The network members should be heard by the judge, just like workers of the bankrupt debtor’s business are, in the case of the joint sale of the company or the production units whose activities have a direct connection with the network activity.
In case of a separate auction for the rights and assets belonging to the active mass there could be a right of first refusal with respect to the bankrupt debtor’s assets which are essentials to the efficient pursuit of the activity or to maintain the competitiveness of the network.
The special interdependence of networks members justifies in these cases a priority right to take the control of the other member specially if it is the network head, before or during the procedure. For creditors this has the advantage of increasing the bankrupt solvability, and it ensures the continuity of the network activity — which in many cases it is the best way to be paid —. For the members this also implies the continuity of their own business and, if it is the case, the continuity of network leadership, in this case collective.
An efficient legal network framework should deal with these questions and include the same or similar solutions.
V. NETWORK AND PUBLIC INTEREST PROBLEMS
Networks are also relevant from the point of view of public interest. Networks often produce external benefits, from cultural to ecological, as a consequence of its interdependent activity. But we will now focus only on the interest in maintaining a workable competition for the benefit of the market and all its participants, mainly the consumers.
On this field there are many network issues in relation with networks mergers15, networks presence in the market in comparison to independent sellers or buyers, abusive practices in networks with impact on the market, and grounds of exemption (Block exemptions and ancillary restraints doctrine16).
We will discuss two of these questions, namely the abuse of dependence and the possibility to extend the application of ancillary restraints doctrine in the field of networks.
a. Abuse of dependence in networks
Business relationships in networks are different than hierarchy or market relations as a consequence of the interdependence of its members. This interdependence can be transformed in some cases in dependence understood as the absence of an equivalent alternative for one of the parties. This includes the absolute absence or the existence of a not reasonable alternative in economic terms, — for example, a producer who sells 100% of its production to a big surface and has done specific investments which cannot be amortized and who cannot place its production in the market —, or a member of a wine second degree cooperative who produces bottled wine when as a consequence of strategic alliances (network/network connexion) with a foreign importer the ownership of the successful trademarks belongs to the second degree cooperative. In these cases the cost to leave the second degree cooperative is not reasonable in economic terms.
The abuse of dependence is not ruled in a uniform way neither in European Law nor in the different laws of the member states. European Courts created the doctrine of relative abuse to deal with cases in which the abuse implies a negative effect over the competition in the market following the German and French legal conceptions. In Spain the abuse of dependence is an unfair competition conduct — art. 16.2 LCD17 — that may have antitrust relevance through article 3 LDC18 if it affects the public interest to maintain a workable competition in the market. Opposite to this line of regulation, Italy regulates the abuse of dependence in civil law as a private matter.
The abuse of dependence has an impact in the formation of the contractual agreement, as an unfair competition conduct, and it may lead to a risk for the workable competition in the market in some cases19. A legal network framework shall deal with all these three aspects and not consider them as alternatives. It shall regulate all of them knowing that the relevant level of dependence in each case may not be the same.
b. Ancillary Restraints doctrine and networks
Exemptions to the application of the prohibition of agreements and practices restrictive of competition in European Law are organized in four different ways. Ancillary restraints doctrine, block exemptions, 101.3 Treaty criteria and de minimis rule. This last one is grounded in the opportunity principle that rules the action of the administration but in fact it has an influence on the private application of competition law that is not clearly justified.
The criteria of 101.3 are grounded in an efficient competition balance recognizing competition as a means to obtain more, better and cheaper goods or services for more customers — quantitatively and geographically extended — and not as a goal in itself and its application produces the compensation of restriction of competition with these goals that are obtained through anticompetitive behaviour with the three limits it establishes. These rules are able to be applied in all kind of cases but if we observe the block exemption regulations we may conclude that in most cases they exempt, in both vertical and horizontal cases, stable business cooperation relationships that can be identified as cases of business networks.
Accessory restraints doctrine, grounded in the idea that a necessary little evil shall not deprive us of a good, has also been applied until now only to a case — distribution and services franchising — that may be described as a vertical business network.
It is quite difficult to modify a block exemption, as shows the actual negotiation about the substitution of the vertical restrictions block exemption. On the contrary, the evolution of a judicial doctrine may be easier to obtain since it suffices to convince a small group of persons among the best jurists in Europe, who act according to technical and justice considerations instead of political ones.
In the case of vertical restraints, the risk for competition is generally low, with the exception of exclusionary effects or market sharing.
We shall keep in mind that business networks — vertical and horizontal — are considered, both in national and community systems, as highly beneficial to the economy in general — efficiencies’ exponential growth — and to the modernization — today just the survival — of SMEs, which allow a reasonable benefits allocation among its members and consumers.
Distribution networks in particular have been seen as positive in general terms on both sides of the Atlantic although the European Court of Justice denies the application of the rule of reason.
The application of the ancillary restraints doctrine to horizontal business networks would be more problematic but the ground of the doctrine is general and it would be applicable also to these cases.
In order to explore this possibility, we shall determine whether the intra-brand restrictions derived from the exercise of directive power and control which are inherent in networks’ governance are justified from the perspective of their incidental nature regarding a legitimate and desirable result as the existence of enterprise networks.
In European Competition Law the concept of ancillary restraints covers any alleged restriction of competition which is directly related to conducting a major not restrictive operation, in our case the creation of a network contract, and which is objectively necessary and proportionate.
In the case of distribution networks efficient territorial organization of the network members, for example, is directly related to network efficiency and indissolubly linked to it20.
Following with the example, an objective and abstract analysis of the need for the territorial organization — not necessary exclusivity — of the network suggest us its necessary character as the lack of organization determines that the operation could be performed only under more uncertain conditions.
On the requirement of proportionality, we must check whether the restriction’s material and geographical extension and duration do not exceed what is necessary to perform the operation.
Since in our case the restrictions linked to the efficient organization of the network are, in general, necessary throughout the life of the contract and sometimes after its extinction, such restrictions must be considered proportionate for the duration of the contractual