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GAZETTE
APRIL 1981
What Constitutes Unfair
Competition?
by Gregg Myles, Solicitor
Both North and South, businesses are becoming ever
more aware of the provisions of competition law by virtue
of recent national legislation.
In the South, the legislation is to be found in the
Restrictive Practices Act, 1972, and the Mergers, Take-
overs and Monopolies (Control) Act, 1978.
In the North, the legislation is to be found in the Fair
Trading Act, 1973, the Resale Prices Act, 1976, and
Restrictive Trade Practices Acts 1976 and 1977 and the
Competition Act, 1980.
In addition to this national competition law, EEC law
makes substantial provision in relation to unfair competi-
tion.
The EEC law is to be applied together with the rele-
vant national legislation above, but where a conflict occurs
between EEC and national law, EEC law prevails.
EEC Competition Law
EEC Competition Law is contained in Articles 85 to
94 of the EEC Treaty and in various regulations,
decisions and notices and also in cases decided by the
EEC's court - the Court of Justice of the European
Communities. This falls into three areas of unfair com-
petition - restrictive trade practices (Article 85), fair
trading (Article 86) and the regulation of State aid
(Articles 92 to 94). This article considers the implications
of EEC restrictive trade practice law for the business
person.
EEC Restrictive Trade Practice Law
Article 85 outlaws agreements which affect trade
between the nine member states of the EEC and which
have as their object or effect the restriction of competi-
tion within the EEC.
This embraces agreements by sole traders, partner-
ships, private companies and public companies.
Agreements covered range from legally binding con-
tracts through to informal co-ordination between traders.
Both the supplier/supplier and supplier/person supplied
relationships are covered.
Where the agreement is shown to be restrictive there is
often little difficulty in establishing that the agreement
affects trade between member states.
Thus, an agreement between two Northern or betwéen
two Southern suppliers might have the effect of isolating
the Northern or Southern market.
Since this would impede
the penetration of that market by outside competitors, it
could constitute a restrictive trade practice.
Prohibited Agreements
In a non-exhaustive list, Article 85 (1) sets out five
classes of agreements which are prohibited where the
above conditions are satisfied — 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 accept-
ance by the other parties of supplementary obliga-
tions which by their nature or according to com-
mercial usage, have no connection with the subject of
such contracts.
Thus an agreement between persons in the North or
South restricting imports to or exports from another
member state comes within (a).
The most obvious example of an illegal agreement
under (b) and (c) is one designed to isolate the Northern or
Southern market.
Such agreements as those discriminating against cer-
tain customers by giving them, for example, less favour-
able terms as to prices, discount or credit would come
within (d).
Under (e), such agreements are prohibited as those
requiring the purchaser to buy all or part of his needs of a
second (tied) product from a supplier of a first (tying)
product.
Agreements of minor importance escape the prohibi-
tion in Article 85 even where they otherwise come
squarely within the terms of the Article. An agreement
may be said to be of minor importance where the relevant
products do not represent more than 5% of the total
market for such products and the aggregate annual turn-
over of the participating undertakings does not exceed a
certain figure.
Exemption
The EEC Commission department responsible for
competition — Directorate-General IV — can grant or
deny exemptions to the application of Article 85 to an
agreement.
For exemption to be granted, the benefits from the
agreement must outweigh the disadvantages from the
restrictions on competition.
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