Territorial restrictions in EU competition law: from Consten-Grundig to Ping and Pay-TV

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Restrictions aimed at limiting cross-border trade within the EU are prima facie unlawful, irrespective of their effects, under Articles 101 and 102 TFEU. The strict legal treatment of these practices is a function of the place and role of competition law in the Treaties. It is clear from the case law that market integration is an autonomous objective of the EU competition law system.

This paper considers some of the remaining uncertainties around territorial restrictions. First, it explains how the assessment of practices changes when market integration considerations are part of the analysis. The observed methodological shift to accommodate such considerations may be a source of confusion in practice. The Ping case, decided in the UK, provides an eloquent example in this sense.

Second, it is possible for firms to escape the prima facie prohibition of the abovementioned territorial restrictions in two circumstances. First, when the practices are objectively necessary to attain a pro-competitive aim. Second, when they are incapable of restricting competition. An analysis of the administrative practice (in particular, Pay-TV and Character Merchandise) suggests that some key questions (such as the impact of exhaustion of intellectual property rights) remain to be fully addressed.

Finally, territorial restrictions, whether they are prohibited by object or effect, can be justified under Article 101(3) TFEU (or under Article 102 TFEU, once the prima facie infringement established). However, the parsimony of the administrative practice declaring that competition law provisions are not infringed makes it difficult to anticipate the instances where a justification is possible.