budapest bank

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On 9 September 2019, Advocate General Bobek advised in the framework of the case C-228/18, Budapest Bank, that a competition agency can establish a twin by object infringement and by effect infringement for the same conduct.

On 24 April 1996, in the framework of a multilateral cooperation procedure to discuss issues concerning card business, banks members of both Visa Europe Ltd and MasterCard Europe SA credit card systems reached an agreement on the minimum level of merchant service charge (MSC), the fee that the acquiring bank charges to merchants that accept payments with credit cards. Some months later, the same group of banks adopted an agreement, which introduced a uniform multilateral interchange fee (MIF), the amount paid by the acquiring bank to the issuing bank when a credit card transaction takes place, applicable to both with effect from 1 October 1996.

On 31 January 2008, Hungarian Competition Authority (HCA) began an investigation into the MIF and concluded that this agreement constituted both a restriction of competition by object and a restriction of competition by effect, imposing fines of 1.922.000.000 Hungarian forint (HF).

Visa and six of the banks that had been fined appealed to the High Court of Hungary, which partially annulled the contested decision since the agreement in question did not constitute a restriction of competition by object. Likewise, the Court considered that it was not possible for conduct to constitute a restriction of competition by object and at the same time by effect.

Against that judgment the HCA brought an appeal before the Supreme Court of Hungary (Kúria) that decided to ask the Court of Justice of the European Union (CJEU) for a preliminary ruling on whether the same conduct can indeed be classified as restricting competition both by object and by effect, provided that the evidence adduced so permits.

In his opinion, AG Bobek finds that the HCA can establish a twin by object and by effect infringement for the same conduct since the disjunctive conjunction `or´ must be understood as an inclusive disjunction, in keeping with the letter and spirit of Article 101 TFEU, which is formulated in very broad terms. From a substantive point of view, there is no difference between anticompetitive agreements by object and anticompetitive agreements by effect since the distinction is based on procedural reasons: an authority is not required to carry out an analysis of the effects if it is found that the agreement is anticompetitive by object. Nevertheless, this does not affect the competition authority obligation to adduce the necessary evidence for both types of restriction as well as to evaluate and subsume them under the appropriate legal categories.

AG Bobek gives fundamental practical criteria to apply the notion of competition restriction by object. The competition authority must carry out a two-step analysis. The first step is aiming to ascertain whether the agreement in question falls within the category of agreements whose harmful nature is, in the light of experience, commonly accepted and easily identifiable. The second step is a basic reality check to determine whether there are any legal or factual circumstances that preclude the agreement or practice from restricting competition. Following the Court’s case law, regarding both Article 101 (1) TFEU and Article 102 TFEU, the assessment of a practice under EU competition rules cannot be made in the abstract.  It requires an examination of that practice in the light of the legal and economic conditions prevailing on the markets concerned to avoidthat a formal assessment condemns an innocuous or procompetitive agreement.

In addition, and contrary to the opinion of the European Commission, AG Bobek does not understand Article 101 TFEU in a way according to which an agreement that is on the whole procompetitive is in principle prohibited by Article 101 (1) TFEU, but can be exempted under Article 101 (3) TFEU. He understands that any time an agreement appears to have ambivalent effects on the market an effects analysis is required.

In its judgment, the Court of Justice of European Union (CJEU) will have the opportunity to further refine and reinforce its recent jurisprudence regarding the notion of restriction by object and to further clarify the relationship between the object analysis and effects analysis.

The opinion of AG Bobek is available here.

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