CHLOE 25.01.18 Firstly, in this scenario, there

CHLOE MITCHELL

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EU LAW HYPOTHETICAL CASE SCENARIOS

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WORDS – DUE DATE 25.01.18

 

Firstly, in this scenario, there is
question as to whether there is a restriction to the ‘Freedom of Circulation of
Goods’1. By
applying Article 34 of the TFEU2, and
by following the ‘Quantitative Restriction’ definition made by Geddo3 (which
states that Quantitative Restrictions amounts to a restraint to the
circumstances of imports or exports of goods in transit4), a
trade restriction can be identified. Estonia’s national legislation prohibits
an individual from using fireworks and allows only public authorities the
permission to use them on public holidays or special occasions. In this sense, the
restriction made is not due to competition – it is a barrier on the Freedom of
the Circulation of Goods5.
Quantitative Restrictions prohibit only a certain percentage of goods, but
Estonia is not prohibiting the import or export of these goods, so it cannot be
a quantitative restriction. However, they are setting a restriction on who is
allowed to buy them but also there is not a restriction on how many can be
bought by the public authorities running the firework displays.

Under Article 36 of the TFEU,
restriction can be justified on the grounds of “protection for the health and
lives of humans, animals and plants”6.
However, understanding that there is not a particular reason that Estonia has
put in place this restriction, it can be argued that this is not justification
enough as there is no violation of human health if there is a continuation to
sell and import these items internally. However, for Estonia, this could be
dependent on their figures for lives and animals put at the risk of danger or
land being destroyed during or due to the use of fireworks.

Estonia’s restriction on purchasing
fireworks can be questioned as to whether it is an obstacle to market access. Referring
to the Keck (C-267 and 268/91 Keck7), the
test of this suggests that even with unclear legal requirements, Certain
Selling Arrangement (CSA) arranged by a government, can be regarded as
discriminatory if it effects the importation of goods. This is also a breach of
Article 34 TFEU8.
The Keck test is passed and there are no breaches of the test as it does not
affect the importation of goods, but it is definitely an obstacle to the market
as there is a limitation on who can buy the fireworks and hinders access to the
market – and this will affect the amount of product bought in Estonia,
respectively.

For Article 34, the main issue
would be to consider the effect rather than the purpose. If the effect of a
measure, which in this case would be the prohibition of private individuals
organizing firework displays, effects or hinders the free movement of goods in
the UK, then this what is seen as the important factor and is the reason why
restrictions are not allowed under Article 34. In this particular scenario,
ignoring the purpose of the restriction, the restriction itself doesn’t
necessarily hinder the freedom of movement of goods, but what it will impact is
the quantity and the amount of product that will be wanted in Estonia and so
eventually, will impact the movement of goods. Although this is not necessarily
on the same path, it could be said that the restriction on who can use
fireworks will affect who will buy them, which in turn will massively affect
how many need to be imported based on how many are being bought at a time. This
would be a relevant argument to refer to Article 34 and to focus on Tallinn
company.

Similar to this, you can apply the
case of C-110/05 Commission V Italy (2009)9. In
this, Italy banned the use of motorcycles towing trailers. The court, in this
case, stated that ‘measures having equivalent effect’ refer to both the
discriminatory national rules and also to any measure which hinders access to
the market. The court in Commission v Italy based ruled that, on the grounds of
public safety, it was a fair restriction to make in accordance with Article 24
EC (now renamed and known as Article 34 TFEU). This could be brought into this
scenario very similarly as, for the safety of the public, animals and the
surroundings, the Estonian government have decided simply to restrict the use
of fireworks of private individuals to public authorities only. Applying
C-110/05 and Article 34 here works neatly to form a strong argument in favour
of the Estonian government.

To be specific, there is no
specific restriction on fireworks being bought, only on who can buy them/use
the and on the specific days they may be used. The restriction is not there as
a prohibition of fireworks being imported or exported, the restriction is
simply on the person buying or using them, not on the fireworks themselves.

Finally, by applying the test of
proportionality, it will be determined; whether the object of a measure is
important enough to justify ‘the limitation of a protected right’, whether the
measure is logically connected to the objective, whether a measure less
invasive could have been made, and, whether the measure’s effects on the rights
of the persons whom it applies to is proportionate to the measure10. The
measure made by the Estonian government, to allow only public authorities the
use of fireworks is due to an unknown reason, however on the grounds of health
and safety or for the protection of human, animal, and plant life, this is
easily justifiable and definitely worth the cause with statistics of injury or
damage made by fireworks in Estonia to prove why such drastic measures have to
take place. Also, the restriction made by Estonian government doesn’t directly
affect the rights of the company nor does it directly effect their rights to
import goods into the state. Unfortunately, there is also no objective stated
as to why the measure has been put in place, but it can be said and supported
that the measure and the objective are not logically connected as there isn’t a
ban on the importation of goods, however, there may be a drop in how many
fireworks will be used after importation or how many fireworks will be needed
for importation. Finally, the measure more closely effects the rights of the
citizens of Estonia who will be denied the purchase of fireworks and the right
to use them on days other than the set days given, if at all. However, this
limit does not affect their statutory rights and is not a good enough basis for
a relevant argument to fight against using them – especially with the belief
that Estonia has a good enough reason to implement this restriction in the
first place.

In conclusion, Estonia haven’t
directly affected the importation of products from the Tallinn company, nor has
it taken away their right to import/export goods either. Estonia’s measure will
have a knock-on effect to how many products will be brought into Estonia,
however, seeing that there will be fewer firework displays throughout the year,
it could be said that the number of fireworks bought will not be too much of a
massive difference as only certain events will use them and so will be special
for having fireworks in the first place. The reasoning from Estonia as to why
they have implemented this restriction on private parties is unknown, but with
the belief that they have a good enough reason to inflict such changes throughout
their country is enough to support their decision, with the hope that they will
support their decision in the future. Overall, I think that Estonia is okay to
implement this change and that their decision will be supported by the courts
as they could be seen to have passed all the right tests, and there are no
breaches to Article 36 TFEU, but most importantly no breaches to Article 34
TFEU.

It is immediately clear in this
scenario, that there is a breach of competition law between each of the
companies involved; Trixi, Fixi, Flo and Razzor.

According to Article 102 TEFU,
Razzor holds a dominant position due to the new Occam technology which only the
Razzor’s batters are suitable for. No other batteries on the market are deemed
as suitable enough for the Occam technology to be used on. This technology
would equally increase the competition between other makes if used on them all,
respectively. However, this puts all other battery companies in a vulnerable
position due to the dominance Razzor batteries have over them (rising from 30%
of the worldwide market in household batteries, to a staggering increase off
the share to 59%). Razzor can be seen as abusing their dominant position by
allowing their product to use this special technology and also by increasing
the price of this product to 62% more expensive than other batteries as they
know consumers will buy them. The share of the other companies being Trixi (at
28% of the worldwide market) and Fixi (being at 20% of the worldwide market)
still even after the increase of price in Razzor’s batteries shows the dominant
position they hold and that the price of the batteries does not affect the
increase of the decrease of their market.

The Razzor team confirmed,
through development and research, that using Occam on other batteries is
technologically impossible. This does not necessarily mean that there is an
exclusionary abuse from Razzor batteries, but by allowing their product to use
this technology knowing that it is impossible on other products could be seen
as exclusionary practise. Also, by abusing this dominant position, increasing
the price of their batteries and allowing the market of other batteries to
fall, Razzor is definitely performing an exclusionary practise. Also, this can
be linked to British Leyland v Commission (1986)11
due to the abuse of dominant position shown through imposing unfair prices and
trading conditions. In this case Leyland increased the prices and charged extra
for left-handed cars than they did for right-handed cars because of their
knowledge that people would pay for them, if they needed them – in the same way
that Razzor is abusing their dominance by increasing the price for better
batteries as they know that people will pay for them, if they need them.

The relevant market for this
product is the worldwide range of household batteries. However, depending on
how the courts want this ruling to go, they may change the relevant market
product-wise, like such in United Brands v Commission (1978)12
or geographical-wise like such in Napier Brown-British Sugar (1988)13.
Shares in this market can give an indication of the monopolistic situation
which is the one in which the company can increase the price without having a
negative effect on the consumers. Razzor definitely holds a monopolistic market14
as it is the only battery that can offer the product and service of an Occam
technology-based battery to the public.

Alongside this, Razzor is
denying other companies access to the technology by; immediately dismissing
them, because ‘they are not suitable’ for it and also by turning down Trixi,
and Fixi when approached with the request for them to be able to see and use
the technology themselves, to eventually make their batteries just as powerful
as Razzor’s. By denying other companies access to the technology can also be
the same as denying them access to the market which is essentially disallowing
them from selling their product at an equivalent level. This could be similarly
linked to the case of Volvo v Eric Veng (1988)15
in which Volvo didn’t release details on how parts were made for their cars and
so this limited access to the market for second hand and used car parts. Eric
Veng, a car technician, wanted to fix Volvo cars and was denied access to the
market due to Volvo abusing their dominant position. However, Razzor offered
Trixi and Fixi a ‘fair compensation’ for the denial, to which they complained
due to abuse of its dominance of their position.

It is stated that Razzor refused
to supply ‘FLO’ – a longstanding customer – access to their AA and AAA
batteries due to a ‘failure to comply with the newly prescribed standards of
handling the goods’ that the Occam technology comes with. Unfortunately, no
immediate conclusion can be made about this particular situation as there is no
defiance in the scenario about what the standards were that were set, who set
them or how legally binding the standards were, however it is enough of a
noncompliance to the standards for there to be a refusal of shipment or a
refusal of access to batteries containing Occam technology.

In conclusion, Article 102
prevents abuse of a dominant position in the market. It requires undertakings,
market dominance, an abuse of this dominant position and an effect on the trade
between MS. It is clear that in this scenario, all of these have been displayed
and that Razzor has breached Article 102 TFEU. Through applying case law and
the relevant EU law, it is clear that there are similarities and very few differences
– meaning that when Razzor gets taken to court, they are very highly likely
going to fail all the tests given onto them. Therefore, I think that Razzor
stands very little chance of succeeding and I believe that the Occam technology
will have to be shared as equal to the other companies. I also believe that
there are parts of the scenario which can be supported but it is mostly a
breach to article 102 TFEU.

1 file:///C:/Users/Owner/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/new_guide_en.pdf

 

2 http://www.lisbon-treaty.org/wcm/the-lisbon-treaty/treaty-on-the-functioning-of-the-european-union-and-comments/part-3-union-policies-and-internal-actions/title-ii-free-movement-of-goods/chapter-3-prohibition-of-quantitative-restrictions-between-member-states/176-article-34.html

 

3 Case 2/73 Geddo v Ente Nazionale Risi 1971 ECR 865

4 Ibid.

5 file:///C:/Users/Owner/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/new_guide_en.pdf
Page 21, 3.3.13

6 file:///C:/Users/Owner/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/new_guide_en.pdf Page 15 3.2

7 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:61991CJ0267 16

8 file:///C:/Users/Owner/AppData/Local/Packages/Microsoft.MicrosoftEdge_8wekyb3d8bbwe/TempState/Downloads/3.+Articles+34-36+TFEU.pdf

9 C-110/05 Commission V
Italy (2009) http://ec.europa.eu/dgs/legal_service/arrets/05c110_en.pdf

10 https://ukhumanrightsblog.com/2015/06/27/supreme-court-on-eu-and-echr-proportionality-back-to-basics/amp/

11 British Leyland v. Commission
1986 ECR 3263 – 1986

12 United Brands v. Commission
1978 ECR 207 – 1978

13 Napier Brown
v. British Sugar, Commission
Decision 88/519/EEC

14 https://www.investopedia.com/terms/m/monopolymarket.asp

15 Volvo v. Veng 1988 ECR 6211 – 1988