The Gazette 1985

GAZETTE

SEPTEMBER 1985

The Competition Policy of the European Community Part II by Peter D. Sutherland Member of the Commission of the European Communities (The following is an edited version of an article first published in the St. Louis University Law Journal. Part I appeared in the September Gazette.) Extra-territoriality

other hand, we remain vigilant lest a joint venture should serve as a forum or even a fagade for practices otherwise forbidden by Article 85. Joint venture agreements between competing undertakings or between undertakings which, after detailed analysis 19 can be considered to be potential competitors are examined under Article 85(1), as the previously competitive relations between those under- takings are likely to be altered. The possible benefits of the arrangement are analysed under Article 85(3). An exemption granted by the Commission may contain reporting or other obligations and is always limited in time. This enables the Commission to monitor the competitive development of markets in which joint ventures proliferate and to ensure that the intimate relationship between the joint venturers produces only legitimate offspring. In recent years, several decisions have been issued clarifying the Commission's approach to joint venture and two block exemption Regulations, on R & D and specialisation, have added considerably to legal certainty in this area. We believe that Article 85 with its first and third paragraphs fulfilling their respective functions is the sort of flexible instrument needed to deal with so variegated a phenomenon as the joint venture. We went, however, to go further and provide some more detailed guidelines to enable prospective joint venturers and their advisers to assess rapidly the compati- bility of their project with Article 85(1) and (3). Work is under way on this and I hope that it will be completed in the near future. Distribution 20 Community law distinguishes between exclusive distribution on the one hand (where a supplier contracts to supply one distributer exclusively) and selective distribution on the other (where a supplier enforces criteria applying to appointment of dealers). In the former case the Commission has enacted successive block exemption Regulations, starting in 1967 with Regulation 67/67 21 which was replaced in 1983 by Regulations 1983/83 22 and 1984/83 23 on exclusive distribution and purchasing respectively. These Regulations lay down conditions, both positive and negative, under which exclusive dealing agreements and practices are exempted by Article 85(3) from the prohibition contained in Article 85(1). Our policy aims to enable manufacturers to take advantage of the opportunities offered by the common market by distributing their goods or services in the way they think fit, provided that consumers too are not denied the benefits of a home market of continental dimensions. 269

Before considering other substantive areas of law and policy, I should like to examine the so-called "extra- territoriality" problem. The Commission espouses the effects or objective territoriality doctrine of jurisdiction and believes it to be necessary, just and in accordance with the requirements of the law of nations. Our approach is to apply our law to restrictive practices which have an appreciable effect on competition within the common market and on trade between the Community's Member States. In investigating a case and reaching a decision, the Commission takes full account of the legitimate interests and concerns of foreign States. The Commission has responsibilities for the foreign relations as well as the competition policy of the Community and the necessary element of comity on which civilised international relations depend is therefore built into the decision-making process. This is quite different from a situation where a court is asked to take account of foreign policy emanating from another branch of Government. To summarise, the Commission does not apply the Community's competition law extra-territorially: on the contrary, it applies it territorially, to phenomena within its borders. The Commission would be glad to consider approaches by foreign Governments with a view to strengthening international co-operation in respect of genuine extra-territoriality and in order to facilitate comity considerations. I say strengthening co-operation because such co-operation already exists and is in fact reasonably successful in its day-to-day application. For example, the Commission keeps the US authorities informed of important developments in cases concerning US companies and, where necessary, engages in more extensive consultations in accordance with the 1979 OECD Recommendation 17 . These consultations provide valuable inputs to our decision-making process. The Commission also founds jurisdiction in competition cases on the enterprise entity doctrine. This means that a group of companies with a subsidiary in the EEC is considered to be an undertaking within the jurisdiction, wherever its corporate headquarters. For purposes of personal jurisdiction too, this doctrine enables us to avoid many problems of service abroad. Joint Ventures 18 Joint ventures are the focus of a good deal of attention in Brussels. One the one hand, we seek to promote the synergies likely to result from the bringing together under one roof of complementary resources and skills. On the