Introduction
This essay examines whether the agreement between Your Health Germany and Health for Greece contravenes European Union (EU) law, specifically in the context of competition law and the principles underpinning the internal market. The agreement includes several stipulations: Your Health Germany will not sell its products to any other company within Greece, Health for Greece will not export products from Greece, Health for Greece will sell Your Health Germany’s products at prices set by the latter, and Health for Greece will not sell online. These terms raise potential concerns under EU competition rules, particularly Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), which prohibit anti-competitive agreements and abuse of dominant position. This essay will analyse the specific clauses of the agreement against the backdrop of EU legal frameworks, focusing on competition law principles and case law precedents. The purpose is to assess the legality of the agreement, considering its potential to distort competition and restrict the free movement of goods within the EU internal market. The discussion will conclude with a summary of findings and their broader implications for businesses operating across Member States.
EU Competition Law Framework: Articles 101 and 102 TFEU
EU competition law seeks to ensure fair competition and protect the internal market by prohibiting agreements and practices that restrict trade or distort competition. Article 101 TFEU forbids agreements between undertakings that have as their object or effect the prevention, restriction, or distortion of competition within the internal market (Eur-Lex, 2008). Such agreements are deemed void unless they meet specific exemptions, such as contributing to innovation or consumer benefits under Article 101(3). Meanwhile, Article 102 TFEU prohibits the abuse of a dominant position within the internal market, which could include imposing unfair pricing or limiting production to the detriment of consumers (Eur-Lex, 2008). The agreement between Your Health Germany and Health for Greece must, therefore, be scrutinised under these provisions to determine if it constitutes an anti-competitive practice or an abuse of market power. Notably, the European Commission and the Court of Justice of the European Union (CJEU) have consistently interpreted these articles broadly to capture a range of restrictive practices, including exclusivity arrangements and territorial restrictions.
Analysis of the Agreement’s Clauses
Exclusivity and Territorial Restrictions
The first clause, stating that Your Health Germany will not enter into agreements to sell its products to another company within Greece, suggests an exclusivity arrangement with Health for Greece. Similarly, the condition that Health for Greece will not export products from Greece implies a territorial restriction, preventing parallel trade across Member States. Under EU law, such provisions are problematic as they may contravene Article 101 TFEU by partitioning the internal market. The CJEU has ruled in cases like GlaxoSmithKline Services Unlimited v Commission (2009) that agreements restricting parallel trade are generally considered to have the object of restricting competition, as they undermine the free movement of goods—a cornerstone of the EU internal market (Craig and de Búrca, 2020). Unless the companies can demonstrate significant efficiencies or consumer benefits under Article 101(3), this clause is likely to be deemed unlawful. However, the burden of proof lies with the undertakings to justify such restrictions, which appears challenging given the explicit nature of the territorial limitation.
Price Fixing
The agreement also stipulates that Health for Greece must sell Your Health Germany’s products at prices set by the latter. This condition raises concerns about price fixing, a practice often deemed a hardcore restriction under Article 101 TFEU. Resale price maintenance (RPM), where a supplier dictates the resale price to a distributor, has been consistently viewed by the European Commission as having the object of restricting competition, as it eliminates intra-brand price competition (Whish and Bailey, 2021). In the case of Binon v Agence et Messageries de la Presse (1985), the CJEU held that RPM agreements are incompatible with the internal market unless justifiable under exceptional circumstances. Given that the agreement explicitly imposes fixed pricing on Health for Greece, it is arguably in breach of EU competition law unless an exemption can be substantiated—a difficult prospect in this context. Furthermore, if Your Health Germany holds a dominant position in the relevant market, such conduct could also constitute an abuse under Article 102 TFEU by imposing unfair trading conditions.
Restriction on Online Sales
The final clause, prohibiting Health for Greece from selling online, represents another potentially anti-competitive restriction. Online sales are a critical component of the internal market, facilitating cross-border trade and consumer access. The CJEU’s ruling in Pierre Fabre Dermo-Cosmétique SAS v Président de l’Autorité de la Concurrence (2011) established that a blanket ban on online sales by distributors generally constitutes a restriction of competition by object under Article 101 TFEU, as it limits market access without objective justification (Craig and de Búrca, 2020). The European Commission’s Guidelines on Vertical Restraints further reinforce that restrictions on online sales are typically considered hardcore unless they meet strict criteria, such as protecting brand image in specific circumstances (European Commission, 2010). In this case, no such justification appears evident, suggesting that the prohibition on online sales is likely incompatible with EU law. This restriction not only limits competition but also hinders the digital single market strategy, a key EU policy priority.
Potential Exemptions and Defences
While the agreement appears prima facie to breach EU competition law, it is worth considering whether any exemptions or defences could apply. Under Article 101(3) TFEU, an agreement may be exempted if it contributes to improving production or distribution, promotes technical progress, or provides substantial consumer benefits, provided that the restrictions are indispensable and do not eliminate competition entirely. However, the clauses in this agreement—particularly price fixing and territorial restrictions—are generally classified as hardcore restrictions by the European Commission, making exemptions unlikely (Whish and Bailey, 2021). Additionally, if either company holds a dominant market position, Article 102 TFEU violations could apply, and justifications for abusive conduct are similarly narrow. Without specific evidence of market efficiencies or consumer benefits, which are not apparent from the agreement’s terms, it seems improbable that a defence would succeed before the European Commission or CJEU.
Broader Implications for the Internal Market
The agreement’s potential breaches of EU law have wider implications for the functioning of the internal market. By imposing territorial and online sales restrictions, the companies undermine the free movement of goods and the digital single market, principles central to EU integration. Such practices could fragment markets along national lines, reducing consumer choice and increasing prices—outcomes contrary to the objectives of EU competition policy. Moreover, tolerating such agreements risks setting a precedent for other companies to engage in similar anti-competitive behaviour, further eroding market integration. The rigorous enforcement of Articles 101 and 102 TFEU by the European Commission, often through substantial fines and remedies, underscores the importance of compliance with these rules for businesses operating across Member States.
Conclusion
In conclusion, the agreement between Your Health Germany and Health for Greece likely breaches EU law on multiple grounds. The exclusivity and territorial restrictions contravene Article 101 TFEU by partitioning the internal market and restricting parallel trade. The price-fixing clause constitutes resale price maintenance, a hardcore restriction of competition, while the ban on online sales further limits market access without apparent justification. Unless the companies can demonstrate exceptional benefits under Article 101(3) or other objective justifications—prospects that seem remote given the nature of the restrictions—the agreement is incompatible with EU competition law. Moreover, if either party holds a dominant position, additional violations under Article 102 TFEU may apply. These findings highlight the importance of aligning business practices with EU legal frameworks to avoid sanctions and support the integrity of the internal market. The broader implication is a reminder to companies of the robust scrutiny applied to cross-border agreements, ensuring that competition and consumer welfare remain paramount within the EU.
References
- Craig, P. and de Búrca, G. (2020) EU Law: Text, Cases, and Materials. 7th edn. Oxford University Press.
- Eur-Lex (2008) Consolidated Version of the Treaty on the Functioning of the European Union – Article 101. Official Journal of the European Union.
- Eur-Lex (2008) Consolidated Version of the Treaty on the Functioning of the European Union – Article 102. Official Journal of the European Union.
- European Commission (2010) Guidelines on Vertical Restraints. Official Journal of the European Union.
- Whish, R. and Bailey, D. (2021) Competition Law. 10th edn. Oxford University Press.
