Cartels

All natural and legal persons (including public institutions) who are involved in the production and distribution of goods and services are required to respect free competition and ensure they do not engage in anti-competitive practices.

By agreeing on prices, quantities produced, market sharing, contractual terms etc., competing undertakings (horizontal agreements) or those linked by commercial relationships (e.g. producer/distributor - vertical agreements) could undermine free competition.
They could thus control or eliminate competitive pressure — a source of innovation — that, ordinarily, allows consumers to benefit from the best goods and services at the best price.

Nevertheless, not all agreements are harmful to competition. Some may even benefit consumers. For example, undertakings that combine their research and development efforts could bring new products to consumers more quickly and at a better price than if each company had to carry out its research individually. Certain agreements can therefore be allowed under specific conditions.

The law prohibits competing undertakings from agreeing on prices or purchasing terms with their suppliers of the raw materials or goods and services they need to provide their own products or services.

The law also prohibits any agreement or arrangement between competing undertakings regarding their sales prices or terms for products or services to consumers or business buyers. This prohibition therefore includes agreements, whether verbal or written, relating to the setting of margins, price lists, payment terms, pricing methods, etc.

The law also prohibits agreements between undertakings operating at different levels of the production chain (e.g. between a producer and distributor) concerning margins, professional fee scales or payment terms.

The law prohibits agreements between undertakings that aim to control or limit production…

…markets…

…technical development…

…or investments.

The law prohibits agreements between undertakings wherby they would divide up markets by geographical area, by type of customer, within the framework of public procurement contracts or by setting production quotas.

Nevertheless, within the framework of vertical agreements, undertakings may grant territorial exclusivity that are likely to limit intra-brand competition, i.e. competition between distributors in the same network.

Likewise, agreements may provide for a certain geographic distribution by prohibiting active selling, i.e. the distributor approaching another distributor's customers. However, it is not permitted to prohibit passive selling, whereby the customer approaches the distributor on their own initiative.

The law also prohibits agreements between undertakings whereby they would allocate sources of supply amongst themselves.

The law prohibits unjustified discriminatory practices, such as sales conditions based on the location of the undertaking, purchase or sale prices based on the buyer or seller, criteria for selecting distributors within adistribution network, etc.

The law prohibits subordination clauses, tied contracts or chain contracts that have the effect of restricting competition.

Article 101(3) of the TFEU allows for the exemption from the prohibition of agreements, decisions or concerted practices, or categories of agreements, decisionsor concerted practices, provided they meet four conditions.

To be exempt from prohibition, these agreements, decisions or concerted practices must:

• contribute to improving the production or distribution of goods or to promoting technical or economic progress, and
• ensure that users receive a fair share of the resulting benefit;

and they must not:

• impose on the undertakings concerned restrictions that are not indispensable to the attainment of these objectives, nor/and
• give undertakings the possibility of eliminating competition for a substantial part of the products concerned.

Block exemption

The above prohibitions are therefore declared inapplicable to certain 'categories' of agreements, decisions or concerted practices which may generate economic benefits to offset the negative effects of restricting competition. These categories of agreements, decisions or concerted practices are presumed to meet the 4 conditions described above.

These block exemptions are laid down in Commission or Council Regulations.

There are Block Exemption Regulations:

• for vertical agreements (supply and distribution agreements, motor vehicle distribution agreements);
• for horizontal agreements (technology transfer agreements, specialisation agreements, research and development agreements);
• for categories of technology transfer agreements;
• for categories of agreements, decisions and concerted practices in the insurance sector;
• for categories of agreements, decisions and concerted practices between liner shipping companies.

Individual exemption

Agreements, decisions or concerted practices that are in principle prohibited may also be permitted if they meet the above conditions.

It is up to the Competition Authority to assess whether these conditions are met in the cases it investigates. If so, the agreement may benefit from an individual or block exemption. If the conditions are no longer met, the Authority may withdraw the benefit of the exemption from the undertakings concerned.