Economic Note / January 2007
The European Commission has set out since its earliest days to make an offence of different firms co-operating in ways it considers “restrictive.” Agreements between companies working on various consecutive stages of a good’s production, such as its manufacture and its distribution, have drawn special attention from the Commission. However, these vertical agreements may be the means that best meet certain needs shown by consumers. Far from being anti-competitive, as European authorities claim, these practices have their place in a competition process that leaves consumers free to support industries organised in different ways.
Examination of the Grundig-Consten case is of particular interest because it is the major precedent in terms of vertical agreements. This case, involving an agreement between these two companies that was declared illegal in 1964, reveals the flawed notion of competition that the Commission has adopted.