The Impact of Voidness for Infringement of Article 101 TFEU on Linked Contracts

Final version published as Cauffman, C. (2012). The Impact of Voidness for Infringement of Article 101 TFEU on Linked Contracts. In I. Samoy & M.B.M. Loos (Eds.), LINKED CONTRACTS (Ius Commune Europaeum) (pp. 29-54). Cambridge: Intersentia; Slightly modified

Maastricht European Private Law Institute (M-EPLI) Working Paper No. 2013/03

Maastricht Faculty of Law Working Paper

25 Pages Posted: 23 Jan 2013 Last revised: 8 May 2018

Date Written: January 22, 2013

Abstract

In Cement, the Court of Justice decided that the automatic voidness provided for by Article 101(2) TFEU applies only to those contractual provisions which are incompatible with Article 101(1) TFEU. The remainder of the agreement and as well as any orders and deliveries made on the basis of the agreement, and the resulting financial obligations are not affected by Article 101(2) TFEU. Their validity is to be determined by the applicable national law. The contribution analyses their validity under Belgian, French, German, Dutch and English law and questions whether the Court of Justice should not review its position on this matter.

The research showed that the question whether the existence of a cartel agreement affects the validity requirements of subsequent agreements cannot be answered unequivocally. According to the currently prevailing opinions in England, Germany and the Netherlands, the existence of the cartel agreement will, in general, not render the subsequent agreement with a third party contrary to statute law, public order or good morals. In Belgium, however, there was a case that was decided otherwise. French and German scholars have argued in the same direction and the same idea may have been the underlying reason why a Dutch court without further argumentation extended the voidness of a cartel agreement to a contract with a third party concluded on cartelized terms. A German court has also held that a contract between a procurer and a winning bid-rigger is void where it infringes a specific provision of the German criminal code. Where the contract is void, because it is held to be contrary to the statutory law, public order or good morals, the consequences of such voidness are not always clear.

When a contract concluded between a cartelist and a third party is not held to be void on the ground that it is contrary to a statutory provision, public order or good morals, it can still be voidable because of a defect of consent. Whether the cartel agreement results in a defect of consent on the side of the innocent party who contracted with a cartelist is unclear. Concluding a cartel agreement is fraudulent in common parlance, but does it also amount to fraud as a defect of consent? In Belgium and France it will generally only amount to incidental fraud, because without the fraud the innocent party would still have concluded the contract, albeit perhaps on different terms. This type of fraud will only lead to an action for damages. In Germany, bid-rigging will amount to fraud as a defect of consent, but other types of cartels generally will not. In England, an action for fraudulent misrepresentation will only lie where the cartelist explicitly stated not to have participated in a cartel. The cartel agreement will generally not render the subsequent contract with a third party voidable for mistake in any of the legal systems studied. The cartel agreement is also unlikely to amount to coercion. The same will generally apply for abuse of circumstances. What prevents the avoidance of the subsequent agreement on the basis of a defect of consent is usually the fact that the impact of the cartel on the contract is not sufficiently serious. In cases of public procurement, avoidance for defects of consent may be more readily available because it seems more feasible that in such cases, the cartel had a serious impact on the contractual terms and conditions.

Is this variety and uncertainty about the validity of agreements implementing cartels acceptable? It could be argued that since the innocent party can in any case claim compensation it is not so important whether or not the contract is or can be declared entirely or partially void. Yet, it can also be argued that there is a growing consensus that contracts at cartelized prices are unfair and perhaps even immoral or illegal. Since Courage, it is clear that parties who suffer damage as a result of an infringement of Article 101 TFEU, including those who have contracted with cartelists, can derive rights from that Article. It can also be argued that the effective enforcement of Article 101 TFEU requires that contracts on cartelized terms be void, at least to the extent of the overcharge, or that they be entirely or partially voidable at the instance of the customer. For the innocent party, partial voidness would have the advantage as compared to damages that discussions about passing-on become irrelevant. From the perspective of enforcement of competition law, partial voidness/voidability and a fortiori entire voidability would have a deterrent effect on potential cartelists. For these reasons the question can be raised whether the Court of Justice should not, when given the opportunity, review its decision in Cement and hold that contracts on cartelized terms are void to the extent of the overcharge and/or entirely voidable at the instance of the innocent party for infringement of Article 101 TFEU.

Keywords: Competition law, contract law, cartel agreements, linked contracts, validity of contracts, nullity, voindness, Cement case, private enforcement, Courage and Crehan, Article 101(2) TFEU

JEL Classification: K21

Suggested Citation

Cauffman, Caroline, The Impact of Voidness for Infringement of Article 101 TFEU on Linked Contracts (January 22, 2013). Final version published as Cauffman, C. (2012). The Impact of Voidness for Infringement of Article 101 TFEU on Linked Contracts. In I. Samoy & M.B.M. Loos (Eds.), LINKED CONTRACTS (Ius Commune Europaeum) (pp. 29-54). Cambridge: Intersentia; Slightly modified ; Maastricht European Private Law Institute (M-EPLI) Working Paper No. 2013/03; Maastricht Faculty of Law Working Paper. Available at SSRN: https://ssrn.com/abstract=2204954 or http://dx.doi.org/10.2139/ssrn.2204954

Caroline Cauffman (Contact Author)

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200MD
Netherlands

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