The one about bananas and credit cards: exchanges of information as restrictions by object
We are back. This time, with a post that is not voluntarily humorous (nevermind the picture above). A good opportunity to prove ourselves, dear readers, that there is (some) room for (at least some) serious discussions in Chillin’ Competition. I have been meaning to write about the ECJ ruling in Bananas (hence the picture above). I am now out of excuses to avoid doing so given that I cannot (and really should not) keep myself busy forever discussing Alfonso’s posts.
The appeal judgment in Bananas is interesting in that it addresses the status of exchanges of information under Article 101(1) TFEU. Because the nature and the context of such exchanges may vary widely from one case to another, it is probably the practice that exemplifies better than any other the approach taken by the ECJ when drawing the line between restrictions by object and by effect. You know from previous posts that I find the relevant case law to be very sensible. More importantly, it is clear to me the Court has been consistent over time in its approach to the question.
The key arguments raised by Dole in its appeal are familiar ones. An exchange of information may not have an actual impact on future prices. For instance, as argued by Dole in the case, the employees discussing prices may lack the power to set them. It may also be the case that the nature of the exchange does not completely eliminate uncertainty about the behaviour of competitors. The Court clearly dismissed these arguments and held that the exchange at stake in the case amounted to a restriction of competition by object. What lessons can one draw from this case? A couple of them. Nothing, I am afraid, that you have not seen in one way or the other in the blog.
Formal categories are not particularly useful
Are exchanges of information restrictive of competition by object? Well, it depends. Sometimes they are, as in Bananas. Sometimes they fall outside the scope of Article 101(1) TFEU altogether, as in Asnef-Equifax. It all depends on the nature and purpose of the exchange in the context in which it is implemented. The formal category is as such not particularly useful. This has always been the problem with the so-called ‘object box’ and with similar attempts to capture the essence of the case law. Labels (‘exchange of information’, ‘price fixing’, ‘market sharing’) mean virtually nothing in themselves and can even be misleading.
Sometimes, an exchange of information is an ingredient in a cartel-like arrangement. In such a case, the exchange lacks pro-competitive virtues and is therefore deemed restrictive by its very nature. Sometimes, it can improve the functioning of markets and as such potentially beneficial for consumers and the economy. It is clear from the case law that the analysis of the nature and purpose of the agreement needs to be carried out on a case-by-case basis. This sort analysis is not about actual or likely effects (more on this below) but about the rationale behind the agreement.
Bananas provides an interesting example of the above. I welcome your views on the ruling, but it seems clear to me that the Court essentially considers whether the relevant exchange pursued a ‘legitimate objective’ (to take the expression found in Cartes Bancaires, which, unsurprisingly, is abundantly cited in the judgment). In this case, it was found that the purpose of the exchange was simply to remove uncertainty about the behaviour of rivals.
The ‘by object’ category is not a presumption of anticompetitive effects
It has become popular to present the ‘by object’ category as a presumption of anticompetitive effects. The likelihood of such effects is so high in the case of some restraints, the argument goes, that it makes sense to prohibit them irrespective of their actual impact on competition. This view is not unreasonable. The problem is that it is contradicted by the case law.
Bananas shows, again, that an agreement can be deemed to restrict competition by object even if it is not clear that it would have resulted in higher prices. In paragraph 123, the Court holds that ‘a concerted practice may have an anticompetitive object even though there is no direct connection between that practice and consumer prices’. Along the same lines, it is stated in paragraph 125 that ‘there does not need to be a direct link between [a concerted practice] and consumer prices’.
In light of the above, it seems clear to me that determining whether an agreement is restrictive by object has little to do with setting a presumption about its likely impact on competition. As explained above, this assessment is about something else. This also means that there is no real overlap between establishing the anticompetitive nature of the agreement (i.e. understanding its object) and showing its restrictive effects. The first test is about determining whether the agreement is plausibly pro-competitive; the second is about showing, in concreto, its negative effects. This is another major source of misunderstandings. I hope the clear statements of the Court in Bananas will prove helpful in this regard.
More on State aid and investments.
Remember my post on State aid and investment arbitration? The Commission has ordered Romania to recover the compensation to the investors following the award of an arbitration tribunal. More to follow, I am sure!