Crehan v Inntrepreneur Pub Co (CPC)

EC Treaty — Competition — Beer tie — Whether tie infringing Article 81(1) of EC Treaty — Whether judge erring in approach to earlier decisions of European Commission — Appeal allowed The appellant took 20-year leases of two pubs from the respondent pub company on the respondent’s standard terms, which included a beer tie requiring the appellant to purchase most of his beer from the respondent at full list price. The pubs made a loss and the appellant eventually surrendered the leases. The respondent brought proceedings against the appellant to recover sums owed for purchases of beer and other goods. In his defence and counterclaim, the appellant claimed damages, to be set off against any sums owed, and argued that the terms of the leases, and the beer tie in particular, were in breach of Article 81 of the EC Treaty. Article 81(1) provided that agreements that might affect trade between member states, and that had as their object or effect the prevention, restriction or distortion of competition within the common market, should be prohibited, “in particular those which directly or indirectly fix purchase or selling prices or any other trading conditions”. The judge held, on a preliminary issue, that even if Article 81 had been infringed, the appellant was unable to sue for damages. He accordingly gave judgment for the respondent and dismissed the appellant’s counterclaim. On appeal, the court noted the proposition of law that a tenant participating in an illegal contract was precluded from claiming damages when the claim was based upon that illegality. It referred certain questions to the European Court of Justice, which ruled that a party to a contract that offended against Article 85 (as Article 81 then was) might be able to rely upon the breach of that Article to obtain relief. However, it left it to the national courts to lay down the procedures to be followed and to determine issues such as the respective bargaining power of the parties. The case was remitted to a judge in the national court, who held that although the failure of the appellant’s business had been caused by the beer ties, those ties did not infringe Article 81. This contradicted the approach of the European Commission in earlier decisions, in particular Whitbread [1999] OJ L88/26. The judge declined to accept Whitbread’s view of the relevant market, and held that he should determine that matter himself on the evidence before him. The appellant appealed. Held: The appeal was allowed. The judge’s decision offended against the principle of legal certainty within the European Community. He had erred in law by failing to comply with the duty of sincere co-operation. Under that duty, the English court was obliged to give to the Commission much greater deference than the judge had been prepared to give. Although the Commission and the European Court had left the English courts to determine whether the beer tie contravened Article 81(1), they had clearly expected the English court to take into account the Commission’s earlier conclusions in relation to the respondent and other companies, even though these were not final decisions. The fact that it was considered unnecessary and undesirable for the Commission itself formally to give the decision as to whether Article 81(1) applied, when the English court was in a position to give the decision and award compensation, did not leave the judge free to reconsider the Commission’s earlier conclusions. Article 81(1) was applicable to the beer tie in question and had been breached. The appellant did not bear any significant responsibility for the distortion of competition. The failure of the appellant’s business had been caused by the breach, and he was entitled to damages. David Vaughan CBE QC, Mark Brealey QC and Marie-Eleni Demetriou (instructed by Maitland Walker, of Minehead) appeared for the appellant; Iain Milligan QC, Nicholas Green QC, James Flynn QC and Martin Rodger (instructed by Sprecher Grier Halberstam) appeared for the respondent. Sally Dobson, barrister