Article 101 of the Treaty on the Functioning of the

European Union
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Scottish Enlightenment philosopher Adam Smith was an early enemy of cartels, but did not advocate them being
outlawed
Article 101 of the Treaty on the Functioning of the European Union prohibits cartels and other agreements
that could disrupt free competition in the European Economic Area's internal market .Article 101 reads,
[1]

1. The following shall be prohibited as incompatible with the internal market all agreements between
undertakings, decisions by associations of undertakings and concerted practices which may affect trade
between Member States and which have as their object or effect the prevention, restriction or distortion of
competition within the internal market, and in particular those which:
(a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have
no connection with the subject of such contracts.
2. Any agreements or decisions prohibited pursuant to this article shall be
automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in
the case of:
any agreement or category of agreements between undertakings,
any decision or category of decisions by associations of undertakings,
any concerted practice or category of concerted practices,
which contributes to improving the production or distribution of
goods or to promoting technical or economic progress, while
allowing consumers a fair share of the resulting benefit, and
which does not:
(a) impose on the undertakings concerned restrictions which are not indispensable to the
attainment of these objectives;
(b) afford such undertakings the possibility of eliminating competition in respect of a
substantial part of the products in question.
Businesses who infringe these rules can be subjected to large
fines by the European Commission or national competition
authorities. Prison is not available as a punishment under Article
101 itself. Some countries within the European Union have laws
that impose criminal sanctions, including prison, for participation
in anti-competitive agreements or practices.
Contents
[hide]
1 Goals
2 Undertakings
3 Collusion
4 Trade between Member States
5 Exemptions
6 See also
7 References
8 Notes
[edit]Goals
Article 101 EC's goals are unclear. There are two main schools of
thought. The predominant view is that only consumer welfare
considerations are relevant there.
[2]
However, a recent book
[Book by
whom? Link to book and author page?]
argues that this position is erroneous
and that other Member State and European Union public policy
goals (such as public health and the environment) should also be
considered there.
[3]
If this argument is correct then it could have a
profound effect on the outcome of cases
[4]
as well as the
Modernisation process as a whole.
[edit]Undertakings
Main article: Undertaking
Under EC law cartels are banned by Article 101 TFEU. Art. 101
TFEU makes clear who the targets of competition law are in two
stages with the term agreement between "undertaking". This is
used to describe almost anyone "engaged in an economic
activity",
[5]
but excludes both employees, who are by their "very
nature the opposite of the independent exercise of an economic
or commercial activity",
[6]
and public services based on "solidarity"
for a "social purpose".
[7]

[edit]Collusion
See also: Collusion
Undertakings must then have formed an agreement, developed a
"concerted practice", or, within an association, taken a decision.
Like US antitrust, this just means all the same thing. According to
Advocate General Reischl in Van Landewyck [1980]
[8]
there is no
need to distinguish an agreement from a concerted practice,
because they are merely convenient labels. Any kind of dealing or
contact, or a "meeting of the minds" between parties could
potentially be counted as illegal collusion. Covered therefore is a
whole range of behaviour from a strong handshakes, written or
verbal agreement to a supplier sending invoices with directions
not to export to its retailer who gives "tacit acquiescence" to the
conduct.
[9]

This includes both horizontal (e.g. between retailers) and vertical
(e.g. between retailers and suppliers) agreements, effectively
outlawing the operation of cartels within the EU. Article 101 has
been construed very widely to include both informal agreements
(gentlemen agreements) and concerted practices where firms
tend to raise or lower prices at the same time without having
physically agreed to do so. However, a coincidental increase in
prices will not in itself prove a concerted practice, there must also
be evidence that the parties involved were aware that their
behaviour may prejudice the normal operation of the competition
within the common market. This latter subjective requirement of
knowledge is not, in principle, necessary in respect of
agreements. As far as agreements are concerned the mere
anticompetitive effect is sufficient to make it illegal even if the
parties were unaware of it or did not intend such effect to take
place.
[edit]Trade between Member States
Article 101 states that agreements that fall under it should
affect trade between Member States. This has been interpreted in
a non-restrictive way, for example, several agreements amongst
firms with no production in the EU have been considered to affect
trade between Member States. In theWebb-Pomerene case, EU
law was applied to a US cartel with no production in the EU.
[10]

[edit]Exemptions

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or sources. Please help improve this section
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and removed. (July 2008)
Exemptions to Article 101 behaviour fall into three categories.
First, Article 101(3) creates an exemption where the practice is
beneficial to consumers, e.g., by facilitating technological
advances (efficiencies), but does not restrict all competition in the
area. In practice very few official exemptions were given by the
Commission and a new system for dealing with them is currently
under review. Secondly, the Commission has agreed to exempt
'Agreements of minor importance' (except those fixing sale prices)
from Article 101. This exemption applies to small companies,
together holding no more than 10% of the relevant market in the
case of horizontal agreements and 15% each in the case of
vertical agreements (the de minimis condition). In this situation as
with Article 102 (see below), market definition is a crucial, but
often highly difficult, matter to resolve. Thirdly, the Commission
has also introduced a collection of block exemptions for different
types of contract and in particular in the case of vertical
agreements.
[11]
These include a list of permitted contract terms,
and a list of those banned in these exemptions (the so-
called hardcore restrictions).