This post is also available in: Español
In September we reported the Opinion of Advocate General Bobek in case C-228/18, Budapest Bank, in which he concluded that a competition authority can establish that a single conduct amounts to a restriction of competition both by object and by effect.
In its important judgment of April 2, the Court of Justice of the European Union (“the CJEU” or “the Court”) ruled on these preliminary references, providing very clear guidance on the concept of restriction of competition by object and its practical analysis.
The CJEU judgment
This judgment answers the questions referred for a preliminary ruling by the Kúria (the Hungarian Supreme Court) in an appeal against the judgment of the Budapest High Court which annulled a decision of the Hungarian Competition Authority (“the HCA”). Seven banks were fined as it was considered that, in a payment cards system, they had agreed to introduce a uniform multilateral interchange fee (MIF) which is the amount of money paid by the bank of the card holder (acquiring bank) to the bank of the merchant (issuing bank) when a credit transaction takes place.
The Court first establishes that a competition authority can classify the same conduct as a restriction of competition both by object and effect. However, in the Court’s words, “classifying the same anticompetitive conduct as a restriction both ‘by object’ and ‘by effect’ in no way detracts from the obligation incumbent on that authority or court, first, to support its findings for that purpose with the necessary evidence and, second, to specify to what extent that evidence relates to each type of restriction thus found to exist”.
Second, the judgment includes an important clarification indicating that an agreement cannot be considered as harmful to the proper functioning of competition by its very nature, that is, restrictive by its object, without “sufficiently reliable and robust experience.” Thus, the practice of competition authorities and the case law of the European Courts must support that conclusion.
As it is recalled by the Court, in line with the well-known judgment in the Groupement des Cartes Bancaires case, the concept of restriction of competition by object must be interpreted restrictively, and a conduct will only be considered as such if a sufficient degree of harm to competition is found. On that basis, the Budapest Bank judgment confirms and supplements the Cartes Bancaires judgment, with a detailed analysis of the three aspects to be considered to determine whether an agreement is sufficiently harmful to competition.
Those elements are:
- The agreement’s provisions must present evidence of harm to competition.
- The agreement’s objective or objectives must be clearly established and defined. In this regard, the Court recalls, in line with the Cartes Bancaires judgment, that “the fact that a measure is regarded as pursuing a legitimate objective does not preclude that measure from being regarded — in the light of the existence of another objective which is pursued by the measure and which, for its part, must be regarded as illegitimate, as having an object restrictive of competition.”.
- The economic and legal context must be considered in any case, even when the foregoing elements (the content and objectives of the agreement) point to a restriction by object. It will be necessary to examine a series of indicators such as the procompetitive rationale of the agreement, its legal context and, particularly, the comparison between the competition conditions with and without the agreement, i.e., an analysis of the counterfactual situation.
The Court establishes that if there are strong indications that the agreement in question improves competition it cannot be considered to restrict competition by its object and a full analysis of its effects will be required, in line with the recent case law in the Generics (UK) and Others case.
The Court stresses that it is up to the referring court to assess the elements listed above. However, based on the referred case files, the Court concludes, on the one hand, that the agreement does not contain provisions proved to be harmful to competition and, on the other hand, that the objective of the agreement was to guarantee a balance between the issue and acquisition activities.
Therefore, following the conclusions of the Advocate General, the Court notes that the evidence adduced by the HCA and the European Commission “is not sufficient to conclude that there is a sufficiently general and continuous experience to consider that an agreement such as that in the main proceedings is harmful to competition.”
The judgment represents a clean break with the previous CJEU case law in cases such as T-Mobile,in 2009, or Allianz, in 2013, both prior to the Cartes Bancaires case, in which the CJEU considered that it was sufficient for the agreement or arranged practice in question to be “capable in an individual case” of producing anticompetitive effects to consider them restrictive by object, and that it was irrelevant for these purposes whether an effective limitation of competition took place.
In view of the clear terms of the Court’s ruling, this judgment should result in a more rigorous analysis of restrictions and prevent excessively broad interpretations of the concept of restriction by object that National Competition Authorities are applying in many cases. Focusing solely on an analysis of capability of restricting competition makes any conduct a restriction by object in practice, virtually annulling the presumption of innocence of the companies under investigation and hampering the exercise of their rights of defense.
Therefore, the much more detailed and thorough analysis to be performed by competition authorities to qualify an agreement as restrictive by object following the CJEU’s judgment is expected to give greater legal certainty and more guarantees to investigated companies in sanctioning proceedings.
Authors:Andrew Ward,Alexandre Picón and Victoria Rivas Santiago
This post is also available in: Español