The Gazette 1985

GAZETTE

JULY/AUGUST1985

criteria under which Member States may implement national aid schemes for R and D; these guidelines will complement the Community's own efforts as part of its industrial policy to encourage and Fund R and D 8 and the Commission's Regulation exempting co-operative R and D agreements from the prohibitions of the antitrust rules (Article 85) on certain conditions 9 . This is a fine example of the interplay between various strands of competition policy and the meshing of that policy as a whole with other Commission and Community policies. - A new notification procedure to enable the Commission to assess the cumulative effects of sectoral, regional and other aids. - Internal de minimis rules to ensure that resources are concentrated on the most important cases. Another area in which the Community's competition policy has worked hand-in-hand with other policies has been in formulating a response to the serious crisis affecting the Community steel industry. Here a combina- tion of rigorous control of state aids and an administered system of production quotas has allowed the painful process of reducing excess capacity to take place in an environment which, recognising the particular needs of the steel industry, does not lose sight of the overall European Coal and Steel Community's commitment to the common market and competition. As the Commissioner responsible for social policy as well as competition policy, I would also mention in passing the considerable efforts made by the Commission to provide an accompanying package of social measures with the restructuring programme. Competition in our policy has three basic functions: to allocate factors of production to their most productive uses, to provide an incentive to firms to use their resources in the most efficient way possible and to stimulate innovation by encouraging the invention and development of new products, services and processes. We in Europe are still at the early stages of building a common market, whereas for the Community's major competitors a large unified market is an everyday reality. The principle that goods and services should move freely between Member States is fundamental to the Community endeavour. Competition policy has developed a number of contributions to that endeavour, one of the most forthright being the parallel import doctrine. Consumers must be able to buy goods and services on c omp a r a b le terms t h r oughout the Community. Horizonatl cartels The Commission is determined to apply Article 85(1), together with appropriate sanctions and remedies, to arrangements between competitors to fix prices or conditions of sale, to divide markets between them or otherwise to restrict output by agreement, concerted practice or decision of a trade association or other similar grouping. In 1984, the Commission took seven decisions in cases involving these "classic" violations of antitrust law. Participants in a market sharing and price Fixing cartel in the peroxide industry were fined a total of 9 million ECU. 10

Fines of 4 million ECU were imposed on companies which took part in arrangements to agree prices, share markets and exchange detailed information to facilitate enforcement in the flat glass industry" in Belgium, Luxembourg and the Netherlands. Another decision was taken in respect of arrangements between six zinc producers 12 whereby prices were agreed and no sales were made on the London Metal Exchange (LME). It was also agreed that the parties, who included nearly all the zinc smelters and ore producers in the western world, would support the LME price if necessary by joint buying, restrict production to agreed levels and limit sales through á system of export quotas and market sharing arrangements. Fines totalling 3.5 million ECU were imposed. The relatively low level of fines in this case reflected the Commission's willingness to consider mitigating circumstances, including exceptionally in this case the severe crisis affecting the industry. This decision also shows the limits of the Commission's tolerance of short-term co-operation between competitors to reduce excess structural capacity: price fixing, market sharing and production quotas are unacceptable. It would point out in passing that it was during the investigation of this case that a celebrated inspection took place at the premises of AM & S Europe Ltd. in England. That inspection gave rise to the judgment of the Court of Justice 13 holding that a doctrine of legal professional privilege protecting certain types of correspondence between lawyers and clients existed in Community competition law. The Court's judgment has given rise to international controversy because only lawyers entitled to practise in the EEC, i.e. members of EEC bars and law societies, are covered. The Commission has proposed to the Council that international negotiations be authorised with a view to concluding reciprocal treaties to resolve this matter 14 . In the wood pulp decision 15 , the Commission took action against forty producers of wood pulp located in the USA, Canada and various other non-Member countries in respect of price fixing arrangements and re-sale and export bans within the Community. Fines of only 4 million ECU in all were imposed as most of the firms involved gave unilateral undertakings as to their future conduct in the EEC. They agreed to quote, sell and invoice at least 50% of the bleached sulphate wood pulp sold to EEC customers in the buyer's local currency rather than in US dollars. This will make the market more opaque and any future concentration more difficult than was the case previously when all producers invoiced in dollars. This case is important because it is the first decision on price concertation for a relatively homo- geneous product in an oligopoly and the first time that concertation has been proved by means of an economic analysis showing that the similarity of prices in the circumstances was inexplicable unless there had been prior concertation. It is also the first case in which all the companies and trade associations involved have their headquarters outside the EEC, while doing business on a regular basis in the common market. "The effect of the agreements and practices on prices announced and/or charged to customers and on re-sale of pulp within the EEC was . . . not only substantial but intended, and was the primary ant! direct result of the agreements and practices." (Commission decision OJ p. 15). This effect on competi- tion within the common market and trade between the

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