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4 Competition L. Int'l 20 (2008)
Protecting your Network/Complying with EC (and National) Competition Laws - A Leegin for Europe

handle is hein.journals/cmpetion4 and id is 22 raw text is: Protecting your network/ complying with EC (and national) competition laws - a Leegin for Europe?' Emanuela Lecchi Charles Russell LLP London emanuela.lecchi@charlesrussell.co.uk (A paper discussed at the IBA Singapore Conference in October 2007) Introduction - network protection and strict market protection In thinking about setting up a distribution network, a company or enterprise would almost inevitably have a 'wish list' of restrictions to be included in a contract with a distributor, with the object of protecting the integrity, identity and reputation of the network. Price restrictions (including retail price maintenance (RPM)) may be one such category of provisions. The network owner may also wish to include territorial restrictions, or requirements for selective distribution. The tension between, on the one hand, accepting that the owner of a distribution network has a legitimate interest in protecting the network's identity and reputation (a concept of 'network protection') and, on the other hand, upholding strict legal concepts of competition law (as well as, in Europe, important broader principles such as the need to create and maintain a 'common market'), a concept that we could refer to, in simple terms, as strict 'market protection', is as old as European competition law. A concept of 'network protection' would seem to imply that the competition authorities should carry out an economic analysis of the context in which any potentially anti-competitive agreement operates (and of its effects, actual or potential, on competition). A concept of strict 'market protection', in the simplified way in which it is intended in this article, would entail a blanket prohibition on some provisions which the system recognises a priori as harmful, akin to the US per se illegality system. Europe has never formally adopted a per se illegality rule on the US model, but competition lawyers in Europe traditionally view with disfavour clauses that are suggestive of price fixing and provisions that could in principle lead to territorial partitioning of markets. These restrictions (together with cartel-like restrictions) are often said to be 'hard-core' restrictions, illegal under Article 81(1) of the EC Treaty and best avoided. In fact, Article 81 (1) of the EC Treaty expressly states that 'directly or indirectly (to) fix purchase or selling prices or any other trading conditions', as well as 'share markets or sources of supply' are two categories of restriction to be considered 'in particular' as prohibited 'as incompatible with the common market'.' Whilst it is obvious that price fixing and market sharing in the context of a cartel are to be considered illegal, the situation is less clear-cut in cases where the provisions in question are adopted for perfectly legitimate reasons of network protection, but may nevertheless have the effect of restricting, preventing or distorting competition. This article considers the legal provisions and available case law and concludes that it should be legally possible in Europe (for effects cases at least) to be analysed adopting an approach similar to the approach applied to RPM in Leegin in the United States, in particular by applying the concept of the counterfactual as seen in recent judgments of the European Courts and of some national Member State courts and tribunals (such as the Competition Appeal Tribunal in the United Kingdom). In principle, there does not appear to be any reason why a similar analysis should not apply in benign examples of so-called object cases (when an agreement is considered to have as its object the distortion, prevention, or restriction of competition, see below) although for some categories of restrictions (namely pricing and territorial restrictions) it would be difficult to overcome the prevailing view that these should be considered anti-competitive, also in light of the wording of Article 81 (1). At the same COMPETITION LAW INTERNATIONAL February 2008

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