Question 1ACME Limited (ACME), a company registered in a Member State of the EU (the Republic of Ireland), is amanufacturer of laminated wooden beams, which are highly regarded for their ruggedness and strength. ACME’smain buyers, who are located in Ireland, France and Spain, use the laminated wooden beams as a key element inthe construction of non-steel framed commercial buildings. ACME uses only bur oak trees for the laminatedwooden beams.Bur oak is widely acknowledged in the commercial building industry as the best wood for use in laminated woodenbeams with its high strength and integrity. However, there are other timbers available within the EU; but only oneforestry firm, Coyote GmbH (Coyote), grows bur oak. Coyote is incorporated in Germany.Coyote’s market share of the EU-wide bur oak market is 42 per cent and it has 15 per cent of the overall EU-widetimber market. Another German company, Strassenlälufer GmbH (Strassenlälufer), has 20 per cent of the EU-wide bur oak market and 11 per cent of the overall EU-wide timber market.For the last 20 years the market share of these two companies (Coyote and Strassenlälufer) has remainedconstant. Between them, both companies grow and supply 80 per cent of the bur-oak seeds and seedlings. Also,for the last 15 years they have agreed not to licence the sale of bur oak seedlings to anyone else.ACME has brought its bur oak supplies from Coyote for many years as importing bur oak from wood mills in theUSA, where it is widely grown, would be prohibitively expensive. As a result of the recession in the buildingindustry in 2020, Coyote has recently reviewed its sales strategy and has decided to appoint exclusive distributors
14/05/2021EMA: View as single pagehttps://learn2.open.ac.uk/mod/oucontent/view.php?id=1708080&printable=12/5of bur oak in respect of each Member State of the EU rather than selling directly to the end-user manufacturers.As part of its revised sales strategy, Coyote has retained a local company to distribute bur oak in the market in theRepublic of Ireland. The local company is named HS Limited (HS) and is incorporated and registered in theRepublic of Ireland.Coyote, in its distributorship agreement with HS, has included a term in the agreement requiring HS to include, inits contracts with its customers, that those customers must agree not to on-sell the unprocessed bur oak to othercustomers anywhere in Ireland or in another Member State. Coyote has not imposed a similar restrictive term onany of its other exclusive distributors in other markets.Another clause in the distributorship agreement, between Coyote and HS, is to the effect that HS may only sellbur oak to manufacturers of wooden beams in the Republic of Ireland at a specified minimum price. HS, in itspricelist, is asking ACME to pay triple the price that it has paid to Coyote in previous years.ACME thought that these changes in contractual terms and pricing are unfair and the conditions which Coyote’ssubsidiary (HS) imposed were unacceptable. ACME tried to use alternative wood for some laminated woodenbeams. It produced these alternative laminated wooden beams as samples for potential buyers; however, thelaminated alternatives did not have the structural integrity of those made from bur oak.Assume that, because of legal advice received on competition law issues, Coyote has decided not to proceed withits distributorship arrangement in each Member State as described earlier. Coyote is now in discussions withMarie-Anne (MA).Marie-Anne owns a business in France supplying wood. MA regularly buys bur oak from Coyote. Coyote isattempting to renegotiate the terms upon which it sells to MA so that they will require her to also buy all hersupplies of elm and ash wood from Coyote in return for which they will discount all timber treatments, such asspecial glues and oils, used in the manufacture of timber wooden beams.
a.Explain why an EU Commission investigation may find Coyote is in breach of Article 102 TFEU.(15 marks)
b.Advise ACME whether the Commission has any grounds under Article 101 or 102 TFEU, or bothArticles, for challenging the conduct of HS or Coyote, or both of them. Would your answer change ifCoyote, instead of contracting with HS, establishes a subsidiary in Ireland to perform the samefunctions?(15 marks)
c.What EU remedies might ACME rely on in the national courts if it sues HS or Coyote, or both ofthem, for breaching Article 101 or 102 TFEU, or both Articles?(5 marks)
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During an informal golf game after an industry conference in December 2020, a director of Coyote discussed withrepresentatives from a US forestry firm and a Norwegian wood supplier (from either of which MA might source herwood requirements) the idea of not undercutting Coyote when supplying any purchasers of their products that are located within the EU. MA has noticed that during 2021 the sales prices of the three undertakings (i.e. Coyote, theUS forestry firm and the Norwegian wood supplier) have increased and decreased in a parallel pattern.MA shops around to find the cheapest deal and usually ends up buying elm and ask from the cheapest source.Coyote has said that if MA does not buy all her elm and ash from them, they will not supply her with bur oak. MAhas ascertained that no other buyer of bur oak is required to buy all their elm and ash from Coyote whenpurchasing supplies of bur oak.
d.Advise MA if she has any grounds under Article 101 TFEU for challenging these terms and practices.(20 marks)
e.What EU procedure might the Norwegian wood supplier invoke in order to limit its exposure in theevent of a European Commission investigation?(5 marks)
