European hypocrisy on cartels

Price competition between members normally destroys cartels.  Therefore accreditation bodies such as UKAS are allotted territories through national mutual recognition arrangements.  This is a nod to the idea of ISO standardisation and objective third-party assessment.  But the real purpose is to keep each national accreditation monopoly free from competition with bodies from other nations.

However, EC legislation creates a compelled market for accreditation. ISO 17025 is enforced on National Reference Laboratories and Official Control Laboratories by EC legislation (Official Control of Foodstuffs Directive 89/397/EEC and Additional Measures Food Control Directive 93/99/EEC).

And yet the Treaty of Rome forbids cartels.  Here is Wikipedia’s summary. Lawyers keen to explore this case and make their name can seek out the EC legislation itself.

Antitrust law on cartels

General view

International competition authorities forbid cartels, but the effectiveness of cartel regulation and antitrust law in general is disputed by economic libertarians.

European Union

The EU‘s competition law explicitly forbids cartels and related practices in its article 81 of the Treaty of Rome. Since The Treaty of Lisbon came into effect, the 81 EG is replaced by 101 AEUV. The article reads:

1. The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market, and in particular those that:

(a) Directly or indirectly fix purchase or selling prices or any other trading conditions
(b) Limit or control production, markets, technical development, or investment
(c) Share markets or sources of supply
(d) Apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts

2. Any agreements or decisions prohibited pursuant to this article shall be automatically void.
3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of:

– Any agreement or category of agreements between undertakings
– Any decision or category of decisions by associations of undertakings
– Any concerted practice or category of concerted practices that improve the production or distribution of goods, or promotes technical or economic progress, while allowing consumers a fair share of the resulting benefit, and that does not:

(a) Impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives
(b) Afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question

Article 81 explicitly forbids price fixing and limitation/control of production, the two more frequent cartel-types of collusion. The EU competition law also has regulations on the amount of fines for each type of cartel and a leniency policy by which, if a firm in a cartel, is the first to denounce the collusion agreement it is free of any responsibility. This mechanism has helped a lot in detecting cartel agreements in the EU.

Where will the corruption of cartels end?  It may not be as dramatic as the 2008 economic meltdown, or the EU itself, but there is a tale to be told.

This entry was posted in Cartel, Economics, Law, Politics, Science and tagged , , , , . Bookmark the permalink.

1 Response to European hypocrisy on cartels

  1. johnseddon says:

    Hello, John Seddon here. Want to contact you.

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