Competition law provides the European Union with some of its strongest powers. Not only is there a directly effective set of norms, but there is also a comparatively well resourced directorate to enforce the norms. As a result there is a tendency to pursue a number of objectives through competition law by characterising problems as competition ones. Nothing illustrates this more clearly than the goal of market integration. Under Article 101(1) Treaty on the Function of the EU (“TFEU”) (ex Article 81(1) EC), collusive conduct with the necessary consequence of impeding market integration or intended to impede market integration has been subject to an approach involving a legal presumption that a restriction on competition exists. The Commission had justified the use of competition law to achieve market integration objectives on the basis that “in applying Article 28 [now Article 34, TFEU] of the Treaty on free movement of goods, the Court of Justice has consistently condemned State measures which restrict parallel imports” and “it is well established that Article 28 and Article 81, while dealing with different types of restrictions on parallel trade, both seek to achieve the same goal, i.e. market integration” (Glaxo Wellcome OJ [2001] L 302/1, paras. [127] and [130]). Whether competition law can be used to achieve market integration objectives in the post-modernisation era is at the heart of the dispute in GlaxoSmithKline v. Commission.
The dispute began in May 2001, in the white heat of the Union's competition policy revolution, when the Commission examined the basis on which GlaxoSmithKline supplied pharmaceuticals to wholesalers in Spain. Wholesalers in Spain were supplied at a price fixed by the state when the goods were for use in the Spanish public health system. A different (normally higher) price was to be paid when the goods were for any other use, including export (Glaxo Wellcome OJ [2001] L 302/1, [19], [23], [31], [36]–[52]). The system of differential pricing was designed to prevent wholesalers profiting from the low price fixed by the Spanish state when reselling in Member States where legislation did not fix the price or did not fix the price at a low level. GlaxoSmithKline had economic evidence to support a claim that consumers suffered no adverse effect from the measure since the end-consumer always paid the price prevailing in the State where consumed: purchase in Spain for resale in other Member States has no beneficial effect on consumers. However, the measures taken by GlaxoSmithKline impeded market integration and an orthodox understanding of the law meant it was neither possible nor necessary to consider the economic studies analysing the effect on consumers of the terms of supply: agreements impeding market integration are “prohibited by [Article 101 TFEU ex Article 81(1) EC] without there being any need for an assessment of their actual effect” (Glaxo Wellcome OJ [2001] L 302/1, [124]).
GlaxoSmithKline, by arguing that the sole purpose of Union competition law is economic efficiency and that, whilst the agreement would restrict parallel trade, there was no restriction of competition, sought to challenge the orthodox understanding of Union competition law. This new, narrower, interpretation was accepted by the Court of First Instance, which considered the purpose of Community competition law as being “to prevent undertakings, by restricting competition between themselves or with third parties, from reducing the welfare of the final consumer of the products in question” (Case T-168/01 Glaxosmithkline Services Unlimited, Formerly Glaxo Wellcome Plc v. Commission [2006] ECR II 2969, [118], emphasis added). From this perspective it was not the case that “an agreement intended to limit parallel trade must be considered by its nature, that is to say, independently of any competitive analysis, to have as its object the restriction of competition” (Case T-168/01 Glaxosmithkline Services Unlimited, Formerly Glaxo Wellcome Plc v. Commission [2006] ECR II 2969, [120]). The Court of First Instance judgment seemed to complete a modernisation process, by which Union competition law became aligned with the economic interests of Union citizens.
Before the Court of Justice Advocate General Trstenjak rejected the narrowing of the scope of Union competition law, finding it legitimate to use Article 101 TFEU (ex Article 81 EC) for “the purpose of strengthening the integration of the national markets.” As such “an agreement to limit parallel trade is to be regarded as a restriction of competition by object” (Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P GlaxoSmithKline Services Unlimited AG Opinion paras. 155 and 160). The Court of Justice, following the reasoning of the Advocate General, rejected the idea that the economic welfare of consumers was the sole purpose of Union competition law, noting, at [63], that
there is nothing in [Article 101 TFEU, ex Article 81 EC] to indicate that only those agreements which deprive consumers of certain advantages may have an anti-competitive object. … [Union competition law] aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such. Consequently, for a finding that an agreement has an anti-competitive object, it is not necessary that final consumers be deprived of the advantages of effective competition in terms of supply or price.
Since Union competition law is not restricted to economic welfare there was nothing to justify departure from the orthodox position that “agreements aimed at partitioning national markets according to national borders or making the interpenetration of national markets more difficult, in particular those aimed at preventing or restricting parallel exports, … be agreements whose object is to restrict competition”, at [61].
In The Antitrust Paradox: A Policy at War with Itself (Free Press, 1993) Robert Bork famously asked whether competition law was “guided by one value or several?” He went on to argue for a unitary goal: competition law had to do less in order to be a rational, coherent, and effective means of achieving anything. The battle has been to restrict the use of competition law machinery to the task of tackling inefficiency. Modernisation seemed to accept this. Whilst the Court of First Instance took the Union within touching distance of an efficiency orientated competition law, the Court of Justice has put a single objective competition law beyond our grasp. With regard to agreements restricting market integration the Court of Justice confirms the long established legal presumption that competition is restricted, so that Article 101(1) TFEU (ex Article 81(1) EC) is automatically infringed. Whether competition is actually or likely to be restricted is never considered: whether a multi-goal Union competition law can ever be made to work in anything but an arbitrary manner remains to be seen.
