The Gazette 1985

GAZETTE

SEPTEMBER 1985

The Competition Policy of the

European Community

Part II

Peter D. Sutherland

Member of the Commission of the European Communities

(The following is an edited version of an article first published in the St. Louis University Law Journal.

Part I appeared in the September Gazette.)

Extra-territoriality

Before considering other substantive areas of law and

policy, I should like to examine the so-called "extra-

territoriality" problem. The Commission espouses the

effects

objective territoriality

doctrine of jurisdiction

and believes it to be necessary, just and in accordance with

the requirements of the law of nations.

Our approach is to apply our law to restrictive practices

which have an appreciable effect on competition within

the common market and on trade between the

Community's Member States. In investigating a case and

reaching a decision, the Commission takes full account of

the legitimate interests and concerns of foreign States.

The Commission has responsibilities for the foreign

relations as well as the competition policy of the

Community and the necessary element of

comity

which civilised international relations depend is therefore

built into the decision-making process. This is quite

different from a situation where a court is asked to take

account of foreign policy emanating from another branch

of Government.

To summarise, the Commission does not apply the

Community's competition law extra-territorially: on the

contrary, it applies it

territorially,

to phenomena within

its borders. The Commission would be glad to consider

approaches by foreign Governments with a view to

strengthening international co-operation in respect of

genuine extra-territoriality and in order to facilitate

comity considerations. I say

strengthening

co-operation

because such co-operation already exists and is in fact

reasonably successful in its day-to-day application. For

example, the Commission keeps the US authorities

informed of important developments in cases concerning

US companies and, where necessary, engages in more

extensive consultations in accordance with the 1979

OECD Recommendation

. These consultations provide

valuable inputs to our decision-making process.

The Commission also founds jurisdiction in

competition cases on the

enterprise entity doctrine.

This

means that a group of companies with a subsidiary in the

EEC is considered to be an undertaking within the

jurisdiction, wherever its corporate headquarters. For

purposes of personal jurisdiction too, this doctrine

enables us to avoid many problems of service abroad.

Joint Ventures

Joint ventures are the focus of a good deal of attention

in Brussels. One the one hand, we seek to promote the

synergies likely to result from the bringing together under

one roof of complementary resources and skills. On the

other hand, we remain vigilant lest a joint venture should

serve as a forum or even a fagade for practices otherwise

forbidden by Article 85.

Joint venture agreements between competing

undertakings or between undertakings which, after

detailed analysis

can be considered to be potential

competitors are examined under Article 85(1), as the

previously competitive relations between those under-

takings are likely to be altered. The possible benefits of

the arrangement are analysed under Article 85(3). An

exemption granted by the Commission may contain

reporting or other obligations and is always limited in

time. This enables the Commission to monitor the

competitive development of markets in which joint

ventures proliferate and to ensure that the intimate

relationship between the joint venturers produces only

legitimate offspring.

In recent years, several decisions have been issued

clarifying the Commission's approach to joint venture

and two block exemption Regulations, on R & D and

specialisation, have added considerably to legal certainty

in this area. We believe that Article 85 with its first and

third paragraphs fulfilling their respective functions is the

sort of flexible instrument needed to deal with so

variegated a phenomenon as the joint venture.

We went, however, to go further and provide some

more detailed guidelines to enable prospective joint

venturers and their advisers to assess rapidly the compati-

bility of their project with Article 85(1) and (3). Work is

under way on this and I hope that it will be completed in

the near future.

Distribution

Community law distinguishes between

exclusive

distribution on the one hand (where a supplier contracts

to supply one distributer exclusively) and

selective

distribution on the other (where a supplier enforces

criteria applying to appointment of dealers). In the

former case the Commission has enacted successive block

exemption Regulations, starting in 1967 with Regulation

67/67

which was replaced in 1983 by Regulations

1983/83

and 1984/83

on exclusive

distribution

and

purchasing

respectively. These Regulations lay down

conditions, both positive and negative, under which

exclusive dealing agreements and practices are exempted

by Article 85(3) from the prohibition contained in Article

85(1). Our policy aims to enable manufacturers to take

advantage of the opportunities offered by the common

market by distributing their goods or services in the way

they think fit, provided that consumers too are not denied

the benefits of a home market of continental dimensions.

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