Internal Analysis and SWOT Analysis

History of the HL-20 Essays

History of the HL-20 Essays History of the HL-20 Essay History of the HL-20 Essay Introduction In Aeronautics industries, the simulation does the cardinal function, because of the complexness. When we do the testing by paradigm it takes considerable clip, rather expensive, and hard to look into the consequences while change the parametric quantities. The ballistic capsule landing has an history with considerable practical and analytical job because of the unpredictable external-environmental parametric quantities i.e. conditions, air current. The HL 20 is the NASA designed theoretical account for a manned spaceplane, known as Crew Emergency Return Vehicle ( CERV ) or Personal Launching System ( PLS ) . The construct of the PLS has been developed to transport six to eight work forces to infinite stations.A Entire length - 8.9 m ( 29 pess )Maximal Diameter-wingtips - 7.2m ( 23.5 pess )Entire habitable volume - 16.3 M3Entire mass -A 10 884 kilogramEntire warhead - 545 kilogram hypertext transfer protocol: //ntrs.nasa.gov/archive/nasa/casi.ntrs.nasa.gov/19980169231_1998082126.pdf A lifting organic structure is fundamentally a wingless vehicle that flies due to the lift generated by the form of its fuselage. researchersA including Alfred Eggers at the NASA Ames Research Center conducted early air current tunnel experiments find that half of a rounded olfactory organ -cone form that was level on top and rounded on underside could bring forth Lift Drag ratio of approximately 1.5 to 1. Literature Survey History of the HL-20 After the second universe war the powerful states were viing to rule the revolution of the infinite universe, output in 1969 the America attained their first measure at Moon. After revolution in infinite universe, the demands to utilize the ballistic capsules are quickly increased in last decennaries. In 1983, Vehicle Analysis Branch began the probe of BOR little infinite plane being orbited several times by the Soviets get downing in 1982 and recovered at in the Indian Ocean and Black sea. During the recovery operations of the infinite plane in the Indian ocean, an Australian P-3 Orion aircraft obtained exposure of the vehicle both drifting in the H2O and being hauled aboard the recovery ship.A [ 2 ] . this provided the valuable penetrations into the form, weight, and centre of gravitation of the vehicle. Based on this information, little air current tunnel theoretical accounts were manufactured and tested by NASA.the consequences demonstrated that, the vehicle had got good Aerodynamic features throughout velocity scope from orbital entry interface to moo supersonic velocities. Wind tunnel trials configuration directional stableness at all velocity from Mach 20, trimmed to maximum L/D with 10 degree elevon warps in subsonic scope. Raising Body Heritage Raising organic structure constructs were proposed for transporting people to and from infinite in late fiftiess. In those yearss NASA Langley Research Center developed a lifting organic structure known as HL 10 it could transport 12 people and be launched on a Saturn IB supporter with about 15000lb of warhead to serve an orbiting infinite station. But the HL-20 design attack was received Dec 10 1992A rivision received Feb 15 1983accepted for the publication Feb 17 1993. [ 1 ] . The NASA Ames Research centre developed the M2-F2 lifting organic structure construct, for this mission whereas the US AirForce developed the X-24 lifting organic structure construct for military purposes.each of these constellations was propelled the extended research and air current tunnel testing. Very get downing of the research periods, the primary ends included the definition of constructs that would be reclaimable and have minimum operational renovation demands, low entry accelerations, fixed geometries, runway set downing capableness, and a lower limit of a once-per-day return capableness to the USA. The specific vehicles ends were the accomplishment of a Lift Drag ratio grater than 1 at hypersonic velocities, high trim-lift coefficient, Lift Drag ratio grater than 4 at subsonic velocities, high volumetric efficiency, inactive stableness and controllability of all velocities and of class compatibility with projected launch vehicle. [ 1 ] . HL 10 Lifting Body The vehicle length was 21.17 pess. The launch weight with propellents was 10 009 pound and the landing weight was 6473 pound, the centre of gravitation scope from 53.14 per centum of the organic structure length for the launch weight constellation to 51.82 per centum for the landing status. From: NASA Reference publication 1332 1994 HL-20 chronologies 1983 January 1-NASA Langley begins surveies taking to HL-20 The vehicle analysis subdivision began probe of the Soviet BOR-4 little theoretical accounts were tested in NASA air current tunnels and demonstrated that the vehicle had good aerodynamic features throughout the velocity scope orbital entry interface to moo supersonic velocities. The Soviet design had a 2400 kilometer cross-range capableness and outstandingly benign thermic profile at peak warming conditions. Therefore Langley adopted it as a baseline for a Crew Emergency Rescue Vehicle to backup or replace the bird after 1986 Challenger accident. 1989 October 1 -Rockwell Begins twelvemonth long contracted survey of HL-20 Rockwell International ( Space System Division ) began a year-long contracted attempt managed by the Langley Research Centre to execute in an in-depth survey of personal Logistics system design and operations with HL-20 construct as a baseline. The infinite plane would supplement the bird in support of the infinite station freedom. 1991 October 1 Lockheed Feasibility surveies of HL-20 Lockheed Advance Development Company began a survey to find the feasibleness of developing a paradigm and operational system. The survey aims were to entree proficient properties, to find flight making demands, and develop cost and agenda estimations. 1991 December 1 HL-20 Mock-up trials completed NASA, North Carolina State University and North Carolina A A ; T University built a all-out theoretical account of the HL-20 for human factors research on the construct. In the terminal, Space station Freedom became the International Space Station. As the initial crew exigency deliverance vehicle, the Russian Soyuz ballistic capsule was selected. However NASA, looking for a higher-capacity option and concern about dependable handiness of the Soyuz in the hereafter, did get down development of the X-38CERV in 1997. The X-38 was nevertheless based on the Johnson construct of parachute-assisted landing, and used the pure -USA X-24 raising organic structure form. History of simulation In last decennaries of the 20th century, AIAA Modeling and Simulation Technical Committee were affecting to develop the aircraft/spacecraft theoretical accounts. When they developed the simulations they had identified and include the basic simulation parametric quantities for airframe theoretical account such as map tabular arraies, block diagram, mathematical equation ( nonlinear partial equations ) and verification trial informations to look into the information before shear the information with another modal. The information should be able to construe to the standard format or codification by the internal designer of the simulation. In late ninetiess they developed candidate format to the aerodynamic subdivision of the simulation theoretical account i.e. if want to unclutter or interchange the informations, mathematical equations, definitions and the map tabular arraies are required. When we consider the HL-20 NASA model the aerodynamic theoretical account contains 51 variables such as 168 one and two dimensional tabular array, four breakpoint sets, and sum of 6240 informations point. It defines the end products for six aero dynamic coefficients i.e. Cx, Cy, Cz, Cl, Cm, Cn as a map in angles of onslaught ( AOA ) angle of slide ship, Mach figure, Airspeed and angular organic structure rate. This includes the non additive map as interpolated tabular arraies, switches and absolute value elements in the variable definitions. From Evaluation of a Candidate Flight Dynamics Model Simulation Standard Exchange Format E. Bruce Jackson*NASA Langley Research Center, Hampton, VA 23681 Bruce L. HildrethaˆSAIC, Lexington Park, MD 20653 Brent W. Yorkaˆ?Naval Air Systems Command, Patuxent River MD 20670 and William B. ClevelandAÂ §Northrop Grumman Information Technology, Moffett Field, CA 94035 Chapter 2 Theoretical analysis Modeling premises and restrictions The simulation of the ballistic capsule system is complicated system, so for easy work and analysis we assume the theoretical account or geometry of HL 20 as follows. HL 20 airframe is laterally symmetrical The airframe consists of three type of motion during winging i.e. the pitch motion, Yaw motion, and Roll motion. If we do nt pattern laterally symmetrical we are non able to pull off the steady province on turn overing motion. It makes more complicate. Therefore we assume the airframe is laterally symmetrical. It s incompressible i.e. the squeezability effects can be negligible The Mach figure is an of import parametric quantity in flight mechanics ; it can be calculated by the undermentioned equation Harmonizing above equation the Mach figure is depended on fluid speed. If the fluid can be compressible, the encircled fluid of the airspeed index speed ca nt be the same as outside fluid speed. And besides the squeezability can change with regard to the velocity of the airframe. Therefore we assume the fluid is incompressible. The airframe is stiff and consists of steady mass The airframe contains three chief constituents such as fuselage, wings, tail. If the airframe is non stiff the constituents can deform from the original form. So the minutes of the airframe can be varied due to the distortion. If they do nt dwell steady mass the force can change during the gesture of the airframe. It makes the fluctuation in the inactiveness. Therefore we assume that, the theoretical account is stiff and consists of steady mass. The control effectivity is varied nonlinearly with the angle of onslaught AOA, and linearly with the Angle of Deflection he environmental theoretical account is non-linear 6 grade of freedom. When we consider the ballistic capsule, there are four forces moving on it. By seting them we can command the airframe and glide it. Raising force The lifting force is produce by the dynamic consequence of the air moving on the aerofoil i.e. due to the force per unit area difference Bernoulli s principal. It acts perpendicular to the ballistic capsule s way through the Centre of lift, which depends on the form of the ballistic capsule and airspeed. If the airframe flies in the vacuumed infinite the lifting force is zero. Because the denseness tends to zero. Thrust force The forward force green goodss by the power works or propeller/rotor. It opposes or overcomes the force of drag.A As general regulation, it acts parallel to the longitudinal axis. For ballistic capsule traveling the thrust force must be exerted and be greater than drag force. The ballistic capsule has to travel until equalise the retarding force force by thrust force to keep the changeless speed.A The thrust force can be calculated by the undermentioned equation. If airframe flies in the vacuumed part there is no thrust force. Because mass of the air peers to zero. Drag force The retarding force force is a clash force, which is generated by the interaction and contact of the solid organic structure with fluid. We can cut down the retarding force force by theoretical account the appropriate form of the airframe. Drag force can be calculated by the undermentioned equation. Centre of gravitation By and large the ballistic capsule is design like a Kite, so we can anaysis the place of the gravitation by analysis the Centre of the gravitation of the kite. The merchandise of Centre of gravitation and weight peers the amount of the merchandises of the constituent weights and distances. i.eA W*cg= ? W*d So W*cg =WL*dL+ WF*dF+WW*dW+WU*dU The above diagram illustrates the mass distribution of the ballistic capsule. So, in order to alter the angle of falling we can utilize the weight favorably i.e. which associates the trust force during the landing but during the raising it acts on opposite way of the ballistic capsule path.A The co-ordinate system When we consider the infinite trade gestures, the gesture is calculated and guided harmonizing three sets of co-ordinate system. The air current axis o X axis positive in the way of the on-going air o Y axis positive to right ofA X axis perpendicular o Z axis positiveA downwards, perpendicularA to X-Y plane Inertial axis o X axis positive forward through olfactory organ of the aircraft/spacecraft o Y axis positive to compensate of X axis o Z axis positiveA downwards, perpendicularA to X-Y plane Earth axis o X axis positive in way of north o Y axis positive in the way of the East o Z axis positive towards the Centre of the Earth The communicating system Basic mechanism The ballistic capsule landing is a broad scope of analysis with several parametric quantities. Some of them related with ballistic capsule elements and radio detection and ranging system, some parametric quantities related with atmosphere/ environmental factors and some are related with the control system from the ground/ infinite station. The following tabular array illustrates the parametric quantities relationship. The ballistic capsule consists of several systems to observe the alterations in parametric quantities. Inactive Pressure system The ALT metre is functioned by the inactive force per unit area system and besides the airspeed index is functioned by the inactive force per unit area system and pilot force per unit area system. The inactive force per unit area system is placed opened to the outside of the airframe to feel the atmosphere force per unit area. The narrow gap is described as inactive port. This system has to fixed really accurately with the airframe, i.e. we have to see the all possible angle of onslaught and do certain the inactive force per unit area is really near to the atmosphere force per unit area. ALT metre The ALT metre is used to mensurate the height of the airframe. The ALT metre is calibrated to demo the force per unit area straight as an height above average sea degree harmonizing the International Standard Atmosphere ISA. The attitude Indicator It is besides known as unreal skyline, which gives the direction about the comparative attitude to the skyline. Harmonizing this information we can state that, whether the wings are flat and if the aircraft olfactory organ is indicating above or below to horizon. The airspeed index The airspeed index gives the airspeed. It functions by the inactive force per unit area and the pilot force per unit area system. The airspeed index besides calibrate for the sea degree atmosphere. When the temperature/pressure combination yields the denseness height higher than sea degree, the airspeed indicates the lower airspeed.A In other manus, if the denseness height is less than sea degree the airspeed index detects the faster airspeed. True airspeed True airspeed can be defined by, the comparative velocity of the airframe with regard to the air mass. The pilotage system is worked by garnering the true velocity and some other informations. The true airspeed can be calculated by the undermentioned equation. Indicated airspeed The airspeed index ASI works harmonizing the Pitot tubing rule. It reads straight by the airspeed index and besides it is straight related with graduated airspeed. Calibrated airspeed The airspeed index has got two types of mistakes such as in instrument mistake, and place mistake. After correct those mistakes, the airspeed index will demo the new value, which is called graduated airspeed. The CAS can be calculated by the undermentioned equation. True height The true height is measured by the airframe from average sea degree, but unluckily the airframe ca nt mensurate the true height. It can mensurate merely indicated height. During the landing i.e. attack really near to anchor the indicated latitude is really near to the true height. Indicated height The indicated height is straight measured by the ALT metre of the airframe. It is utile to keep the terrain/obstacle clearance and keep the perpendicular separation to following airframe that passes over the airframe. Pressure height When the airframe flies above 18000 pess with high velocity ( subsonic velocity or hypersonic velocity ) , acquiring up-to-date ALT metre scene is non practically possible. And besides we ca nt presume the Indicated height is same as true height due to the high difference between them by the high above describing Stationss. So the force per unit area altitudeA A does non incorporate terrain, it consists merely perpendicular separation. Absolute height The absolute height means the tallness of the airframe from the land. If the airframe flies over the coastal country the absolute height is same as true height. But if the airframe flies over the hill the absolute height is changing with the fluctuation of the tallness of mountain. This is really of import to forestall from the airframe clangs with land. Density height The lifting force is depends on the denseness atmosphere, during the winging the the denseness is changing with the height alterations. And besides the engine wants O for the burning, if the denseness of air decreases the concentration of the O in air besides lessening. So it makes the Chemically Oxygen Demand ( COD ) consequence, Yield the engine generates less power so the thrust force can be decreased. So the denseness height is used to detect and keep the air denseness of encircled air. From hypertext transfer protocol: //www.meretrix.com/~harry/flying/notes/altitudes.html The impetus angle The impetus angle means the angle between longitude and the way of the airframe. The impetus index measures the impetus angle. The header Index The header index is besides known as directional gyro or gyro compass. It displays the aircraft header belongs the geographical North. The horizontal Situation Indicator can be replacing to the header index. Turn index The bend index measures the way of turnings and the rate of turnings. The quality of bend is besides can be discernible by utilizing the bend index. Slats Slate is a instrument fixed at the aerodynamic surface of the taking border in wings. It used to alter the wings shape unnaturally to do higher angle of onslaught. Slates contribute the safety and decelerate taking off or landing. Static Air Temperature The inactive air temperature is measured by specially modified temperature mounded on the airframe surface. The investigation is designed to convey the air to rest relation to the airframe i.e. the velocity of the air is same as airframe s velocity. But practically the air is seemed as tight ( Adiabatic procedure ) . So the entire temperature is bigger than the inactive temperature. The relationship between the inactive temperature and entire temperature is given by the undermentioned equation. Pitch Axial rotation Yaw Basic depressions and Principles During the flying clip the airframe is hold in the air due to the raising force. There are several account for the coevals of the raising force. By and large the proponentsA of the statements belong into two topographic points. Bernoulli s rule Newton s postion Bernoulli s rule The Bernoulli s rules states that addition in the velocity of the fluid occurs at the same time with a lessening in force per unit area or lessening in a fluid s possible energy. The Bernoulli s rule can be applicable for incompressible laminar flow. It can be describes in mathematical signifier as follows. Newton s first low The organic structure at remainder will stay at remainder and a organic structure in a gesture will go on in consecutive line gesture unless subjected to an external applied force. Newton s 3rd low For every action, there is an equal and opposite reaction.

International Management Essay Example | Topics and Well Written Essays - 1250 words - 2

International Management - Essay Example India is a country which is having the second largest population in the world. Moreover, it is blessed with different religions, languages and cultures across the country. â€Å"India comprises of 28 states and seven union territories† (India States, 2009) â€Å""Unity in diversity". It is not just another phrase or quotation. But, these words are highly prudent to a country like India that is incredibly rich in culture and heritage† (India Culture, 2009) â€Å"India is an enormously hierarchical society (arguably the most hierarchical in the world) and this, obviously, has an impact on management style† (Indian Management Style, n.d) Most of the Indian organizations consist of people from different parts of the country and the management should address the cultural diversity aspects all the time. Different management styles like conservative, entrepreneurial, professional, bureaucratic, organic, authoritarian, participative, intuitive, familial, altruistic etc are prevailing in Indian organizations (Khandwalla, 2009) I have worked as a production, planning and control executive in one of the topmost tire manufacturing companies in India called Apollo Tires situated in Cochin, Kerala. My organization consists of around 3000 workers divided in three shifts of eight hour duration. My organization was owned by a Punjabi Sikh person and hence some of the top management people were Punjabis. In Indian organizations, getting a promotion can be accomplished in two ways; purely on the basis of merits and on the basis of influence at the top management level. Some people utilizes their influences to get higher positions even though they were not qualified enough. One of the top production managers in my organization was a person from Punjab who has reached this position purely on the basis of his influence rather than academic qualification or expertise. This person often created problems to others because of his lack of ideas and knowledge in the

Cognitive and language development Essay Example | Topics and Well Written Essays - 2500 words

Cognitive and language development - Essay Example Like different species of this environment, animals rely on camouflage, feathers and fur coats, and speed may be some of the things that they use to adapt to the environment they live in. Human beings, on the other hand work upon adapting to their environment, with the help of thinking. Through this, they not only adapt to their environment but also transform it. Hence, we can say that among all the species that live in this environment, we as human beings stand apart because of our mental faculties. Children move from simple to complex tasks, while attaining their cognitive skills. They become more and more effective thinkers with their progressing age. It’s important to note that the mental faculties of a child are not incomplete or less effective than that of adults. But we can see that the child’s focus on a limited amount of information might be adaptive (Bjorklund and Blasi, 2011). Jean Piaget was a Swiss cognitive theorist who completed his education in zoology a nd gave a biological explanation to the things he saw happening in his environment in terms of cognitive development. He viewed cognitive development as an adaptive process in which thinking develops gradually from its less oriented form to something that is driven by logic. It slowly and steadily emerges out to be a fit with the external reality. Piaget’s had a constructivist approach towards the idea of cognitive development. He said that children develop their cognitive skills by progressing via four universal stages. The names of the stages are The Sensorimotor Stage, The Preoperational Stage, The Concrete Operational Stage and The Formal Operational stage (Ginsberg and Opper, 1979). All these constructs that he gave, came under the purview of the theory he gave which he named as the Cognitive Developmental Theory. Vygotsky gave the Sociocultural Theory. In it he devised, that language is a very important determinant of cognitive development and it broadens the purview of cognition of children with the help engagement in dialogues and conversations with people around them, who provide them with new knowledge and reinforce them to master socially relevant and culturally important tasks driven by the norms and values prescribed by the environment they are residing in. According to him the important determinant of cognitive development as it occurs in the life of a child are the social experiences he/she goes through. There are many differences that we come across while trying to decipher the basic nature of both these theories. The very nature of both these theories is different. Piaget devised the theory in terms of the four stages a child progresses through but Vygotsky based his theory on the foundation of developing the basic ideas which are required for the construction of knowledge wherein the concepts of learning play a huge role in the development. According to him development cannot be separated from social contexts a child has to live in, wh ich also involves effective conversations with the significant others with the help of language. This tells us that the most evident difference between the two theories is that Piaget’s theory is hierarchical in nature but on the other hand, we don’t come to see any kind of stagewise progression in Vygotsky’s theory. This tells us that each of the Piaget’s preceding stages must be accomplished before the child moves on to the

Investigate osmosis in blood cells Lab Report Example | Topics and Well Written Essays - 1250 words

Investigate osmosis in blood cells - Lab Report Example The cellular geometry, that is, the biconcave disc shape of red cells, is critical for the cells' survival. This cell surface shape provides a high ratio of surface area to cellular volume. The normal volume of the erythrocyte is approximately 90 m3. The minimum surface area that could encase this volume is a sphere of approximately 98 m3. The surface area of a biconcave disc enclosing this volume is approximately 140 m3. Thus, shape alone provides the red cell with a considerable amount of redundant membrane and cytoskeleton. This feature provides the extra membrane surface area needed when red cells swell. More importantly, this geometric arrangement allows red cells to stretch as they undergo deformation and distortion in response to the mechanical stress of the circulation. The consequent reduction in tolerance of these cells to osmotic stress explains why anaemias resulting from membrane defects often are accompanied by osmotic fragility, the basis for the clinical laboratory te st. Similarly, if erythrocytes are engorged with water, they become macrospherocytic and less deformable (Dacie, J. V., Lewis, S. M., and Luzzatto, L., 1981). Red Cell Membrane Permeability: The normal red cell membrane is nearly impermeable to monovalent and divalent cations, thereby maintaining a high potassium, low sodium, and very low calcium content. In contrast, the red cell is highly permeable to water and anions, which are readily exchanged. As a result, erythrocytes behave as nearly perfect osmometers. Water and ion transport pathways in the red cell membrane include energy-driven membrane pumps, gradient-driven systems, and various channels. An important feature of the normal red cell is its ability to maintain a constant volume. The mechanisms by which red cells "sense" changes in cell volume and activate appropriate volume regulatory pathways are unknown. The effects of disruption of the red cell permeability barrier are illustrated by complement-mediated hemolysis. Complement activation on the red cell surface leads to formation of the membrane attack complex, which is composed of terminal complement components embedded in th e lipid bilayer. This multimolecular complex acts as a cation channel, allowing passive movements of sodium, potassium, and calcium across the membrane according to their concentration gradients. Attracted by fixed anions, such as hemoglobin, ATP, and 2,3-BPG, sodium accumulates in the cell in excess of potassium loss and of the compensatory efforts of the Na+-K+ pump. The resulting increase in intracellular monovalent cations and water is followed by cell swelling and ultimately colloid osmotic hemolysis (Dacie, J. V., Lewis, S. M., and Luzzatto, L., 1981). Rationale of the Test: Osmotic activity in the red cells is tested by adding increasingly hypotonic concentrations of saline solution to red cells. As a result of osmosis, more and more water from the increasingly hypotonic solution will enter the red cells leading to increased volume of red cells by swelling. If the concentration goes beyond threshold, more water will enter into the cells which already are at maximum volume for surface area, and will burst at the most hypotonic normal saline concentrations. However, after incubation at 37C (98.6F) for 30 mins, these red cells will lose membrane surface area more readily than normal because their

Economic Globalisation and Competition

Economic Globalisation and Competition 1. Introduction Competition is a vital mechanism of the market economy and is an efficient means of guaranteeing consumers a level of quality in terms of the value and price of products and services. Economic globalization has increased volatile growth within international trade and as a result in subject of competition law. Article 81(1) of the EC Treaty ‘prohibits agreements between undertakings; decisions by associations of undertakings and concerted practices which may affect trade between Member States and which prevent restrict or distort competition’. These agreements shall be void according to 81(2). However, the agreements which satisfy the conditions set out in article 81(3) EC shall not be prohibited, no prior decision to that effect being required. 1.1. Anti-Competitive Agreements Article 81 of the EC Treaty, prohibiting anti-competitive agreements, must be considered in relation to all commercial agreements with a probable EU cross-border impact. The Horizontal and the Vertical agreements are the agreements, which are relevant for the purposes of the application of the competition rules. Horizontal agreements are those between undertakings operating at the same level of production or marketing, while vertical agreements are those completed between undertakings operating at different economic levels. Under EC Competition Law, restrains included in vertical agreements are regarded as not as much damaging than those included in horizontal agreements. In Consten and Grundig v Commission the European Court of Justice considered that Article 81(1) EC applies not only to horizontal agreements but also to vertical agreements. The later decisional practice of the Commission on the treatment of vertical arrangements under Art 81(1) and 81(3) EC, and the case law of the Community Courts, have been one of the most controversial and severely criticized aspects of Community competition policy. These agreements are very important for the functioning of the economy. Commercial agreements may be exempted from the application of article 81(1) under article 81(3). 1.2. The Vertical Block Exemption Regulation However, there is a ‘safe harbour’ for undertakings: the Vertical Block Exemption Regulation 2790/1999. Safe harbours exist for certain agreements including restrictions providing conditions are met so that agreements falling within the terms of the Regulation are exempt from the application of Article 81(1) EC guaranteeing the enforceability of the agreement and granting protection from antitrust prosecution. Thus, if undertakings wish to be certain that their vertical agreements are in line with EC competition law, they should agree on clauses within the scope of the Regulation. Outside this safe harbour, the European Commission’s Notice Guidelines on Vertical Restraints are a helpful guide for the assessment under Art 81(3) EC and are explaining the application of Regulation 2790/1999 and the Commission’s approach to vertical restraints. The Guidelines on Vertical Restraints sets out the principles for the assessment of vertical agreements under Article 81, including the application of the Regulation to vertical agreements. Article 2(1) of the Vertical Block Exemption Regulation gives the definition of vertical agreements and states that Article 81(1) shall not apply to ‘agreements or concerted practices entered into between two or more undertakings each of which operates, for the purposes of the agreement, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services’. The Commission adopted the Vertical Block Exemption Regulation on 1999 and the new Block Exemption Regulation is expected in 2010. Modifications might remain quite limited and might concern, especially, the presentation of more certain rules on e-commerce, on internet sales and the treatment of resale price maintenance. 1.3. Scope of Application of the Vertical Block Exemption Regulation The objective of the Vertical Block Exemption Regulation is to exempt certain categories of vertical agreements that, under certain conditions, may improve economic efficiency within a production or distribution chain and is directed at vertical agreements for the purchase or sale of goods or services. The Regulation covers various vertical agreements and applies to any type of agreement entered into companies, which do not operate at the same level of the production or distribution chain. Agreements are covered by the Vertical Block Exemption Regulation on franchising, selective distribution, exclusive dealing, exclusive purchasing, exclusive supply, and non-genuine agency agreements within the scope of Article 81. An agency agreement falls outside article 81(1) where the agent bears no or only insignificant risks in relation to either of these matters. Article 81(1) does not apply to certain agreements or concerted practices entered into between two or more undertakings. The concept of an undertaking was discussed in Hofner and Elser v Matrocton. It was stated that: â€Å"The concept of an undertaking encompasses every entity engaged in economic activity regardless of the legal status of the entity and the way it is financed†. The definition of competing undertakings in Article 1(b) includes actual or potential suppliers in the same product market. The exclusion may be quite wide and uncertain in application. In Tetra Pack I it was considered that a contract within the terms of the Vertical Block Exemption Regulation enjoys exemption from Article 81(1), but not from article 82 unless the Commission withdraws the exemption for the future, with a decision. The Regulation does not apply, however, to vertical agreements to rent and lease agreements, as no sale takes place and to agreements which have as their primary object the licensing of intellectual property rights, nor automobile distribution agreements, nor agreements between competitors, except if they are ancillary to a vertical agreement and facilitate the purchase, sale or resale of the contract goods or services by the buyer and vertical agreements whose subject matter falls within the scope of another block exemption regulation. Also, the Vertical Block Exemption Regulation does not cover any restrictions or obligations that do not relate to the conditions of purchase, sale and resale. The Regulation does not apply to vertical agreements with a subject matter that falls within the scope of any other Block Exemption Regulation. The application of the Regulation, in certain circumstances, can be withdrawn by a decision of the European Commission, or the national competition authorities. Also, the European Commission can enact a regulation declaring the Regulation usually inapplicable to certain agreements including specific restraints. 1.4. Agreements between Competitors The Vertical Block Exemption Regulation does not cover vertical agreements that are concluded on a reciprocal basis between competitors. This exclusion may be very broad because it includes both actual and potential competitors, with the latter being defined as companies that would be able and likely to enter the market within one year. Vertical agreements between competitors are covered by the Vertical Block Exemption Regulation if the agreement is non-reciprocal and the buyer has a turnover not exceeding â‚ ¬100 million or the buyer is not a manufacturer of competing goods but only a competitor of the supplier at the distribution level. Also, are covered and where the supplier is a provider of services operating at several levels of trade, while the buyer does not provide competing services at the level of trade where it purchases the contract services. 1.5. Summary Article 81(1) EC prohibits agreements which have anti-competitive effects. By enacting the Vertical Block Exemption Regulation, the Commission has establish ‘safe harbors’ for undertakings, that outline conditions regarding when vertical agreements and concerted practices that have an anti-competitive purpose or results and would be prohibited under article 81(1) might be acceptable because they satisfy the criteria of article 81(3). When an agreement fulfills the conditions set out in the Regulation, the agreement is valid and enforceable. The Vertical Block Exemption Regulation is a measure under European Union law that grants an exemption from the application of Article 81. Agreements that meet the conditions set out in the Regulation are considered either not to adversely affect competition on the relevant European market(s) or only to affect competition to a limited degree. It is now time to examine if the Vertical Block Exemption Regulation has worked and whether the Regulation and the vertical Guidelines are need any modification, and, if so, what have to be done. PART I Requirements of the Application of the Vertical Block Exemption Regulation The Vertical Block Exemption Regulation contains certain requirements that have to be satisfied before, for the vertical agreement is able to benefit from the Regulation. The market share of the supplier must not exceed 30% (Article 3). Also the agreement must not contain any of the hard-core restrictions (Article 4). Finally, the Regulation contains conditions relating to three certain restrictions (Article 5). 2. The Market Share Cap The Market Share threshold is probably one of the most important provisions of the Vertical Block Exemption Regulation. In Article 3(1) is stated that ‘the market share held by the supplier does not exceed 30% of the relevant market on which it sells the contract goods or services’. Also, Article 3(2) states that ‘in the case of vertical agreements containing exclusive supply obligations, the exemption provided for in Article 2 shall apply on condition that the market share held by the buyer does not exceed 30% of the relevant market on which it purchases the contract goods or services’. In Telenor/Canal+/Canal Digital the 30% rule prevented the application of the Vertical Block Exemption Regulation. The market share threshold is aimed to reduce regulatory burdens from those businesses that, according to Bishop and Ridyard, ‘could not behave anti-competitively even if they tried’. The introducing of a market share cap was one the most hotly contested aspects of the Vertical Block Exemption Regulation. Businesses and its lawyers argued that such a rule would be unworkable, since it is so difficult to establish market shares with any degree of precision, particularly in rapidly developing markets. However, the Commission insisted that there was no better means of ensuring that the benefit of the Block Exemption, did not go to firms with too much market power, and the market share cap stayed, albeit in the form of a single threshold of 30%, rather that two of 20% and of 40% which had been proposed in an earlier draft. If the market share of the parties exceeds the 10% threshold described in the De Minimis Notice, Article 81(1) EC will normally not apply to the agreement if the product is new or if the existing product is sold for the first time on a different geographic market. One factor which may have assisted the Commission in prevailing was the fact that while discussions on the Vertical Block Exemption Regulation were going on, it published its white paper on procedural modernization in the application of articles 81 and 82 EC, which proposed the abolition of the notification system altogether. This may have led some to feel less strongly about the content of the Regulation. 2.1. Calculating the Market Share In order to calculate the market share there must be identified the manufactured goods and geographic markets. Regarding market definition, the general rules apply. On the relevant market, the supplier calculates its market share by comparing its turnover achieved on that market with the total value of sales on that market. However, the benefit of the Vertical Block Exemption Regulation will, subject to certain conditions, not always be lost if the market share exceeds the 30% threshold. In Rewe/Meinl the European Commission considered that a supplier is in a situation of â€Å"economic dependence† when the buyer accounts for over a 22% market share and thus buyer power might distort competition. John De Gregorio, European counsel for consumer goods manufacturer Kimberly-Clark Corporation, has stated: ‘With the introduction of market share thresholds to the block exemption analysis, it’s more important than ever for in-house counsel to know how the Commission and European courts may define the â€Å"relevant market† for the goods that your company manufactures and sells, and to be comfortable with the definition your company adopts’. 2.2. The De Minimis Doctrine and Agreements of Minor Importance In addition to the Vertical Block Exemption Regulation and the Guidelines the Commission has issued a series of notices, called ‘Notices on agreements of minor importance’ which give guidance on the agreements which will escape Article 81(1), because the market share of each or both of the parties to the agreement is too small. The European Commission’s de minimis Notice states that no Article 81 subjects are raised by an agreement between undertakings where in vertical agreements the market share of each party to the agreement does not exceed 15% of the relevant market, or 5% for vertical agreements where access to the relevant market is foreclosed by the increasing effect of parallel networks of vertical agreements by several companies. The ‘de minimis’ notice sets the relevant threshold at 5% for horizontal agreements. Commercial agreements between parties where market shares exceed these thresholds might however not have a considerable effect on competition or might benefit from exemption. Nevertheless, the presumption in the de minimis Notice will not apply if the commercial agreement contains hardcore restrictions. In Franz Volk v Establissments Vervaecke SPRL the 0.6% of market share in washing machines considered insignificant. In general, agreements taken between Small and Medium size Enterprisers are ‘de minimis’. Paragraph 3 of the Notice recognizes that agreements between small and medium-sized undertakings are rarely capable of appreciably affecting trade between Member States. Finally, Article 8 provides that the Commission can withdraw the benefit of Block Exemption where ‘50 % of a relevant market, contain specific restraints relating to that market. This Regulation shall not become applicable earlier than six months following its adoption’. 2.3. Market Power The Vertical Block Exemption Regulation states that, with some certain exceptions, all vertical restrains are acceptable unless they are coupled to significant market power. Market share thresholds are criticized to be uncertain because they need a definition of the market which is the reason why the idea of market share thresholds has been discarded in most systems. Also, the amount of market power can be considered by reference to market share. Scherer and Ross state that economic analysis shows that in most cases the welfare-reducing effects of vertical restrains depend on the degree of market power the involved firms have. If market shares are in general indicative of potential market power, they can never be considered without considering some other factors to achieve a reasonable assessment of market power for instance the barriers to entry and prospective competition and the characteristics of the oligopolistic dealings between businesses. The Commission in some of its judgments show that market shares do not equal market power. For example, in Alcatel-Telectra the Commission cleared a merger which gave the parties market shares of 83%. Also, in Rhone-Poulenc/SNIA the high degree of concentration was ought to weighed by the existence of rapid technology development. The most obvious issue, according to Professor Denis Waelbroeck, is to consider whether the system should not allow all vertical agreements which do not include hardcore restrictions, separately of the market share of the parties involved, and only apply a control under Article 82 EC in cases of dominance. That would remove the burden above the threshold for businesses to achieve a complex evaluation of their agreements under Article 81(1) and Article 81(3) EC and it will provide more legal certainty in this subject. In addition, the economic assessment required by the Guidelines on Vertical Restrains and the Guidelines on the application of Article 81(3) of the Treaty is challenging, and it is doubtful that many judges and parties will have the income or abilities to undertake it sufficiently, thus raising the danger of extensive, expensive and uncertain litigation. 2.4. Arguments about the Threshold The use of market shares as a key element of the Regulation’s treatment has been criticised as being possible to lead to uncertainty and unpredictability given the difficulties in defining the relevant market and market share. It may be argued that the threshold is too low or that it is improperly cast. Those who argue that the threshold is too low point out that the anti-competitive risks can arise only when there is a dominant firm. A non-dominant firm cannot increase rivals costs and cannot make damage to the consumers as they still benefit from inter-brand competition. Those who argue that the threshold is improperly cast would agree with the above criticism but bear in mind that anti-competitive effects can manifest themselves when there is the risk of oligopolistic interdependence. Bishop. and Ridyard state that an assessment of the market’s concentration would be more useful than the assessment of one players market share. Some argue that given the uncertainties over market definition, a market share threshold is not a substitute for a detailed analysis of whether the consumers suffer consequently of a particular practice but this might damage the effectiveness of the existing system which creates a safe harbour so that analytical incomes are allocated to those cases where anticompetitive effects are most possible to occur. The Vertical Block Exemption Regulation creation of a market share threshold which the Regulation does not apply, limits manufacturing businesses that manufacture extremely innovative goods and want to sell them before other businesses have the chance to promote competitive goods into the market. In this situation, the manufacturing businesses with the extremely innovative goods might have a very high market share in a particular industry within a specific geographic area as no competing goods exist. However, as its market share is more than 30%, the manufacturing business is unable to take benefit from the Regulation and would be banned from effectively distributing and selling its manufactured goods in the market. 2.5. Removing the Threshold The Vertical Block Exemption Regulation is unduly restrictive by setting the threshold at 30%. Many agreements thus escape the safe harbour though they are completely harmless from a competition law perspective. By removing the thresholds the sellers using private resellers may be penalised not as much as vertically integrate businesses. Also, abolishing the threshold would give more stability to the system because not all restrictions of competition under 81 are an abuse under 82. On the other hand, if the system is seen as too essential one may think a less radical change to the Regulation consisting of a differentiated approach identifying those clauses which can be problematic above 30% although the parties are not dominant. Those clauses which are always straightforward, even in cases of dominance and which thus essentially deserve an exemption and should not to be matter to any market share threshold and also those clauses which should never advantage from a group exemption even they are below 30%. 2.6. Summary The Vertical Block Exemption Regulation can simplify issues but also can cause difficulties. It makes issues simple as it offers the parties more flexibility in establishing their agreements and if a business’s market share is less than the related market share threshold the agreement will fall outside the scope of the competition rules or be qualified for exemption provided that it does not include hardcore restrictions. The Regulation can also cause difficulties as the parties’ market share must be verified in every case and this can be very hard in situations, for instance as those concerning new markets. Where the market share threshold is exceeded, issues become more difficult as the Regulation requires a complete evaluation of the agreement to define whether it would restrict competition under Article 81(1) and, if so, whether it would meet the requirements for an exemption under Article 81(3). This requires the parties to verify the economic effect of certain restrictions by considering how they would operate in the specific product market involved. The Vertical Block Exemption Regulation principally proposes that businesses with small market shares are given more choice to establish their agreements and will not require undertaking an antitrust review of their dealings. Businesses with large market shares might need to spend time and resources to assessing their agreements from an antitrust perspective. 3. The Hard-Core Restrictions The Vertical Block Exemption Regulation does not apply to vertical agreements that have certain anti-competitive objects. The Regulation lists a number of hard-core restrictions that, if included in the agreement, prevent the safe harbour from applying and cause the exclusion of the whole agreement from the benefit of the Block Exemption even if the market share of the supplier or buyer is below 30%. There are hard-core restrictions which apply to agreements between competitors, and agreements between non competitors. If one hard-core restriction is present in the agreement, the agreement will lose the benefit of the block exemption so Article 81(1) EC may apply. This can result in the unenforceability of the entire agreement and may even lead to fines and it is important that a severability or invalidity clause is included in the agreement where appropriate. Hard-core restrictions are considered to be so serious that they are almost always prohibited. In Javico International and Javico AG v Yves Saint Laurent Parfumes SA it was considered that hard-core restrictions do not infringe Article 81(1) except if they might have considerable effect on trade between Member States. There are five hard-core restrictions which, if there are contained in a vertical agreement, they have the consequence of taking the whole agreement outside the scope of the Regulation. 3.1. Resale Price Maintenance The first hard-core restriction concerns resale price maintenance. Article 4(a) states that the benefit of the Vertical Block Exemption Regulation does not apply to vertical agreements that fix prices and have the object of restricting a buyer’s ability to determine its sale price. A supplier is not allowed to fix or minimum the sale price at which distributors can resell his products. The restriction on the buyer’s power to establish his sale price is a hard-core restriction. The Commission in Yamaha considered that an obligation of a purchaser to resell at a particular price is ‘an obvious restriction of competition that is prohibited by Article 81(1)’. However, Paragraph 47 of the Guidelines states that ‘the provision of a list of price recommendations by the supplier to the buyer is not considered in itself as leading to resale price maintenance’ if they do not amount to a fixed or a minimum sale price. In Pronuptia de Paris v Pronuptia de Paris Irmgard Schillgalis, the Court held that the recommendation of prices would not infringe Article 81(1). In genuine agency agreements, where the principal bears all or almost all the financial and commercial risks related to the transactions concluded on his account by the agent, Article 81(1) would generally not be applicable. In Vlaamse Reisbureaus an agreement between travel agents and tour operators indented to oblige the travel agents to examine the prices and tariffs set by the Tour operators and the agents were banned from sharing commissions with or granting refunds to their customers. The Court held that the Belgium system infringed Article 81(1). From an economic point of view, it can be said that there is no certain analysis nowadays as to how to treat with resale price maintenance. Resale price maintenance can be pro-competitive or anti-competitive. Nevertheless, even when applying an effect based approach, it is obvious that in many cases competition will be delayed and that cases when resale price maintenance is efficient are actually quite rare. 3.1.2. Anti-Competitive and Pro-Competitive Effects in Resale Price Maintenance Resale price maintenance is a complex issue and may be harmful in some circumstances. There are two major anti-competitive effects in relation to resale price maintenance. These are the elimination of intra-brand price competition which has as a direct effect the price increase, and the resulting risk of a reduction in inter-brand competition which gains from increased price transparency, thus make easiest price collusion between manufacturers or distributors at a horizontal level. Other anti-competitive effects of the resale price maintenance, according to Luc Peeperkorn, are the loss of pressure on the seller’s scope and the loss of dynamism and innovation from in particular discounters. However, the doubts about the efficiency of and the likelihood that resale price maintenance leads to positive aspects. Economic theory has shown that this practice might have a number of efficiency benefits. For instance, price fixing may prevent ‘free riding’ by retail price discounters on the pre-sales services and/or reputation of full price dealers while it is obvious that intra-brand price competition will be reduced by imposing a fixed or minimum price. This can be reasonable, for example, where a distribution outlet offers first-class services on which customers then rely to buy at a cheaper discounter which does not provide these services and thus is able to charge lower prices. Free riding arises when one business benefits from the performance of another with no paying for it. A minimum price would remove the pricing advantage from the discounter and change intra-brand price competition with competition on services. Minimum resale price maintenance can thus occasionally be economically and commercially reasonable if certain conditions are fulfilled. One could argue that the ‘free riding’ problem could be solved by using other block exempted restrains achieving the same result. Some inefficiencies and externalities caused by the ‘free riding’ problem might be solved by exclusivity clauses, or selective distribution but this restraint may not be an ideal substitute in all conditions for resale price maintenance and it is then questionable that resale price maintenance should be per se prohibited in all cases. Also, resale price fixing can be useful to entrant manufacturers as it might assist them to position their products and thus retailers would have the incentives to invest in making the entrant’s products better known to consumers. Resale price maintenance has created worries in Commission because is being stand on national limits with different costs in different member states. According to Professor Boscheck, taking into account that the economic conditions to consider such restrains ‘are still either too crude or too costly to apply to allow for efficient rules and structured rule of reason’, it is difficult to argue that fixed or minimum prices should not be part of the hard-core list. On the other hand, it appears that such clauses are not considered as if an exemption were inconceivable in any case. There are reasonable arguments that such restrains, considered under an effects-based approach, can rarely be deemed as pro-competitive. It is still uncertain whether free riding by resale price maintenance to rationalize the exclusion of price competition between dealers or retailers. There are methods, for instance promotional allowances or service requirements, which can avoid ‘free riding’ without the anticompetitive side effect of reducing price competition between dealers and retailers. 3.2. Territorial and Customer Restrictions Article 4(b) states that restricting sales by the buyer into specified territories or to specified customers is a hard-core restriction. Distributors must remain free to decide where and to whom they sell. Paragraph 49 of the Guidelines recognizes two restrictions on buyers that would not be considered as hard-core under 4(b): a prohibition on resale except to certain and users for which there is an ‘objective justification related to the product’, and an obligation on the reseller relating to the display of the supplier’s brand names. There are exceptions to 4(b), such as restriction ‘of active sales into the exclusive territory or to an exclusive customer group reserved by the supplier or allocated by the supplier to another buyer’. The Commission in Souris-Topps held that Topps’s distribution agreements for its Pokemon Stickers and Cards failed to benefit from the Block exemption as they violated Article 4(b). The Paragraph 51 of the Guidelines deals with the Internet. It states that ‘A restriction on the use of the Internet by distributors could only be compatible with the Block Exemption Regulation to the extent that promotion on the Internet or sales over the Internet would lead to active selling into other distributors’ exclusive territories or customer groups’. The Commission in Yves Saint Laurent case held that a prohibition on internet publicity and sale usually constitutes a hard-core restriction. The Commission is awry of deterring the growth of e-commerce, and has confirmed that the use of the internet is not considered a form of active sales as it is a reasonable way of reaching customers. Provisions that restrict the territory into which, or the customers to whom, the buyer might sell the contract goods or services are illegal. There are four exceptions to that rule: (1) The restriction of active sales into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer, where such a restriction does not limit sales by the customers of the buyer, (2) Restrictions of sales to end-users by a buyer operating at the wholesale level of trade, unless it relates to a selective distribution system. This Principle was established by the Commission in Villeroy Boch, (3) the restriction of sales to unauthorised distributors by the members of a selective distribution system, and (4) the restriction of the buyers ability to sell components, supplied for the purposes of incorporation, to customers who would use them to manufacture the same type of goods as those produced by the supplier. A restriction on active sales might not restrict sales by the consumers of the buyer. Thus, a seller can not prohibit his consumers to sell his goods or services on-line without an objective reason and he also can not reserve such sales to himself and/or advertising over the internet. The Vertical Guidelines contain definitions of the terms ‘active sales’ and ‘passive sales’. ‘Active sales’ are defined in paragraph 50 of the Guidelines and it means actively approaching individual customers inside another distributor’s exclusive territory or exclusive consumer group while ‘passive sales’ means responding to unsolicit Economic Globalisation and Competition Economic Globalisation and Competition 1. Introduction Competition is a vital mechanism of the market economy and is an efficient means of guaranteeing consumers a level of quality in terms of the value and price of products and services. Economic globalization has increased volatile growth within international trade and as a result in subject of competition law. Article 81(1) of the EC Treaty ‘prohibits agreements between undertakings; decisions by associations of undertakings and concerted practices which may affect trade between Member States and which prevent restrict or distort competition’. These agreements shall be void according to 81(2). However, the agreements which satisfy the conditions set out in article 81(3) EC shall not be prohibited, no prior decision to that effect being required. 1.1. Anti-Competitive Agreements Article 81 of the EC Treaty, prohibiting anti-competitive agreements, must be considered in relation to all commercial agreements with a probable EU cross-border impact. The Horizontal and the Vertical agreements are the agreements, which are relevant for the purposes of the application of the competition rules. Horizontal agreements are those between undertakings operating at the same level of production or marketing, while vertical agreements are those completed between undertakings operating at different economic levels. Under EC Competition Law, restrains included in vertical agreements are regarded as not as much damaging than those included in horizontal agreements. In Consten and Grundig v Commission the European Court of Justice considered that Article 81(1) EC applies not only to horizontal agreements but also to vertical agreements. The later decisional practice of the Commission on the treatment of vertical arrangements under Art 81(1) and 81(3) EC, and the case law of the Community Courts, have been one of the most controversial and severely criticized aspects of Community competition policy. These agreements are very important for the functioning of the economy. Commercial agreements may be exempted from the application of article 81(1) under article 81(3). 1.2. The Vertical Block Exemption Regulation However, there is a ‘safe harbour’ for undertakings: the Vertical Block Exemption Regulation 2790/1999. Safe harbours exist for certain agreements including restrictions providing conditions are met so that agreements falling within the terms of the Regulation are exempt from the application of Article 81(1) EC guaranteeing the enforceability of the agreement and granting protection from antitrust prosecution. Thus, if undertakings wish to be certain that their vertical agreements are in line with EC competition law, they should agree on clauses within the scope of the Regulation. Outside this safe harbour, the European Commission’s Notice Guidelines on Vertical Restraints are a helpful guide for the assessment under Art 81(3) EC and are explaining the application of Regulation 2790/1999 and the Commission’s approach to vertical restraints. The Guidelines on Vertical Restraints sets out the principles for the assessment of vertical agreements under Article 81, including the application of the Regulation to vertical agreements. Article 2(1) of the Vertical Block Exemption Regulation gives the definition of vertical agreements and states that Article 81(1) shall not apply to ‘agreements or concerted practices entered into between two or more undertakings each of which operates, for the purposes of the agreement, at a different level of the production or distribution chain, and relating to the conditions under which the parties may purchase, sell or resell certain goods or services’. The Commission adopted the Vertical Block Exemption Regulation on 1999 and the new Block Exemption Regulation is expected in 2010. Modifications might remain quite limited and might concern, especially, the presentation of more certain rules on e-commerce, on internet sales and the treatment of resale price maintenance. 1.3. Scope of Application of the Vertical Block Exemption Regulation The objective of the Vertical Block Exemption Regulation is to exempt certain categories of vertical agreements that, under certain conditions, may improve economic efficiency within a production or distribution chain and is directed at vertical agreements for the purchase or sale of goods or services. The Regulation covers various vertical agreements and applies to any type of agreement entered into companies, which do not operate at the same level of the production or distribution chain. Agreements are covered by the Vertical Block Exemption Regulation on franchising, selective distribution, exclusive dealing, exclusive purchasing, exclusive supply, and non-genuine agency agreements within the scope of Article 81. An agency agreement falls outside article 81(1) where the agent bears no or only insignificant risks in relation to either of these matters. Article 81(1) does not apply to certain agreements or concerted practices entered into between two or more undertakings. The concept of an undertaking was discussed in Hofner and Elser v Matrocton. It was stated that: â€Å"The concept of an undertaking encompasses every entity engaged in economic activity regardless of the legal status of the entity and the way it is financed†. The definition of competing undertakings in Article 1(b) includes actual or potential suppliers in the same product market. The exclusion may be quite wide and uncertain in application. In Tetra Pack I it was considered that a contract within the terms of the Vertical Block Exemption Regulation enjoys exemption from Article 81(1), but not from article 82 unless the Commission withdraws the exemption for the future, with a decision. The Regulation does not apply, however, to vertical agreements to rent and lease agreements, as no sale takes place and to agreements which have as their primary object the licensing of intellectual property rights, nor automobile distribution agreements, nor agreements between competitors, except if they are ancillary to a vertical agreement and facilitate the purchase, sale or resale of the contract goods or services by the buyer and vertical agreements whose subject matter falls within the scope of another block exemption regulation. Also, the Vertical Block Exemption Regulation does not cover any restrictions or obligations that do not relate to the conditions of purchase, sale and resale. The Regulation does not apply to vertical agreements with a subject matter that falls within the scope of any other Block Exemption Regulation. The application of the Regulation, in certain circumstances, can be withdrawn by a decision of the European Commission, or the national competition authorities. Also, the European Commission can enact a regulation declaring the Regulation usually inapplicable to certain agreements including specific restraints. 1.4. Agreements between Competitors The Vertical Block Exemption Regulation does not cover vertical agreements that are concluded on a reciprocal basis between competitors. This exclusion may be very broad because it includes both actual and potential competitors, with the latter being defined as companies that would be able and likely to enter the market within one year. Vertical agreements between competitors are covered by the Vertical Block Exemption Regulation if the agreement is non-reciprocal and the buyer has a turnover not exceeding â‚ ¬100 million or the buyer is not a manufacturer of competing goods but only a competitor of the supplier at the distribution level. Also, are covered and where the supplier is a provider of services operating at several levels of trade, while the buyer does not provide competing services at the level of trade where it purchases the contract services. 1.5. Summary Article 81(1) EC prohibits agreements which have anti-competitive effects. By enacting the Vertical Block Exemption Regulation, the Commission has establish ‘safe harbors’ for undertakings, that outline conditions regarding when vertical agreements and concerted practices that have an anti-competitive purpose or results and would be prohibited under article 81(1) might be acceptable because they satisfy the criteria of article 81(3). When an agreement fulfills the conditions set out in the Regulation, the agreement is valid and enforceable. The Vertical Block Exemption Regulation is a measure under European Union law that grants an exemption from the application of Article 81. Agreements that meet the conditions set out in the Regulation are considered either not to adversely affect competition on the relevant European market(s) or only to affect competition to a limited degree. It is now time to examine if the Vertical Block Exemption Regulation has worked and whether the Regulation and the vertical Guidelines are need any modification, and, if so, what have to be done. PART I Requirements of the Application of the Vertical Block Exemption Regulation The Vertical Block Exemption Regulation contains certain requirements that have to be satisfied before, for the vertical agreement is able to benefit from the Regulation. The market share of the supplier must not exceed 30% (Article 3). Also the agreement must not contain any of the hard-core restrictions (Article 4). Finally, the Regulation contains conditions relating to three certain restrictions (Article 5). 2. The Market Share Cap The Market Share threshold is probably one of the most important provisions of the Vertical Block Exemption Regulation. In Article 3(1) is stated that ‘the market share held by the supplier does not exceed 30% of the relevant market on which it sells the contract goods or services’. Also, Article 3(2) states that ‘in the case of vertical agreements containing exclusive supply obligations, the exemption provided for in Article 2 shall apply on condition that the market share held by the buyer does not exceed 30% of the relevant market on which it purchases the contract goods or services’. In Telenor/Canal+/Canal Digital the 30% rule prevented the application of the Vertical Block Exemption Regulation. The market share threshold is aimed to reduce regulatory burdens from those businesses that, according to Bishop and Ridyard, ‘could not behave anti-competitively even if they tried’. The introducing of a market share cap was one the most hotly contested aspects of the Vertical Block Exemption Regulation. Businesses and its lawyers argued that such a rule would be unworkable, since it is so difficult to establish market shares with any degree of precision, particularly in rapidly developing markets. However, the Commission insisted that there was no better means of ensuring that the benefit of the Block Exemption, did not go to firms with too much market power, and the market share cap stayed, albeit in the form of a single threshold of 30%, rather that two of 20% and of 40% which had been proposed in an earlier draft. If the market share of the parties exceeds the 10% threshold described in the De Minimis Notice, Article 81(1) EC will normally not apply to the agreement if the product is new or if the existing product is sold for the first time on a different geographic market. One factor which may have assisted the Commission in prevailing was the fact that while discussions on the Vertical Block Exemption Regulation were going on, it published its white paper on procedural modernization in the application of articles 81 and 82 EC, which proposed the abolition of the notification system altogether. This may have led some to feel less strongly about the content of the Regulation. 2.1. Calculating the Market Share In order to calculate the market share there must be identified the manufactured goods and geographic markets. Regarding market definition, the general rules apply. On the relevant market, the supplier calculates its market share by comparing its turnover achieved on that market with the total value of sales on that market. However, the benefit of the Vertical Block Exemption Regulation will, subject to certain conditions, not always be lost if the market share exceeds the 30% threshold. In Rewe/Meinl the European Commission considered that a supplier is in a situation of â€Å"economic dependence† when the buyer accounts for over a 22% market share and thus buyer power might distort competition. John De Gregorio, European counsel for consumer goods manufacturer Kimberly-Clark Corporation, has stated: ‘With the introduction of market share thresholds to the block exemption analysis, it’s more important than ever for in-house counsel to know how the Commission and European courts may define the â€Å"relevant market† for the goods that your company manufactures and sells, and to be comfortable with the definition your company adopts’. 2.2. The De Minimis Doctrine and Agreements of Minor Importance In addition to the Vertical Block Exemption Regulation and the Guidelines the Commission has issued a series of notices, called ‘Notices on agreements of minor importance’ which give guidance on the agreements which will escape Article 81(1), because the market share of each or both of the parties to the agreement is too small. The European Commission’s de minimis Notice states that no Article 81 subjects are raised by an agreement between undertakings where in vertical agreements the market share of each party to the agreement does not exceed 15% of the relevant market, or 5% for vertical agreements where access to the relevant market is foreclosed by the increasing effect of parallel networks of vertical agreements by several companies. The ‘de minimis’ notice sets the relevant threshold at 5% for horizontal agreements. Commercial agreements between parties where market shares exceed these thresholds might however not have a considerable effect on competition or might benefit from exemption. Nevertheless, the presumption in the de minimis Notice will not apply if the commercial agreement contains hardcore restrictions. In Franz Volk v Establissments Vervaecke SPRL the 0.6% of market share in washing machines considered insignificant. In general, agreements taken between Small and Medium size Enterprisers are ‘de minimis’. Paragraph 3 of the Notice recognizes that agreements between small and medium-sized undertakings are rarely capable of appreciably affecting trade between Member States. Finally, Article 8 provides that the Commission can withdraw the benefit of Block Exemption where ‘50 % of a relevant market, contain specific restraints relating to that market. This Regulation shall not become applicable earlier than six months following its adoption’. 2.3. Market Power The Vertical Block Exemption Regulation states that, with some certain exceptions, all vertical restrains are acceptable unless they are coupled to significant market power. Market share thresholds are criticized to be uncertain because they need a definition of the market which is the reason why the idea of market share thresholds has been discarded in most systems. Also, the amount of market power can be considered by reference to market share. Scherer and Ross state that economic analysis shows that in most cases the welfare-reducing effects of vertical restrains depend on the degree of market power the involved firms have. If market shares are in general indicative of potential market power, they can never be considered without considering some other factors to achieve a reasonable assessment of market power for instance the barriers to entry and prospective competition and the characteristics of the oligopolistic dealings between businesses. The Commission in some of its judgments show that market shares do not equal market power. For example, in Alcatel-Telectra the Commission cleared a merger which gave the parties market shares of 83%. Also, in Rhone-Poulenc/SNIA the high degree of concentration was ought to weighed by the existence of rapid technology development. The most obvious issue, according to Professor Denis Waelbroeck, is to consider whether the system should not allow all vertical agreements which do not include hardcore restrictions, separately of the market share of the parties involved, and only apply a control under Article 82 EC in cases of dominance. That would remove the burden above the threshold for businesses to achieve a complex evaluation of their agreements under Article 81(1) and Article 81(3) EC and it will provide more legal certainty in this subject. In addition, the economic assessment required by the Guidelines on Vertical Restrains and the Guidelines on the application of Article 81(3) of the Treaty is challenging, and it is doubtful that many judges and parties will have the income or abilities to undertake it sufficiently, thus raising the danger of extensive, expensive and uncertain litigation. 2.4. Arguments about the Threshold The use of market shares as a key element of the Regulation’s treatment has been criticised as being possible to lead to uncertainty and unpredictability given the difficulties in defining the relevant market and market share. It may be argued that the threshold is too low or that it is improperly cast. Those who argue that the threshold is too low point out that the anti-competitive risks can arise only when there is a dominant firm. A non-dominant firm cannot increase rivals costs and cannot make damage to the consumers as they still benefit from inter-brand competition. Those who argue that the threshold is improperly cast would agree with the above criticism but bear in mind that anti-competitive effects can manifest themselves when there is the risk of oligopolistic interdependence. Bishop. and Ridyard state that an assessment of the market’s concentration would be more useful than the assessment of one players market share. Some argue that given the uncertainties over market definition, a market share threshold is not a substitute for a detailed analysis of whether the consumers suffer consequently of a particular practice but this might damage the effectiveness of the existing system which creates a safe harbour so that analytical incomes are allocated to those cases where anticompetitive effects are most possible to occur. The Vertical Block Exemption Regulation creation of a market share threshold which the Regulation does not apply, limits manufacturing businesses that manufacture extremely innovative goods and want to sell them before other businesses have the chance to promote competitive goods into the market. In this situation, the manufacturing businesses with the extremely innovative goods might have a very high market share in a particular industry within a specific geographic area as no competing goods exist. However, as its market share is more than 30%, the manufacturing business is unable to take benefit from the Regulation and would be banned from effectively distributing and selling its manufactured goods in the market. 2.5. Removing the Threshold The Vertical Block Exemption Regulation is unduly restrictive by setting the threshold at 30%. Many agreements thus escape the safe harbour though they are completely harmless from a competition law perspective. By removing the thresholds the sellers using private resellers may be penalised not as much as vertically integrate businesses. Also, abolishing the threshold would give more stability to the system because not all restrictions of competition under 81 are an abuse under 82. On the other hand, if the system is seen as too essential one may think a less radical change to the Regulation consisting of a differentiated approach identifying those clauses which can be problematic above 30% although the parties are not dominant. Those clauses which are always straightforward, even in cases of dominance and which thus essentially deserve an exemption and should not to be matter to any market share threshold and also those clauses which should never advantage from a group exemption even they are below 30%. 2.6. Summary The Vertical Block Exemption Regulation can simplify issues but also can cause difficulties. It makes issues simple as it offers the parties more flexibility in establishing their agreements and if a business’s market share is less than the related market share threshold the agreement will fall outside the scope of the competition rules or be qualified for exemption provided that it does not include hardcore restrictions. The Regulation can also cause difficulties as the parties’ market share must be verified in every case and this can be very hard in situations, for instance as those concerning new markets. Where the market share threshold is exceeded, issues become more difficult as the Regulation requires a complete evaluation of the agreement to define whether it would restrict competition under Article 81(1) and, if so, whether it would meet the requirements for an exemption under Article 81(3). This requires the parties to verify the economic effect of certain restrictions by considering how they would operate in the specific product market involved. The Vertical Block Exemption Regulation principally proposes that businesses with small market shares are given more choice to establish their agreements and will not require undertaking an antitrust review of their dealings. Businesses with large market shares might need to spend time and resources to assessing their agreements from an antitrust perspective. 3. The Hard-Core Restrictions The Vertical Block Exemption Regulation does not apply to vertical agreements that have certain anti-competitive objects. The Regulation lists a number of hard-core restrictions that, if included in the agreement, prevent the safe harbour from applying and cause the exclusion of the whole agreement from the benefit of the Block Exemption even if the market share of the supplier or buyer is below 30%. There are hard-core restrictions which apply to agreements between competitors, and agreements between non competitors. If one hard-core restriction is present in the agreement, the agreement will lose the benefit of the block exemption so Article 81(1) EC may apply. This can result in the unenforceability of the entire agreement and may even lead to fines and it is important that a severability or invalidity clause is included in the agreement where appropriate. Hard-core restrictions are considered to be so serious that they are almost always prohibited. In Javico International and Javico AG v Yves Saint Laurent Parfumes SA it was considered that hard-core restrictions do not infringe Article 81(1) except if they might have considerable effect on trade between Member States. There are five hard-core restrictions which, if there are contained in a vertical agreement, they have the consequence of taking the whole agreement outside the scope of the Regulation. 3.1. Resale Price Maintenance The first hard-core restriction concerns resale price maintenance. Article 4(a) states that the benefit of the Vertical Block Exemption Regulation does not apply to vertical agreements that fix prices and have the object of restricting a buyer’s ability to determine its sale price. A supplier is not allowed to fix or minimum the sale price at which distributors can resell his products. The restriction on the buyer’s power to establish his sale price is a hard-core restriction. The Commission in Yamaha considered that an obligation of a purchaser to resell at a particular price is ‘an obvious restriction of competition that is prohibited by Article 81(1)’. However, Paragraph 47 of the Guidelines states that ‘the provision of a list of price recommendations by the supplier to the buyer is not considered in itself as leading to resale price maintenance’ if they do not amount to a fixed or a minimum sale price. In Pronuptia de Paris v Pronuptia de Paris Irmgard Schillgalis, the Court held that the recommendation of prices would not infringe Article 81(1). In genuine agency agreements, where the principal bears all or almost all the financial and commercial risks related to the transactions concluded on his account by the agent, Article 81(1) would generally not be applicable. In Vlaamse Reisbureaus an agreement between travel agents and tour operators indented to oblige the travel agents to examine the prices and tariffs set by the Tour operators and the agents were banned from sharing commissions with or granting refunds to their customers. The Court held that the Belgium system infringed Article 81(1). From an economic point of view, it can be said that there is no certain analysis nowadays as to how to treat with resale price maintenance. Resale price maintenance can be pro-competitive or anti-competitive. Nevertheless, even when applying an effect based approach, it is obvious that in many cases competition will be delayed and that cases when resale price maintenance is efficient are actually quite rare. 3.1.2. Anti-Competitive and Pro-Competitive Effects in Resale Price Maintenance Resale price maintenance is a complex issue and may be harmful in some circumstances. There are two major anti-competitive effects in relation to resale price maintenance. These are the elimination of intra-brand price competition which has as a direct effect the price increase, and the resulting risk of a reduction in inter-brand competition which gains from increased price transparency, thus make easiest price collusion between manufacturers or distributors at a horizontal level. Other anti-competitive effects of the resale price maintenance, according to Luc Peeperkorn, are the loss of pressure on the seller’s scope and the loss of dynamism and innovation from in particular discounters. However, the doubts about the efficiency of and the likelihood that resale price maintenance leads to positive aspects. Economic theory has shown that this practice might have a number of efficiency benefits. For instance, price fixing may prevent ‘free riding’ by retail price discounters on the pre-sales services and/or reputation of full price dealers while it is obvious that intra-brand price competition will be reduced by imposing a fixed or minimum price. This can be reasonable, for example, where a distribution outlet offers first-class services on which customers then rely to buy at a cheaper discounter which does not provide these services and thus is able to charge lower prices. Free riding arises when one business benefits from the performance of another with no paying for it. A minimum price would remove the pricing advantage from the discounter and change intra-brand price competition with competition on services. Minimum resale price maintenance can thus occasionally be economically and commercially reasonable if certain conditions are fulfilled. One could argue that the ‘free riding’ problem could be solved by using other block exempted restrains achieving the same result. Some inefficiencies and externalities caused by the ‘free riding’ problem might be solved by exclusivity clauses, or selective distribution but this restraint may not be an ideal substitute in all conditions for resale price maintenance and it is then questionable that resale price maintenance should be per se prohibited in all cases. Also, resale price fixing can be useful to entrant manufacturers as it might assist them to position their products and thus retailers would have the incentives to invest in making the entrant’s products better known to consumers. Resale price maintenance has created worries in Commission because is being stand on national limits with different costs in different member states. According to Professor Boscheck, taking into account that the economic conditions to consider such restrains ‘are still either too crude or too costly to apply to allow for efficient rules and structured rule of reason’, it is difficult to argue that fixed or minimum prices should not be part of the hard-core list. On the other hand, it appears that such clauses are not considered as if an exemption were inconceivable in any case. There are reasonable arguments that such restrains, considered under an effects-based approach, can rarely be deemed as pro-competitive. It is still uncertain whether free riding by resale price maintenance to rationalize the exclusion of price competition between dealers or retailers. There are methods, for instance promotional allowances or service requirements, which can avoid ‘free riding’ without the anticompetitive side effect of reducing price competition between dealers and retailers. 3.2. Territorial and Customer Restrictions Article 4(b) states that restricting sales by the buyer into specified territories or to specified customers is a hard-core restriction. Distributors must remain free to decide where and to whom they sell. Paragraph 49 of the Guidelines recognizes two restrictions on buyers that would not be considered as hard-core under 4(b): a prohibition on resale except to certain and users for which there is an ‘objective justification related to the product’, and an obligation on the reseller relating to the display of the supplier’s brand names. There are exceptions to 4(b), such as restriction ‘of active sales into the exclusive territory or to an exclusive customer group reserved by the supplier or allocated by the supplier to another buyer’. The Commission in Souris-Topps held that Topps’s distribution agreements for its Pokemon Stickers and Cards failed to benefit from the Block exemption as they violated Article 4(b). The Paragraph 51 of the Guidelines deals with the Internet. It states that ‘A restriction on the use of the Internet by distributors could only be compatible with the Block Exemption Regulation to the extent that promotion on the Internet or sales over the Internet would lead to active selling into other distributors’ exclusive territories or customer groups’. The Commission in Yves Saint Laurent case held that a prohibition on internet publicity and sale usually constitutes a hard-core restriction. The Commission is awry of deterring the growth of e-commerce, and has confirmed that the use of the internet is not considered a form of active sales as it is a reasonable way of reaching customers. Provisions that restrict the territory into which, or the customers to whom, the buyer might sell the contract goods or services are illegal. There are four exceptions to that rule: (1) The restriction of active sales into the exclusive territory or to an exclusive customer group reserved to the supplier or allocated by the supplier to another buyer, where such a restriction does not limit sales by the customers of the buyer, (2) Restrictions of sales to end-users by a buyer operating at the wholesale level of trade, unless it relates to a selective distribution system. This Principle was established by the Commission in Villeroy Boch, (3) the restriction of sales to unauthorised distributors by the members of a selective distribution system, and (4) the restriction of the buyers ability to sell components, supplied for the purposes of incorporation, to customers who would use them to manufacture the same type of goods as those produced by the supplier. A restriction on active sales might not restrict sales by the consumers of the buyer. Thus, a seller can not prohibit his consumers to sell his goods or services on-line without an objective reason and he also can not reserve such sales to himself and/or advertising over the internet. The Vertical Guidelines contain definitions of the terms ‘active sales’ and ‘passive sales’. ‘Active sales’ are defined in paragraph 50 of the Guidelines and it means actively approaching individual customers inside another distributor’s exclusive territory or exclusive consumer group while ‘passive sales’ means responding to unsolicit

A Mothers Biggest Fair :: Essays Papers

A Mothers Biggest Fair One spring afternoon a mother met her greatest fear head-on. Crystal Beck and her three-year-old son Travis were shopping for a new spring and summer wardrobe at a local mall. The mall was very hectic for the middle of the afternoon and to make matters worse Crystal had forgotten her sons stroller at home after taking him for a walk earlier that day. She had told her inquisitive son to say by her side. After visiting a few stores Crystal began to notice that Travis was becoming very anxious. So she made the decision to finish her son’s shopping in JC Penney at the far end of the mall, the two made their way to the children’s clothing section located on the third floor. As Crystal searched through the cluttered racks looking for the perfect outfits for her son, still glancing back at Travis who was looking through a bin of stuffed toys. She looked back to the rack for a split second to find the size she needed, and when she looked back up to check on her son he was gone. Crystal began calling his name, waiting for a response, no response ever came. She called again, but louder this time â€Å"Travis, where are you?† With every call for her son her heart began to beat fast and harder inside of her chest. She could feel herself beginning to tremble and shake, her vision became gray and distorted, she then began running though the store call her son and crying uncontrollably. A salesperson stopped her to try to calm her down and find out what had happened. Crystal explained to her still crying and shaking what had happened. The salesperson assured her not to worry, that he would be found. The girl notified security for the store, they brought Crystal to their office and asked for a description of the boy. She told them that he was a three years old boy, with blonde hair and blue eye, and standing 36 inches in height. He was wearing a blue baseball cap, a red long sleeved shirt, blue jeans, and a pair of white Reebok sneakers. When she was done with the description of her son the security officer offered her a glass of water, but she refused it. Her stomach felt as if there was a solid piece of metal lying at the bottom of it.