Consequences of Being a member of a cartel : The Stick and Carrot approach.
The main focus of this essay will be the fines that are issued when firms collaborate in breach of Article 101(1) TFEU. The commission has a wide range of powers which they can utilise to try and prevent the formation of cartels.The policy allows for the commission to demand an end to the practices which undertakings use to distort competition and include fining the firms for the infringing behaviour based on the gravity and duration of the collaboration[i]. In 1980, the commission declared that fines would be increased as a means of deterring undertakings[ii]. From 1991[iii] the commission has shown an increased willingness to fine 10% of an undertakings turnover from the previous year, the maximum amount[iv] allowed under Regulation 1/2003 EC. Between 2004 and 2009, fines totalling €8.5 Billion were levied on firms that took part in cartels and recently the commission has handed out one the largest fines to a cartel in its history[v]. Despite the willingness of the commission to hand out larger fines, attention has to be paid to the leniancy policy which allows for undertakings to reduce their fines in return for, amongst other things, behaviour which allows for the commission to succesfully complete an investigation.
Purpose of Competition Law
The purpose of competition law raises interesting questions about the methods taken by the commission when undertakings are found to be in breach of article 101. If as Pescatore argues that the purpose of Competition law is simply “the elimination of obstacles that stand in the way of the free movement of goods and services“[vi] then the measures should only take account of present or future breaches as they are removing any obstacles to free trade rather than punishing undertakings for their behaviour.
However the General Court has stated that the purpose of competition law is the protection of the final consumer[vii] which suggests that the court has a more value laden approach which is reflected within the treaty. It specifically exempts 101(1) TFEU where collaboration improves production or distribution, or it improves the technical standards or provides economic benefits[viii]. In response to the fact that the commission was saddled with huge amounts of individual exemption requests they set up a number of block exemptions and in moved to an ex ante system that allows for companies to draft contracts and agreements that do not disrupt competetition. Similarly companies whose agreements do not affect a large enough market share are exempted from the consequences of breaching article101 TFEU.
Others argue that the protection of the Member States as a whole is the most important factor[ix]. This is reflected in the mitigating factors that the commission considers and I will later look at the affect of one form reducing fines later in the essay via the Inability to Pay exemption (ITP). The confusion regarding the specific point of comptetion law as a whole is reflected in the decisions of the commission and it may lead to what some see as arbitrary behaviour of the commission since if in different investigations and subsequent decisions that different objectives are being pursued. All of the views can be seen in the decisions of the court and the commission but this is because of the natures of collaboration in Business. It is undoubted that, what in one sector could deprive the economy and consumer of benefit may in another sector benefit the consumer and a one-size fits all approach to anti-competition legislation simply would not be beneficial to the economy as a whole. It is also important to note that the purpose of the measure will be more focused towards stopping the activity and in certain cases towards stopping but also punishing the members of the cartel. If we take the vitamins case[x] as an example the commissioner at the time seemed emptionally charged during...
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