Relaxing whilst doing Competition Law is not an Oxymoron

Groupement des Cartes Bancaires and the resilience of the case law on restrictions by object

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[Note by Alfonso: I devoted part of the weekend to drafting a comment on the recent Court Judgment in GCB, but Pablo Ibañez Colomo has proved quicker. Here’s his reaction to the Judgment; mine will follow].

The ECJ judgment in Groupement des Cartes Bancaires will be discussed at length in the coming months (maybe more so than MasterCard). The outcome is unsurprising (at least in my view). The Court, as AG Wahl, applies the principles stemming from a well-established line of case law, which has proved to be remarkably resilient. It should now be clear beyond doubt that relying on pigeon holes or formal categories to identify object restrictions can often be misleading. What matters is the rationale behind the agreement (as inferred from its wording and the economic context), and not so much whether it includes a particular restraint. Thus even an agreement providing for price-fixing may not be restrictive by object (in para 51 of the judgment the Court is careful not to refer to any form of price-fixing between competitors, but to naked price-fixing cartels and their functional equivalents). Conversely, an agreement that does not fit within the ‘suspect’ categories may also be restrictive by its nature – this is how I understand Allianz Hungaria, and the reason why it makes sense to me.

It should also be clear after Groupement des Cartes Bancaires that identifying the object of an agreement and establishing its restrictive effects are two separate steps. The first one may at times require a careful and lengthy analysis of the relevant legal and economic factors that explain the logic and purpose of a restraint. However, this fact does not mean, as has sometimes been claimed (in light of what now seems to be a misinterpretation of T-Mobile), that it is tantamount to establishing the restrictive effects of the agreement. The ECJ finds that the GC did not distinguish between the two steps. Claiming that an agreement is capable of having restrictive effects is not the same thing as saying that it is, ‘by its nature’, contrary to Article 101(1) TFEU (see para 69). Additional questions around this point will soon be addressed in academic articles and discussed at conferences. I am ready to guess that the formula chosen by the Court (‘sufficient degree of harm to competition’) will give rise to speculation about its exact scope and meaning (I have my answer, but it would be the nth time I write about it in the blog). It is also necessary to read some paragraphs (49-51, for instance) together with the judgment in Expedia, where it was clarified that ‘by object’ agreements that have an effect on trade between Member States appreciably restrict competition.

There is another aspect that is not strictly related to the substantive analysis but that will have piqued the interest of some people. The ruling could be used in textbooks to illustrate the principles of judicial review in EU competition law. The Court is very explicit and structured in this regard. First, it sets out the legal criteria for the assessment of the object of an agreement and comes to the conclusion that the GC had erred in law by applying a different set of principles. Secondly, it examines the legal characterisation of the agreement as restrictive ‘by nature’ and finds an additional error in law. It would seem from the judgment itself that the analytical clarity with which judicial review is conducted is a ramification of KME and Chalkor. In fact, the ECJ holds that the GC had not complied with the standard of review set out in the case law (para 91).

Groupement des Cartes Bancaires is likely to have consequences for some cases pending before the Commission and the GC. I thought ‘pay for delay’ when I read the bits about the relevance of ‘experience’ and about BIDS. I thought ‘pay TV investigation’ when I read that, in order to determine whether an agreement is restrictive by object, ‘it is […] necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question’. In spite of its relevance for the case, this issue was never considered by the ECJ in Murphy. It had not been raised by the parties. In the context of formal proceedings before the Commission, it would inevitably have to be addressed. I have recently published a paper discussing how this factor could influence the outcome of the investigation.

Interesting times ahead!


Written by Alfonso Lamadrid

15 September 2014 at 3:53 pm

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