Legal Issues of European Integration: Law Review of the Europa Instituut, University of Amsterdam

140 Pages·1974·0.3 MB·English

by  William Rankin (auth.)

LEGAL ISSUES OF EUROPEAN INTEGRATION
1974/2
LEGAL ISSUES OF EUROPEAN INTEGRATION
LAW REVIEW OF THE EUROPA INSTITUUT,
UNIVERSITY OF AMSTERDAM
EDITORS:
D. Gijlstra
H. G. Schermers
E. L. M. Volker
EDITORIAL BOARD:
H. G. Angelo, Davis, Brussels
B. Baardman, Rotterdam
A. M. Donner, Luxembourg
B. van der Esch, Brussels
B. Grossfeld, Munster
J. van Hoom, Amsterdam
R. Kovar, Strasbourg
0. Lando, Copenhagen
R. H. Lauwaars, Amsterdam
J.D. B. Mitchell, Edinburgh
C. M. Schmitthoff, London
G. Schrans, Ghent
I. Seidl-Hohenveldem, Cologne
E. Stein, Ann Arbor
M. Waelbroeck, Brussels
H. W. Wertheimer, Delft
All correspondence on the content of this review should be addressed to the editors at the
Europa Instituut of the University of Amsterdam, Herengracht 508, Amsterdam, The Nether
lands.
All correspondence concerning subscriptions and distribution should be directed to Kluwer,
Post Box 23, Deventer, The Netherlands.
LEGAL ISSUES
OF EUROPEAN INTEGRATION
1974/2
LAW REVIEW OF THE EUROPA INSTITUUT,
UNIVERSITY OF AMSTERDAM
W. Rankin, The 'solus' agreement in English law and in the law of the European
Communities
N. L. Allen, The development of European Economic Community Antitrust
Jurisdiction over Alien Undertakings
D. J. Gijlstra and D. F. Murphy, EEC Competition Law after the Brasserie
de Haecht II and SABAM Cases
H. G. Schermers, The Law as it stands against Treaty violations by States
SPRINGER-SCIENCE+BUSINESS MEDIA. B.V.
This Review may be cited as
LIEI 1974/2
ISBN 978-90-268-0774-9 ISBN 978-94-017-2061-8 (eBook)
DOI 10.1007/978-94-017-2061-8
© 1974 Springer Science+ Business Media Dordrecht
Originally published by Uitgeverij Kluwer B.V., Deventer, The Netherlands in 1974
No part of this book may be reproduced in any form, by print, photoprint, microfilm or any
other means without written permission from the publisher.
TABLE OF CONTENTS
THE 'SOL US' AGREEMENT IN ENGLISH LAW AND
IN THE LAW OF THE EUROPEAN COMMUNITIES
BY WILLIAM RANKIN.
I. Introduction . . I
II. The United Kingdom . I
A. The 'Solus' or 'Tied House' Agreement in English Law .
B. Conclusions. . . . . . . . . . . . . . . . . . . . 25
III. The European Economic Community . . . . . . . . . . 26
A. The position of the 'solus' or 'brewery contracts' system in the
laws of the European Economic Community . 26
B. Conclusions. 3 I
IV. Addendum. . . . . . . . . . . . . . . . . 32
THE DEVELOPMENT OF EUROPEAN ECONOMIC COMMUNITY
ANTITRUST JURISDICTION OVER ALIEN UNDERTAKINGS
BY NOEL L. ALLEN 35
0
I. Introduction . 35
II. Definition of terms 35
A. Subjective Territorial Jurisdiction. 37
B. Objective Territorial Jurisdiction. 39
C. Territorial Effects Principle 43
III. The Dyestuffs Cases. . . 48
A. Introductory remarks. 48
B. Facts ....... . 48
C. Commission Decision. 49
D. Proceedings before the Court of Justice. 52
1. Arguments of the Parties. . . . . . 52
2. Submissions of the Advocate-General . 54
3· Aide Memoire submitted by the United Kingdom. 56
4· European Court Decision . . . . . . . . . . . 57
VI TABLE OF CONTENTS
IV. The Continental Can Case. . . . . 6I
A. Introductory remarks. . . . . . 6I
B. Facts and Commission Decision . 62
C. Submissions of the Advocate-General. 62
D. European Court Decision. 64
V. The Zoja Case . . . . . 65
A. Introductory remarks. 65
B. Facts. . . . . . . . 65
C. Commission Decision. 66
D. Case on Appeal to the European Court of Justice 68
I. Arguments of the Parties and Submissions of the Advocate-
General . . . . . 68
a. Entity theory . . . . 68
b. Effects doctrine . . . 70
2. European Court Decision 72
VI. Recent developments 75
VII. Conclusions . . . . . . . . . 77
EEC COMPETITION LAW AFTER THE BRASSERIE
DE HAECHT II AND SABAM CASES
BY D. J. GULSTRA AND D. F. MURPHY . 79
I. Provisional validity . . . . . 8o
A. 'Old' and 'new' agreements 8o
I. Legislative provisions . 8o
2. Extra Territorial Effects?. 82
3· The relevance of notification and non-notification . 83
4· Group exemptions. . . . . . . . . . . . . . . 84
B. Development of the concept of provisional validity by the Court
of Justice . . . . . . . . . . . . . 85
1. Case Law of the Court of Justice . 85
a. The Bosch Case . . . 85
b. The Portelange Case . . . . . 88
c. The Bilger-Jehle Case . . . . 91
d. The Rochas and Beguelin Cases . 93
2. What are the consequences of (provisional) validity?. 94
3· Termination of (provisional) validity . . . . . . . 95
C. Provisional validity in the light of the Haecht II Judgement . 98
1. The de Haecht II Case. 98
2. Evaluation. . 101
II. Standard contracts . . . . . 103
A. The Rochas Case. . . . . I 03
B. The Brasserie de Haecht II Case . 105
III. National courts and Article 9(3) of Regulation I7. I05
TABLE OF CONTENTS VII
A. Introduction. . . 105
B. The SABAM Case . 107
IV. Conclusions . . . . . 109
THE LAW AS IT STANDS AGAINST TREATY
VIOLATIONS BY STATES
BY HENRY G. SCHERMERS .... III
I. Control by the Commission III
A. Survey of treaty provisions III
B. Number of cases. Il2
C. Time involved . . . . . .
Il3
D. The violation . . . . . . Il4
1. Existence of the violation. Il4
2. Violations caused by laws 115
E. Alleged justifications of violations 117
1. Reservations . . . . . Il7
2. Autonomy of the State. . . 117
3· Absence of interest . . . . Il8
4· Exceptional circumstances . Il8
5· Invalidity of the violated rules 119
6. Availability of local remedies. 121
7. Exceptio non adimpleti contractus. 121
F. The violator. . . . . . . . . . 122
G. The discretion of the Commission . . 125
H. The Reasoned Opinion ...... . 126
I. The decision of the Court and its application 129
II. Control by other Member States 130
III. Control by individuals. 130
Annex I. 136
Annex II ...... .
139
WILLIAM RANKIN
THE 'SOL US' AGREEMENT IN ENGLISH LAW AND
INTHELAWOF
THE EUROPEAN ECONOMIC COMMUNITY
I. INTRODUCTION
As a legacy of the entry of the United Kingdom into the European Economic
Community various aspects of our law, hitherto considered settled, will undergo
reappraisal as a result of the jurisprudence of the Community. One particular
field that will be the subject of considerable influence from concepts developed
by the Court and Commission of the European Community is that concerning
Restrictive Practices and Monopolies.
In this paper it is proposed to deal with one particular facet of this broad
area of the law-the 'solus' or 'tied-house' agreement, or, to use the term by
which it is best known in Europe-the 'brewery contracts' system.
For the sake of perspicuity the law as it is at present in England will be dealt
with firstly and then attention will be turned to the position of these agreements
within the jurisprudence of the Community.
II. UNITED KINGDOM
A. THE 'SOLUS' OR 'TIED HOUSE'
AGREEMENT IN ENGLISH LAW
A rather curious and unfortunate omission in the Restrictive Trade Practices
legislation1 in England has thrown upon the Monopolies Commission and
the doctrines of the Common Law the burden of assessing the legality of ille
gality of these agreements. Section 6(I) of the Restrictive Trade Practices Act
I956 defines agreements to which Part I of that Act applies and it provides, inter
alia that the agreement must be one 'between two or more persons carrying on
business within the United Kingdom ... being an agreement under which
restrictions are accepted by two or more parties'. As a result of this provision2
the Restrictive Trade Practices Acts do not apply to such agreements as the
'solus' agreements, as by their very nature restrictions are only accepted by one
1. Halsbury's Statutes of England 3rd. Edition Vol. 37.
2. Coupled with careful drafting of any agreement.
2 WILLIAM RANKIN
party3• However, the Monopolies and Mergers Act I948 and I965 are appli
cable and under these Acts the Secretary of State is empowered to refer to the
Monopolies Commission for investigation and report cases in which the 'con
ditions to which the Acts apply' are believed to exist. The Commission has in
two reports of 1965 and 1969, undertaken pursuant to Section 2(1) of the 1948
Act4 reported on the supply of petrol5 and beer6 in the U.K. Obviously a not
inconsiderable period of time has elapsed since the evidence reproduced in
these reports was adduced but as the conclusions in both reports did not
recommend abolition of the 'solus' system per se there is nothing to warrant
the inference that that system is not still prevalent in these two markets at least.
The Courts when faced with the particular problems posed by 'solus' agree
ments apply a doctrine, developed over the years, that has its roots in the
Middle Ages when consequent on the Black Death there was a severe shortage
of labour in England. The strength of the employers was dissipated and the
concepts of a person trading freely emerged. The common law approach essays
to reach a balance between the needs of the employer and the worker, a balance
in which the interests of each are sufficiently protected without either accepting
too severe a restriction on his liberty of action.
Before dealing with the two Monopolies Commission reports mentioned
above and then with the common law reaction to 'solus' agreements it is
pertinent here to note some of the more fundamental aspects of 'solus' trading.
The brewing industry has a much longer history of this particular type of trading
than has the petrol industry as it was not until 1950 that the 'tied' garage type
of agreement was introduced in this country. It spread rapidly, however, for
the Commission found that 95% of all retail outlets were tied to sell only the
petrol of a particular oil company7 and as recently as 1967 66% of the total
beer retained for consumption in the U.K. was sold through licensed premises
owned by the brewers8•
Although each particular agreement contains individual terms peculiar to it,
it is possible to glean from the reported cases and from other sources such as
the Monopolies Commission Reports some essential features of 'solus' trading.
Basically, the retailer undertakes to stock and sell the particular brands of a
supplier in consideration for which he receives a 'solus' rebate from that
supplier (this is often referred to as 'the tying covenant'). In most cases similar
undertakings extend also to other products of the supplier e.g. lubricating oils
in the case of the retail of petrol and wines and spirits in the retail of beer.
To further protect their interests the suppliers might elicit from the retailer an
3. A Liberal amendment to cover agreements under which only one party accepts a restriction was
lost in Parliament (1956) H. C. Debates. Fifth series Vol. 551 Cols. 1998-2014.
4· As amended by the Restrictive Trade Practices Act 1956 and the Monopolies and Mergers Act
1¢5.
5· Monopolies Commission. A report on the supply of petrol to retailers in the United Kingdom.
1965 (Paper 264) hereinafter referred to as 'The 1965 Report'.
6. Monopolies Commission. A report on the supply of beer. (Paper 216). Hereinafter referred to as
'The 1969 Report'.
7. The 1965 Report para~IOI.
8. The 1969 Report para~44:(footnote).
THE 'SOL US' AGREEMENT IN ENGLISH LAW AND IN THE LAW OF THE EEC 3
undertaking that he will procure the acceptance by a purchaser of the identical
'solus' obligations on the sale or transfer of his business, (referred to as the
'continuity covenant'). A provision which might be extended by giving to the
supplier the first refusal to purchase. Other common terms include stipulations
characteristic of the petrol tie: that the retailer must keep open at reasonable
hours and provide an efficient service ('the compulsory trading covenant'), and
provisions regulating loans, advertising matter etc.
It is evident therefore that there are three principal interests of which account
must be taken-those of the suppliers, the retailers and the consumers. The
suppliers having initiated the system really have the burden of justifying it and
though their arguments are noted more fully below one can encapsulate these
by saying that the system enables them to obtain adequate return on their
initial capital outlay, it leads to more economical forms of distributions and it
has improved the all-round efficiency of filling stations. The savings and other
benefits that accrue are passed on to the retailers and via them to the consumers.
It cannot be gainsaid that the market is highly competitive for if there be a
steady flow of ties coming up for renewal each year each supplier must offer
terms that are at least as attractive as his competitors in order to retain an
adequate number of outlets for his products. The term suppliers however,
includes not only those at present operative in the market but also others who
might wish to enter and gain outlets for their products. For them a substantial
number of retailers are foreclosed and thus, in order to establish new outlets
they are constrained to build the same or to take-over a pre-existing chain
either of which course of action necessitates vast capital investment and this in
spite of the possibility that at the outset some of the outlets might prove un
profitable. The longer the terms of the ties the fewer outlets there will be
available for new suppliers to vie for and thus there is a stong argument for
having short-term agreements if the system as such is to remain. If, on the
other hand, all are long-term then there is a danger that the market becomes
rigid at the shares of existing suppliers and the consequent barrier to any new
supplier is evident.
The retailers are in the position that they can 'shop-around' amongst the
suppliers and negotiate with the one offering them the most favourable terms.
Once tied, however, they virtually become an outlet in a vertically integrated
system and thus have a disincentive to retail the products of a supplier other
than that to which they are tied. Again short-term ties are beneficial for they
increase the retailers' bargaining strength which is something of especial
importance lest they are constrained to accept terms permitting the suppliers
to squeeze their profit-margins. Any retailer acting as a 'free-house' as opposed
to one 'tied' to a supplier is at a disadvantage if he receives his products from
that same supplier for obviously he will have to take second place and this
despite the fact he might be providing a better service as far as the public is
concerned.
The public as buyers would have legitimate grounds for complaint if it could
be established that in the absence of such a system as prevails the product
would be cheaper or of a better quality or that the retailers would be more