Common Market: A Blow for Freer Competition

While Common Market planners pursue their goal of free trade, businessmen of the six member nations have continued an older tradition: that of boundary-crossing deals through which manufacturers, in order to sandbag their competition, award exclusive sales rights to retail distributors. Now, in a long-awaited decision involving one such arrangement between Grundig, a West German electronics giant, and Consten, a French retail distributor, the Common Market has moved to topple the restraint-of-trade tradition.

Under a 1957 agreement, Grundig gave Consten exclusive rights to sell its TV sets, tape recorders and other products in France in return for Consten’s promise not to handle competing brands. Grundig thus sewed up a $14 million share of the French consumer electronics market. Free from competition, Consten could sell Grundig products at markups as high as 50%—double what German retailers were getting. So sweet was the deal that in 1961, when another French firm started underselling Consten with Grundig wares bought from German wholesalers, outraged Consten officials charged it with unfair practices in a French court—to their later chagrin. Asked for an opinion on the case, the EEC in Brussels brushed aside bitter German protests, decided that the Grundig-Consten deal created “a monopoly within French territory” in violation of Common Market free-trade accords. The Market’s court of justice in Luxembourg thereupon ruled the exclusive dealership illegal.

Though French courts must finally decide the Consten-Grundig case, they are expected to go along with the EEC precedent, which may affect more than 30,000 exclusive-dealership arrangements in the Six.