The rest of EU Law midterm

4. Relation of Case Arguments to EU Principles and Member State Positions

CJEU case law reveals how Member States’ arguments often test the limits of EU principles, especially the free movement of goods and establishment. States frequently invoke justifications such as public policy, consumer protection, or fiscal stability to defend restrictive measures. However, the CJEU assesses whether those restrictions are proportionate and necessary, ensuring they don’t undermine the internal market’s effectiveness. In Dassonville (1974), Belgium’s origin certificate rule was found to hinder trade, showing that even non-discriminatory rules can breach Article 34 TFEU if they make cross-border commerce harder. Similarly, in Omega (2004), Germany justified banning a “laser-tag” game on human dignity grounds, and the Court accepted the restriction as proportionate — showing that fundamental rights can justify limited restrictions. These examples show that while Member States may pursue legitimate national aims, EU principles of market integration, proportionality, and non-discrimination prevail when restrictions are excessive or protectionist in nature.

5. Options Companies Have When Exercising Freedom of Establishment

Companies can exercise the freedom of establishment in several ways, depending on strategic goals and legal considerations. They may set up a branch, which operates as an extension of the parent company without its own legal personality; a subsidiary, which forms a separate legal entity under host-state law; or engage in cross-border conversion or merger, transferring operations or legal form to another Member State. These options are protected under Articles 49 and 54 TFEU, as interpreted in Centros (1999) and Volvo Group (2024), which confirm that companies can choose the most favorable jurisdiction to operate in. For instance, subsidiaries offer greater independence and limited liability, while branches allow direct control but less autonomy. The choice may depend on tax flexibility, liability rules, or administrative burdens. EU law prevents Member States from discriminating against companies exercising this freedom, ensuring full access to the market and supporting the mutual recognition of corporate forms across the EU.

6. Types and Procedures of Mergers, Especially Cross-Border Mergers

Mergers within the EU can take two main forms: merger by acquisition, where one company absorbs another and continues to exist, and merger by the formation of a new company, where several companies combine to form a new legal entity. Cross-border mergers between companies from different Member States are governed by Directive 2005/56/EC, now codified in Directive 2017/1132, which harmonizes national laws and ensures mutual recognition. The procedure involves several stages: (1) drafting common merger terms, (2) preparing reports for shareholders and employees, (3) obtaining independent expert evaluations, (4) approval by general meetings, and (5) issuance of pre-merger certificates by national authorities. These safeguards protect creditors, employees, and minority shareholders. The EU Merger Regulation (139/2004) also ensures that mergers do not significantly impede effective competition (the SIEC test). Thus, EU law both facilitates corporate integration across borders and maintains fair competition in the internal market.

7. Groups of Companies and Competition Law

Groups of companies — networks of parent and subsidiary firms under common control — raise unique challenges because they operate as economic units while consisting of legally separate entities. Although an EU “group” lacks its own legal personality, the CJEU treats it as a single undertaking for competition law purposes when subsidiaries do not act independently from their parent. In Sumal (2021), the Court held that a subsidiary can be held liable for the parent company’s participation in a cartel if they form part of the same economic unit and the subsidiary’s activities are linked to the infringement. This ensures accountability within corporate structures and prevents companies from avoiding liability through internal organization. Groups are thus significant actors in the internal market, promoting diversification and transnational expansion, but they must comply with Articles 101 and 102 TFEU prohibiting collusion and abuse of dominance. Their existence highlights the tension between legal plurality and economic unity in EU company law.

8. Characteristics and Types of Distribution Agreements

Distribution agreements govern how suppliers and distributors collaborate to market goods and services. They are key instruments of vertical integration and are assessed under Competition Law (Article 101 TFEU) to ensure they don’t restrict trade between Member States. The main types include exclusive distribution, where a supplier grants a distributor territorial exclusivity; selective distribution, used for luxury or technical goods, where only authorized resellers can sell; and franchising, where the franchisor licenses intellectual property and provides technical know-how. The Vertical Block Exemption Regulation (2022/720) sets conditions under which such agreements are permitted. For example, in Coty (2017), the Court upheld selective distribution to preserve a luxury brand’s image. However, “hardcore restrictions” like resale price maintenance or cross-territorial limitations are prohibited. Distribution networks promote market efficiency but must balance freedom to conduct business with maintaining effective competition within the internal market.

9. The Legal Position of Digital Platforms

Digital platforms (e.g., Amazon, Apple, Google, TikTok) are central to the modern EU internal market because they act simultaneously as intermediaries, distributors, and service providers. The Digital Services Act (Regulation 2022/2065) and the Digital Markets Act (Regulation 2022/1925) regulate these entities to ensure market integrity, transparency, and fair competition. Platforms benefit from network effects, where the value of the service increases with user numbers, but this can create dominant positions and gatekeeping power. Under the DSA, platforms must comply with due diligence duties: removing illegal content, maintaining transparency reports, and cooperating with authorities. Under competition law, they may be subject to Article 102 TFEU scrutiny for abuse of dominance. The EU also imposes special obligations on “very large online platforms” (VLOPs) to assess systemic risks and ensure compliance audits. Thus, digital platforms are not only economic players but also regulatory subjects essential to the proper functioning of the digital internal market.

10. Market Integrity and Competition in the Internal Market

The integrity of the EU internal market depends on ensuring that all economic actors — from traditional businesses to digital platforms — compete fairly and transparently. Market integrity encompasses consumer protection, data safety, and the absence of distortive practices such as cartels or abuses of dominance. The Digital Services Act promotes a “safe and trusted online environment,” while the Competition Law framework (Articles 101–102 TFEU) prevents anti-competitive agreements and monopolistic behavior. Maintaining this integrity ensures contestability — the ability for new firms to enter the market — which is crucial for innovation and growth. The CJEU has consistently reinforced this principle, linking it to the EU’s constitutional goal of an “area without internal frontiers.” In essence, preserving market integrity through consistent enforcement of competition and digital regulation safeguards both economic freedom and consumer welfare, which together sustain the internal market’s legitimacy and effectiveness.