European Competition Law provides a wide-ranging review of the European rules relating to competition: restrictive agreements, abuse of a dominant position, impact of intellectual property rights, procedure, merger control, State aid.

European Competition Law

Under Article 101(3), the provisions of paragraph 1 are not applicable in the case where any agreement contributes to “improving the production or distribution of goods or to promoting technical or economic progress”. Although not expressly mentioned, services are also covered by this provision . The contribution to economic progress that the Commission identifies to “efficiency gains”  may be localized in the area where production or distribution takes place and be of wider benefit to the economy in general.

Many agreements between competitors (research and development, specialization, cooperation, joint venture etc.) can lead to improvements in productivity (cost efficiency gains). The same is true when the agreement promotes the introduction of a new product or technology onto the market , enables the entry or the development of a new operator , or reduces production costs and increases productivity thanks to a concentration of production or research, the extending of lines (asset integration, economies of scale  or of scope ) or the elimination of loss-making production . The productive advantage may also be qualitative (qualitative efficiency gains) and consist, among other things, in an extension of the range , an improvement in quality , standardization of products , minimum coverage against insurance claims , faster commercialization of new global services , an improvement of cross-border payment facilities , a more frequent service  or the provision of special services . Finally, improvements may result from a better organization of production or a better adaptation of production in relation to demand (coordinating investments to avoid the creation of excessive production capacities , reduction of overcapacity , or better use of existing capacity ).

In theory, vertical agreements (exclusive distribution or supply, selective distribution, franchises) improve distribution by creating quantitative  or qualitative  efficiency gains. Exclusive or selective distribution agreements lead to a better organization of the network, enable distributors to maintain larger stocks and encourage promotion drives. Often implementation by the distributor of an after-sales and warranty service  are conditional upon the existence of such agreements. An exclusive supply agreement leads to improved sales planning, reduces distribution costs  and facilitates product promotion and market penetration . Franchise agreements enable the franchisor to establish a network with limited investment and the franchisee to access the market more easily .

Sometimes, the advantage provided by the agreement is regarded as being of overall benefit to the economy. This is also the case for patent or know-how licensing agreements, which affect the implementation of new techniques or manufacturing processes , research and development agreements , agreements for the distribution of resources in cases of shortages , or even agreements for the coordination of investments to avoid excesses of production capacity  or for the reduction of existing over-capacity .

In assessing the contribution to economic progress , the EU authorities do not merely take stock of the overall economic picture by reviewing the advantages of the agreement from the point of view of its immediate economic efficiency, such as cost reductions  but may sometimes take into account more general considerations such as the protection of small businesses , health , sports ethics , the environment  or jobs , a crisis in the particular sector , the capacity to innovate , the public interest  or combating free-riding .

For applications in the services sector: Commission Decision No 84/191/EEC of 30 March 1984, Nuovo Cegam, LawLex200500004114JBJ: the creation of a consortium of insurance companies contributes to improving the distribution of service in a highly specialized sector, which involves a thorough knowledge both in risk assessment and cost, and risk prevention; No 85/75/EEC, of 5 December 1984, Fire insurance, LawLex200500004019JBJ; No 85/44/EEC of 10 December 1984, Grohe's distribution system, LawLex200500005321JBJ; No 85/615/EEC of 16 December 1985, P&I Clubs, LawLex200400002435JBJ; No 87/13/EEC of 11 December 1986, Belgische Vereniging der Banken/Association Belge des Banques, LawLex201400000474JBJ; No 87/103/EEC of 12 December 1986, ABI, LawLex200400003536JBJ; Case 45/85, Verband der Sachversicherer v Commission [1987] ECR 405, LawLex200500003946JBJ; Commission Decision No 88/604/EEC of 14 November 1988, ServiceMaster, LawLex200500005332JBJ; No 89/512/EEC of 19 July 1989, Dutch banks, LawLex200400002449JBJ; No 90/22/EEC of 20 December 1989, Teko, LawLex200400002456JBJ; No 90/25/EEC of 20 December 1989, Concordato Incendio, LawLex200400002458JBJ.

Commission Notice No 2004/C 101/08 of 27 April 2004 on the application of Article 81(3) of the EC Treaty, at pt 48 et seq [now 101(3) TFEU]. See, also, Case T-168/01 GlaxoSmithKline Services v Commission [2006] II-2969, LawLex200700000304JBJ.

Commission Decision No 1999/329/EC of 12 April 1999, P & I Clubs, IGA - P & I Clubs, Pooling Agreement, LawLex200400002958JBJ.

Commission Decision No 96/546/EC of 17 July 1996, Atlas, LawLex200500004762JBJ; No 96/547/EC of 17 July 1996, Phoenix/GlobalOne, LawLex200500004764JBJ.

Commission Decision No 85/77/EEC of 10 December 1984, Uniform Eurocheques, LawLex200500004018JBJ.

Commission Decision No 1999/421/EC of 26 January 1999, P&O Stena Line, LawLex200400002619JBJ.

Commission Decision No 2003/68/EC of 14 November 2002, Revised TACA, LawLex200500004660JBJ: contracts between several shipping companies involving, inter alia, setting prices for all the services provided between the ship and the port gate, qualify for an individual exemption under Article 101(3) TFEU, particularly because of the provision of special services and improvement to the supply chain.

Commission Decision No 76/248/EEC of 23 December 1975, United Reprocessors GmbH, LawLex200400002390JBJ.

Commission Decision No 84/380/EEC of 4 July 1984, Synthetic fibres, LawLex200500005394JBJ; No 84/387/EEC of 19 July 1984, BPCL/ICI, LawLex200500004392JBJ; No 87/3/EEC of 4 December 1986, ENI/Montedison, LawLex200500004454JBJ.

Commission Decision No 71/222/EEC of 28 May 1971, FN/CF (not available in English): a specialization agreement between competing producers contributes to the improvement of the production of goods within the meaning of Article 101(3) TFEU insofar as it leads to a more intensive, rational and economic use of the industrial facilities available; No 78/253/EC of 23 December 1977, Campari, LawLex200400002804JBJ; No 83/622/EEC of 6 December 1983, Schlegel/CPIO, LawLex200400002427JBJ; No 84/381/EEC of 12 July 1984, Carlsberg, LawLex200500004390JBJ.

Commission Decision No 89/536/EEC of 15 September 1989, Film purchases by German television stations, LawLex200500004629JBJ: an agreement between public broadcasters and a film production company, with the object being the right to broadcast films selected in its library, contributes to improving the distribution of products, where it allows the dissemination of a large number of films for the first time on television and provides 'windows' during which broadcasting licenses can be granted to third parties.

Commission Decision No 1999/573/EC of 20 May 1999, Cégétel + 4, LawLex200400002622JBJ.

Commission Decision No 83/668/EEC of 5 December 1983, VW-MAN, LawLex200400002763JBJ; No 83/669/EEC of 8 December 1983, Carbon Gas Technologie, LawLex200900003182JBJ; No 86/405/EEC of 14 July 1986, Optical fibres, LawLex200500004441JBJ; No 87/100/EEC of 17 December 1986, Mitchell Cotts/Sofiltra, LawLex200500004445JBJ.

See Regulation No 1983/83 of 22 June 1983 on the application of Article 81(3) EC to certain categories of exclusive distribution agreements, OJ L 173 of 30 June 1983, 1.

Commission Decision No 2001/837/EC of 19 September 2001, Hofmann, LawLex200500004674JBJ.

See Regulation No 1984/83 of 22 June 1983 on the application of Article 81(3) EC to certain categories of exclusive purchase agreements, OJ L 79 of 23 March 1984, 38; Commission Decision No 2003/778/EC of 27 July 2003, Joint selling of the commercial rights of the UEFA Champions League, LawLex200500004523JBJ; No 2003/778/EC of 23 July 2003, Joint selling of the commercial rights of the UEFA Champions League, LawLex200500004523JBJ: the selling of media rights in packages through a single point of sale facilitates access to the national market in terms of language, culture, communication and commercial transparency.

See Regulation No 4087/88 of 30 November 1988 on the application of Article 81(3) EC to certain categories of franchise agreements, OJ L 359 of 28 December 1988, 46.

Commission Decision No 87/123/EEC of 15 December 1986, Boussois/Interpane, LawLex200500005327JBJ; No 88/88/EEC of 22 December 1987, Olivetti/Canon, LawLex200400002448JBJ; No 88/143/EC of 22 December 1987, Rich Products/Jus-rol, LawLex200500005329JBJ; No 97/780/EC of 29 October 1997, Unisource, LawLex200400002552JBJ.

Commission Decision No 79/298/EEC of 17 January 1979, Beecham/Parke, Davis, LawLex200500004049JBJ; No 83/669/EEC of 8 December 1983, Carbon Gas Technologie, LawLex200900003182JBJ; No 94/771/EC of 11 November 1994, Olivetti-Digital, LawLex200500004794JBJ: a research and development agreement between two computer manufacturers, by which the first agrees to buy from the other for a period of five years (tacitly renewable) a substantial quantity of components, contributes to the promotion of technical progress, to the extent that it allows large-scale production and a more rapid dissemination of innovative products of high quality.

Commission Decision No 80/917/EEC of 9 July 1980, National Sulphuric Acid Association, LawLex200500005316JBJ; No 83/671/EEC of 12 December 1983, International Energy Agency, LawLex200400002430JBJ.

Commission Decision No 84/380/EEC of 4 July 1984, Synthetic fibres, LawLex200500005394JBJ; No 84/387/EEC of 19 July 1984, BPCL/ICI, LawLex200500004392JBJ. 

Commission Decision No 91/480/EEC of 30 July 1991, IATA Passenger Agency Programme, LawLex200500004643JBJ: the reduction in administrative costs, resulting from the agreements between airlines in an association having as its object the collective application of an identical distribution system for passengers transport services, contributes to the promotion of economic progress.

Commission Decision No 82/71/EEC of 17 November 1981, Langenscheidt/Hachette, LawLex200500004078JBJ; No 81/1066/EEC of 26 November 1981, Sopelem-Vicker, LawLex200300001279JBJ; No 83/390/EEC of 13 July 1983, Rockwell/Iveco, LawLex200400002423JBJ.

Commission Decision No 89/536/EEC of 15 September 1989, Film purchases by German television stations, LawLex200500004629JBJ; No 91/329/EEC of 30 April 1991, Scottish Nuclear, Nuclear Energy Agreement, LawLex200400002463JBJ: a long-term exclusive supply agreement for electricity with imposed prices and quotas contributes to the improvement of production within the meaning of Article 101(3) TFEU, insofar as it ensures the security of supply and an independent energy supply market and allows economies of scale to be achieved.

Case 26/76 Metro v Commission [1977] ECR 1875, LawLex200400002980JBJ. 

Commission Decision No 75/73/EEC of 13 December 1974, Bayerische Motoren Werke AG, LawLex200700001839JBJ; No 94/770/EC of 6 October 1994, Pasteur Mérieux-Merck, LawLex200500004793JBJ: the cooperation between competing vaccine manufacturers within a joint venture, in which they transfer their European distribution network, their European vaccine portfolio and some European-oriented R & D activities, with commitments from the founding companies not to supply products or competing products on this territory to a third party, nor to grant licenses to that party on such products, is of benefit to consumers in terms of public health as it allows a synergy of knowledge and the development of new technologies.

Case T/193/02, Piau v Commission [2005] ECR II-209, LawLex200500006260JBJ; Case C/519/04 P Meca-Medina and Majcen v Commission [2006] ECR I-6991, LawLex200600002432JBJ.

Commission Decision No 75/73/EEC of 13 December 1974, Bayerische Motoren Werke AG, LawLex200700001839JBJ; No 82/742/EEC of 29 October 1982, Amersham Buchler, LawLex200500004106JBJ; No 84/380/EEC of 4 July 1984, Synthetic fibres, LawLex200500005394JBJ; No 91/38/EEC of 12 December 1990, KSB/Goulds/Lowara/ITT, LawLex200500005347JBJ; No 92/96/EEC of 14 January 1992, Assurpol, LawLex200500004817JBJ; No 94/896/EC of 21 December 1994, Asahi/Saint-Gobain, LawLex200500004799JBJ; No 2000/475/EC of 24 January 1999, Ceced, LawLex200400002590JBJ; No 2001/663/EC of 15 June 2001, Eco-Emballages, LawLex200400002642JBJ; No 2001/837/EC of 19 September 2001, Hofmann, LawLex200500004674JBJ; see also, Commission Notice No 2001/C 3/02 of 6 January 2001 on the applicability of Article 81 of the EC Treaty [now 101 TFEU] to horizontal cooperation agreements, at pt 192.

Case 26/76 Metro v Commission [1977] ECR 1875, LawLex200400002980JBJ; Case 42/84 Remia v Commission [1985] ECR 2545, LawLex200500003994JBJ; Commission Decision No 93/49/EEC of 23 December 1992, Ford Volkswagen, LawLex200500004813JBJ; No 94/296/EC of 29 April 1994, Stichting Baksteen, LawLex200500004786JBJ.

Commission Decision No 88/330/EEC of 5 May 1988, Bayer/BP Chemicals, LawLex200500004470JBJ; No 94/296/EC of 29 April 1994, Stichting Baksteen, LawLex200500004786JBJ. 

Case T-168/01 GlaxoSmithKline Services v Commission [2006] II-2969, LawLex200700000304JBJ.

Cases T-528/93 Métropole Télévision v Commission [1996] ECR II-649, LawLex200500003937JBJ: the pursuit of the public interest should not be confused with the particular tasks for the operation of services of general economic interest under Article 106 TFEU; See also, Commission Decision No 93/49/EEC of 23 December 1992, Ford Volkswagen, LawLex200500004813JBJ.

Case T-491/07 RENV Groupement des cartes bancaires, Judgment of 30 June 2016, not available in English: rejecting however the need for the measures taken to combat the free-riding denounced.

Reducing the cost per unit as production increases.

Reducing the cost through the use of the same factors of production for different goods.

Commission Decision No 75/76/EEC of 20 December 1974, Rank/Sopelem, LawLex200400003451JBJ; No 76/172/EEC of 15 December 1977, Bayer/Gist-Brocades, LawLex200400002386JBJ; No 77/160/EEC of 20 January 1977, Vacuum Interrupters Ltd, LawLex200400002392JBJ; No 77/543/EEC of 25 July 1977, De Laval-Stork, LawLex200400002394JBJ; No 77/781/EEC of 23 November 1977, GEC-Weir Sodium Circulators, LawLex200500004050JBJ; No 78/194/EEC of 23 December 1977, JAZ-Peter, LawLex200400002399JBJ; No 80/1332/EEC of 11 December 1980, Vacuum Interrupters Ltd, LawLex200500005281JBJ; No 81/1066/EEC of 26 November 1981, Sopelem-Vicker, LawLex200300001279JBJ; No 82/742/EEC of 29 October 1982, Amersham Buchler, LawLex200500004106JBJ; No 83/390/EEC of 13 July 1983, Rockwell/Iveco, LawLex200400002423JBJ; No 83/668/EEC of 5 December 1983, VW-MAN, LawLex200400002763JBJ; No 83/669/EEC of 8 December 1983, Carbon Gas Technologie, LawLex200900003182JBJ; No 85/77/EEC of 10 December 1984, Uniform Eurocheques, LawLex200500004018JBJ: use by competing banks of a joint decision - making body responsible - in particular for setting directly and uniformly the remuneration of the check-cashing service in a foreign nation of checks drawn on foreign banks in the framework of the Eurocheque system - improves recovery and purchasing facilities within the internal market and extends the benefit of bank guarantees; No 86/405/EEC of 14 July 1986, Optical fibres, LawLex200500004441JBJ; No 91/480/EEC of 30 July 1991, IATA Passenger Agency Programme, LawLex200500004643JBJ: agreements between airlines in an association having as its object the collective application of an identical distribution system for passengers transport services, leaving little room for other forms of distribution due to their scope and permitting a central administration of a broader network of agents than the companies could afford individually; No 2003/778/EC of 23 July 2003, Joint selling of the commercial rights of the UEFA Champions League, LawLex200500004523JBJ; No 2004/208/EC of 16 October 2003, ARA - ARGEV, ARO, LawLex200500004535JBJ: exclusivity clause in contracts for collection of used household packaging promoting the achievement of economies of scale and scope and ensuring that needs are met regularly and reliably. 

Commission Decision No 71/222/EEC of 28 May 1971, FN/CF (not available in English); No 78/194/EEC of 23 December 1977, JAZ-Peter, LawLex200400002399JBJ; No 83/390/EEC of 13 July 1983, Rockwell/Iveco, LawLex200400002423JBJ.

Commission Decision No 78/194/EEC of 23 December 1977, JAZ-Peter, LawLex200400002399JBJ; No 80/234/EEC of 5 December 1979, Rennet, LawLex200400002413JBJ; No 88/330/EEC of 5 May 1988, Bayer/BP Chemicals, LawLex200500004470JBJ: for technical cooperation agreements between competing producers that improve production, because they allow closures of obsolete plants and replacement by more modern plants and optimal redistribution of production in order to improve technical efficiency and quality of products in an industrial sector threatened by imports from third countries; No 94/896/EC of 16 December 1994, Asahi/Saint-Gobain, LawLex200500004799JBJ; No 2000/182/EC of 14 September 1999, GEAE/P & W, LawLex200400002581JBJ; No 1999/781/EC of 15 September 1999, British Interactive Broadcasting/Open, LawLex200500005276JBJ; No 2003/570/EC of 30 April 2003, O2 UK Limited / T-Mobile UK Limited ("UK Network Sharing Agreement"), LawLex200500004518JBJ and No 2004/207/EC of 16 July 2003, T-Mobile Deutschland/O2 Germany: Network Sharing, LawLex200500004534JBJ: concerning agreements allowing better coverage and faster transmission relative to mobile roaming.

Commission Decision No 78/194/EEC of 23 December 1977, JAZ-Peter, LawLex200400002399JBJ; No 83/668/EEC of 5 December 1983, VW-MAN, LawLex200400002763JBJ.

71. Contribution to economic progress/Efficiency gains