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Chapter X the Protection of Competition Chapter X The Protection of Competition Stefan A. Riesenfeld * I. INTRODUCTION-SCOPE, BACKGROUND, AND INTERPRETATION OF THE PROVISIONS FOR THE PROTECTION OF COMPETITION IN THE E.E.C. TREATY A. SCOPE AND ORGANIZATION OF THE PERTINENT ARTICLES I. PLACE OF THE REGULATIONS WITHIN THE TOTAL STRUCTURE OF THE TREATY One of the most important and widely publicized aspects of the Treaty Establishing the European Economic Community is its protection of competition in the Common Market. Since the publi­ cation of the texts of the respective international agreements,1 a veritable flood of literature on that subject has emerged in the Community countries as well as abroad, and a host of controversies has arisen over the significance and import of the controlling clauses.2 The pertinent articles differ greatly in structure and are dis­ tributed and arranged over various portions of the Treaty, as a *Dr. ]ur., Breslau, 1931; Dott. in Giur., Milan, 1934; LL.B., University of Cali­ fornia, 1937; S.].D., Harvard, 1940. Professor of Law and Vice-Chairman, Institute of International Studies, University of California, Berkeley, California. Special Con­ sultant to the Ad Hoc Committee on Restrictive Business Practices of the Economic and Social Council of the United Nations. Author of books on social legislation, inter­ national law, insurance Ia w, and other subjects and of numerous articles in the field of commercial transactions and trade regulations in German and American legal publications. 1 The Treaty establishing the European Economic Community is one of the group of international agreements signed in Rome on March 25th, 1957. It is supplemented by the Convention relating to certain Institutions common to the European Communi­ ties, of the same date, and a number of protocols. 2 See the bibliography in part IV, notes 580 and 634 infra. 197 198 AMERICAN ENTERPRISE IN THE COMMON MARKET consequence of the fact that the play of the forces of competition in the market may be channelized and affected by different modes and measures of governmental action as well as by arrangements and other practices of private enterprises. However, this dispersal of the regulations and the multitude of interference types envisaged must not becloud the essential unity of purpose and interconnection of the various segments of the total scheme. The E.E.C. Treaty is divided into six principal parts dealing, consecutively, with the Principles (Articles 1-8), the Bases of the Community (Articles 9-84), the Policy of the Community (Arti­ cles 8 s- I JO)' the Association of Countries and Territories Over­ seas (Articles 13 1-136), the Institutions of the Community (Arti­ cles I37-246), and, finally, General and Concluding Provisions (Articles 210-248). Articles bearing on the protection of com­ petition are found primarily in the First, Second, and Third parts of the Treaty. The most comprehensive and specific set of provisions on the subject is placed in Part Three, Title I, Chapter I of the Treaty, and bears the telling sub-heading "Rules of Competition." It deals with restrictive practices by private or public enterprises (Articles 8 5-90), dumping (Article 9 I), and public subsidies (Article 9 2). It must not be overlooked, however, that the provisions of this chapter are supplemented by important articles in other parts or chapters of the Treaty. In the first place, Part One of the Treaty, which establishes the governing principles of and for the Community, specifies, in Article 3, the principal activites of the Community for the accomplishment of its task and lists, in a catalogue of eleven programmatic items, the following two : (f) The establishment of a system which safeguards the competi­ tion within the Common Market against adulterations; .. (h) The harmonization of the provisions of national laws to the extent required for an orderly functioning of the Common Market.... The particular position in the Treaty, as well as the broad phraseology of this provision, makes it clear that one of the basic objectives and tenets of the Common Market is the achievement of a market order which is free from "falsifications" due to dis­ criminatory or otherwise unduly restrictive practices whether im­ posed by governmental mandate or initiated by private action.3 3 Moreover, it should be noted that the proscription of any discrimination on national THE PROTECTION OF COMPETITION I 99 Again, since Part Two regulating the Bases of the Community focuses primarily on the structural pattern of the Common Market as created by the gradual abolition of reciprocal territorial barriers restricting the freedom of inter-market trade, employment or mobility of workers, and movement of capital, only such interfer­ ence with competition is dealt with in that connection as stems from quantitative restrictions or government monopolies entailing dis­ criminations on a territorial or local basis. The Treaty aims at the ultimate elimination of all quantitative restrictions on imports and exports impinging on inter-market trade; but Article 36 excepts prohibitions against, and restrictions of, the importation, exporta­ tion, or transit of goods, justified by reasons of public morals, or­ der, and safety, of the protection of the health and life of persons and animals, of the preservation of plants, of the conservation of natural treasures having an artistic, historical, or archeological value, or of the protection of industrial or commercial property. Nevertheless the Article specifies that such prohibitions and re­ strictions must "not constitute a means of arbitrary discrimination or a disguised restriction on the commerce among the Member States." Article 37, similarly, ordains a transformation of existing state trade monopolies in such a fashion that at the end of the transi­ tional period any discrimination among nationals of the Member States is eliminated with respect to conditions governing supply to, or procurement from, such monopolies. This provision is declared to apply to all institutions by which a Member State exercises, in law, or in fact, a direct or indirect control, direction, or discernible influence over importation or exportation among Member States. It also applies to monopolies conferred by a Member State upon other legal entities. 2. THE RULES OF COMPETITION FOR ENTERPRISES IN PARTICULAR As has been stated before, the core of the Treaty provisions for the protection of competition in the Common Market are con- grounds is one of, the guiding principles of the E. E. C. by virtue of Article 7 of the Treaty which provides: Any discrimination on the grounds of nationality is prohibited within the field of application of this Treaty, without prejudice to the special provisions contained therein. The Council, acting with qualified majority upon a proposal of the Com­ mission and after consultation of the Assembly, may publish any regulation for the purpose of prohibiting such discrimination. 200 AMERICAN ENTERPRISE IN THE COMMON MARKET tained in Articles 8 5-90. While the last of these articles deals primarily with public enterprises and enterprises which have been accorded special or exclusive rights, the first five contain rules gov­ erning the market conduct of enterprises in general. Since the fol­ lowing discussions deal primarily with their significance and ap­ plication, the full text of these Articles 4 is set out for the con­ venience of the reader : ARTICLE 85 (I) Incompatible with the Common Market and prohib­ ited are all agreements between enterprises, all decisions of associations of enterprises and all concerted practices which are apt to affect the commerce between Member States and which have as their object or effect the preven­ tion, restriction or adulteration of competition within the Common Market, and especially those which consist in:- (a) fixing directly or indirectly the purchase or sales prices or other conditions of transacting business; (b) limiting or controlling the production, distribu­ tion, technical development or investment; (c) dividing the markets or sources of supply; (d) applying unequal conditions for equivalent goods or services vis-a-vis other contracting parties, thereby inflicting upon them a competitive disad­ vantage; (e) conditioning the conclusion of contracts upon the acceptance by the other contracting parties of ad­ ditional goods or services, which, neither by their nature nor by commercial usage, have any connec­ tion with the object of these contracts. ( 2) The agreements or decisions prohibited according to this article are void. ( 3) However, the provisions of paragraph (I) may be declared inapplicable to: any agreement or category of agreements between en­ terprises, any decision or category of decisions of associations of enterprises, and any concerted practice or category of concerted prac­ tices, which contribute to the improvement of the production or distribution of commodities or to the promotion of • The wording of the translations is by the author. No satisfactory English trans­ lation is in print. The difficulties of an adequate rendition in English of the provisions of the Treaty are formidably enhanced by the fact that there are substantial divergen­ cies between the four controlling texts. See infra passim. THE PROTECTION OF COMPETITION 201 technological or economic progress, while reserving an appropriate share of the resulting profit to the consumers and without: (a) imposing on the enterprises involved any restric­ tions not indispensable for the attainment of these objectives, or (b) enabling such
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