore failed
even though the court concluded that the failure of the
business was caused by the beer ties. The court also
decided that the block exemption was not available.
Comment. The trial judge’s decision was overturned in
the Court of Appeal on the grounds that he had not com-
plied with the duty of ‘sincere co-operation’ required by
Art 10 of the EC Treaty in that he had not accepted the
Commission’s view about the state of the UK beer mar-
ket as expressed in a different case involving Whitbread.
The House of Lords held that the trial judge’s decision
should be reinstated. The Commission’s findings might
constitute a highly persuasive part of the evidence which
he should consider but he was entitled to consider addi-
tional evidence and form his own view.

Publishers’ Association applied to the European Court
for an annulment of the Commission’s decision. The
European Court upheld the Commission’s view that the
Agreement infringed Art 81.
Comment. The European Court’s judgment did not affect
the operation of the Net Book Agreement within the UK:
the Commission’s challenge was confined to how it
operated in other EC states. However, the Net Book
Agreement only lasted for a few years after this judg-
ment. The agreement collapsed in practice in 1995, and
in March 1997 the Restrictive Practices Court discharged
the orders which upheld the agreement.

Publishers’ Associationv Commission
of the European Communities(1992)
This European Court of Justice case involved the opera-
tion of the Net Book Agreement under which publishers
enforced resale price maintenance in respect of books.
The agreement had been approved by the Restrictive
Practices Court under UK legislation (Re Net Book Agree-
ment(1962)). However, in 1988 the European Commission
found that the Agreement infringed Art 81 in respect of
books sold from the UK to other EC states. The Com-
mission turned down an application for exemption. The
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