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A New Look at Provisional Validity

Published online by Cambridge University Press:  16 January 2009

Alan Dashwood
Alan Dashwood
Affiliation:
Lecturer in European Economic Law, Centre of European Studies, University of Edinburgh.
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Extract

The EEC rules concerning restrictive business combinations are sanctioned not only by the imposition of substantial penalties in the event of intentional or negligent infringement but also by depriving offending agreements of their validity in civil law. Thus Article 85 (2) of the Treaty provides in uncompromising terms: “Any agreements or decisions prohibited pursuant to this Article shall be automatically void.” This is a directly effective provision which has become part of the law of the member states and must be applied as such by their courts. It must be stressed that the nullifying force of the Article operates automatically, rendering agreements void without the need for a decision by the Commission or by a court. This contrasts with the position under United Kingdom legislation where agreements within Part I of the Restrictive Trade Practices Act 1956 only become void following a decision of the Restrictive Practices Court that the provisions in question are contrary to the public interest.

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Articles
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The Cambridge Law Journal , Volume 33 , Issue 1 , April 1974 , pp. 116 - 129
Copyright
Copyright © Cambridge Law Journal and Contributors 1974

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References

1 See Arts. 15 and 16 of Reg. 17, J.O. 204/62.

2 The Court of Justice has held that, in principle, nullity only affects the parts of an agreement which infringe the competition rules. However, the extent to which severance is possible depends on the national law governing the contract. See Consten and Grundig v. Commission, Cases 56 and 58/64, Rec. XII 429; [1966] C.M.L.R. 418; Technique Minière v. Maschinenbau Ulm, Case 56/65, Rec. XII 337; [1966] C.M.L.R. 357. See also Re Yoga Fruit Juices [1969]Google Scholar C.M.L.R. 123; Re Vat 69 [1969] C.M.L.R. 266.Google Scholar

3 For a short account of the relationship between Community law and national law, see Mathijsen, P. S. R. F., A Guide to European Community LawGoogle Scholar, Chap. 1. The leading cases on direct effectiveness are Van Gend en Loos v. Nederlandse Tariefcommissie, Case No. 26/62, Rec. IX 1; [1963] C.M.L.R. 105 and Costa v. Enel, Case No. 6/64, Rec. X 1141; [1964] C.M.L.R. 425. See also European Communities Act 1972, s. 2 (1).

4 Explicitly confirmed by Art. 1 of Reg. 17.

5 See Restrictive Trade Practices Act 1956, s. 20 (3).

6 Art. 85 of the EEC Treaty is structured in a manner characteristic of anti-trust legislation, with a broad prohibition (para. (1)), modified by an escape clause (para. (3)). Cf. the “gateway” provisions in s. 21 of Restrictive Trade Practices Act 1956. For the basic principles of the notification system under EEC law, see Arts. 4, 5 and 6 of Reg. 17. The Power of granting exemption under Art. 85 (3) of the Treaty is reserved exclusively to the Commission (Art. 9 (1) of Reg. 17).

7 See Art. 4 (2) of Reg. 17.

8 See Bosch v. de Geus, Case 13/61, Rec. VIII 89; [1962] C.M.L.R. 1: Portelange v. Smith Corona Marchant International, Case 10/69, Rec. XV 309; (1970) 7 C.M.L.Rev. 234; Bilger v. Jehle, Case 43/69, Rec. XVI 127; (1971) 8 C.M.L.Rev. 241; Parfums Marcel Rochas v. Bitsch, Case 1/70, Rec. XVI 515; [1971] C.M.L.R. 104.

9 It is also subject to a limitation similar to Art. 15 (6) of Reg. 17. See infra, p. 10.

10 Case 48/72; [1973] C.M.L.R. 287. Accounts of provisional validity in general works on EEC competition law prior to Brasserie de Haecht (No. 2) must be treated with caution. For excellent and up to date treatment of the subject, from which, however, the present article differs in important respects, see Bellamy and Child, The Common Market Law of Competition, paras. 410–422; Lipstein, The Law of the EEC, Chap. 11. See also Vogelaar and Guy (1973) 22 I.C.L.Q. 648; Saint-Esteben, Rev.trim. droit Europ., 1973, 270; Wertheimer (1973) 10 C.M.L.Rev. 386.

11 The main difference between them is that, whereas in relation to new agreements exemption cannot be granted with effect earlier than the actual date of notification. old agreements which have been duly notified, i.e. before 1 November 1962 (1 February 1963 in the case of bilateral agreements), may receive exemption retrospectively to the date when Reg. 17 came into force. See Art. 6 of Reg. 17.

12 Art. 25 of Reg. 17 added by the Act of Accession, Annex 1. The notification date was set six months from the date of accession, i.e. 1 July 1973.

13 [1973] C.M.L.R. 287 at 301–302.

14 Rec. VIII 89 at 105; [1962] C.M.L.R. 1 at 28.

15 Rec. XV 309 at 316, author's translation.

16 Cf. Consten and Grundig v. Commission, Cases 56 and 58/64, Rec. XII 429; [1966] C.M.L.R. 418, where arrangements intended to give a national concessionaire absolute territorial protection were held restrictive under Art. 85 (1) and failed to obtain exemption. Any such provision will disqualify a sole agency agreement from benefiting under the block exemption regulation. See Art. 3 (1) of Reg. 67/67.

17 Rec. VIII 89 at 106; [1962] C.M.L.R. 1 at 29.

18 Rec. XV 309 at 317. Author's translation.

19 See [1973] C.M.L.R. 287 at 292–293.

20 See also Parfums Marcel Rochas v. Bitsch, Case 1/70, Rec. XVI 515; [1971] C.M.L.R. 104. The Commission had argued that an exclusive dealing agreement, forming part of a distribution system designed to provide absolute territorial protection, and therefore extremely unlikely to obtain exemption under Art. 85 (3), should not benefit from provisional validity. The court was surely right to reject this view which would have tended to defeat the object of maintaining “the general principle of certainty of law.”

21 See Art. 7 of Reg. 17.

22 [1973] C.M.L.R. 287 at 302.

23 This seems to be derived, by analogy, from Art. 15 (6) of Reg. 17 under which, in similar circumstances, notified agreements lose their immunity from fines.

24 [1973] C.M.L.R. 287 at 302.

25 Ibid at 304.

26 Art. 4 (2) (i) excuses from notification agreements between enterprises operating in the same member state which do not relate either to imports or exports between member states. This would cover most tied house agreements and “solus” agreements between garages and petrol companies. From what was said in Bilger v. Jehle it appears that the tie, which by implication prevents the party concerned from obtaining his supplies abroad, is not sufficient to take the agreement outside this exception. See Esso Petroleum Co. Ltd. v. Kingswood Motors (Addlestone) Ltd. [1973] 3 W.L.R. 780, infra, p. 129.Google Scholar

27 The special status of Art. 5 (2) agreements was adumbrated in Bosch, where the court said that they “must be considered valid,” whereas Art. 5 (1) agreements were “temporarily valid.” See Rec. VIII 89 at 105; [1962] C.M.L.R. 1 at 29.

28 After Bilger v. Jehle some writers sought to extend this principle to duly notified old agreements. See, for example, the note by Maas and van der Wilden in (1971) 8 C.M.L.Rev. at 246. The view was unsupported by authority and inconsistent with the rationale of the doctrine of provisional validity as explained in Portelange. If accepted, it would have deprived Arts. 6 (2) and 7 of their whole legal purpose. Brasserie de Haecht (No. 2) has finally shown it to be untenable.

29 Brasserie de Haecht v. Wilkin, Case 23/67, Rec. XIII 525; [1968] C.M.L.R. 26.

30 In Parfum Marcel Rochas v. Bitsch (supra, n. 20) the court had held that notification of a standard form contract would operate as notification of similar contracts which were subsequently entered into. One of the questions in Brasserie de Haecht (No. 2) was whether contracts made at a date prior to the notification would benefit in this way. The court ruled: “…duly effected notification of a standard form contract is to be taken to be notification of all agreements of the same content, even previous ones, made by the same undertaking” ([1973] C.M.L.R. 287 at 303). In any case, the Brasserie de Haecht agreement, like that in Bilger v. Jehle, would seem to fall within Art. 4 (2) (i) of Reg. 17.

31 [1973] C.M.L.R. 287 at 302–303.

32 Ibid at p. 304. This goes further than the referring court apparently thought possible. The contract becomes void not merely from the date when nullity was first alleged but from its inception.

33 1 January 1967, established by Reg. 118/63. amending Art. 7 (2). For preaccession agreements the date was 1 July 1973 (see Art. 25 (2) of Reg. 17).

34 See J.O. 2881/66.

35 Rec. VIII 89 at 105; [1962] C.M.L.R. 1 at 29.

36 [1973] C.M.L.R. 287 at 302.

37 See, for example, Technique Minière v. Maschinenbau Ulm, Case 56/65, Rec. XII 337; [1966] C.M.L.R. 357: Völk v. Vervaecke, Case 5/69, Rec. XV 295; [1969] C.M.L.R. 273.

38 See the examples in Bellamy and Child, op. cit., para. 421, n. 81. In one case an agreement which a Dutch court had enforced by injunction for nine years was refused exemption by the Commission: see Re van Katwijk's Agreement, J.O. 1970 L242/18; [1970] C.M.L.R. D43.

39 It must, however, be remembered that the power of retroactive validation is discretionary and is unlikely to be exercised for the benefit of a party whose behaviour in the anti-trust proceedings has been unsatisfactory. If there is evidence that the enterprises concerned have not co-operated fully with the Commission, the national court will be justified in refusing an injunction.

40 Art. 88 gave the national authorities responsibility for the administration of the competition rules during the period prior to the enactment of Reg. 17. Art. 9 (3) of the Regulation preserves this jurisdiction, though in a truncated form.

41 There was a long-standing controversy on this point, which was thought to have been settled by Bilger v. Jehle. See Lipstein, op. cit., p. 227 and refs.

42 The Court restricted itself to holding that mere acknowledgment by the Commission of the receipt of notification does not amount to the initiation of a procedure for the purposes of Art. 9 (3). There must be an act representing the first step in a course of conduct leading to the exercise of executive authority. See [1973] C.M.L.R. 287 at 303.

43 Belgische Radio en Televisie and another v. Fonior, The Times, 4 February 1974, p. 4.

44 Cf. Aero Zipp Fasteners Ltd. and Lightning Fasteners Ltd. v. Y.K.K. Fasteners (U.K.) Ltd. [1973]Google ScholarFleet Street Patent Law Reports 580; [1973] C.M.L.R. 819. In a case concerning an alleged patent infringement, an application was made for a defence plea based upon possible violation of Arts. 85 and 86 to be struck out. Affidavit evidence showed that proceedings under Art. 3 of Reg. 17 had been initiated in respect of a related patent and it was asserted by an expert that such action would only be taken if the Commission was satisfied that a prima facie case of infringement existed. Graham J. accepted this as sufficient grounds for refusing to treat the plea as frivolous, vexatious or an abuse of process.

45 This does not apply to the initiation of proceedings under Arts. 2 or 6, which carries no implication for or against the agreement.

46 [1973] 3 W.L.R. 780.

47 See n. 12, supra.