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ECJ Judgment in AC-Treuhand (C-194/14 P) – On the scope of Art. 101 (1) TFEU

with 3 comments

by Alfonso Lamadrid and Sam Villiers

You may remember that earlier this year we commented on AG Wahl’s Opinion in AC-Treuhand (C-194/14 P) (see here) and anticipated that, in spite of its thought provoking reasoning, it was likely not to be followed by the Court. Well, the ECJ’s Judgment was released on Thursday, and, as expected, the General Court’s Judgment was upheld.

To briefly recap, the case involved a Zurich-based consultancy (AC-Treuhand) which was hired by cartelists to arrange and participate in meetings, gather and circulate data, moderate tensions and foster commitments, in exchange for remuneration [Note: If any other facilitator reads this post, please remember our hotel offer]

The General Court held that the company infringed Art. 101(1) TFEU for its role as a cartel “facilitator”, despite not being active in the affected markets (tin stabilisers and ESBO/esters sectors). [Parental advisory: We thought about using this image to illustrate what a facilitator does, but then chickened out; if you access it, it’s under your own responsibility]

The first—and most important—ground of appeal (of four) asserted by AC-Treuhand in its appeal was that the General Court was wrong to hold that (i) the conduct of a consultancy firm which provides services to a cartel falls within the ambit of Art. 101(1), and (ii) that that interpretation was reasonably foreseeable at the time of the infringement.

On this first point, departing from the approach of AG Wahl (summarised in our previous post; see hyperlink above) the ECJ embraced an expansive notion of Art. 101(1). The Court stated that there is nothing in the wording of Art. 101 indicating that the prohibition is only directed at parties active in the affected markets (para. 27), and that it is well-established that even passive participation may be caught by Art. 101 (para. 31). The Court went on to state, at para. 35, that “it is apparent from the Court’s well established case-law that the text of Article 81(1) EC refers generally to all agreements and concerted practices which, in either horizontal or vertical relationships, distort competition on the common market, irrespective of the market on which the parties operate, and that only the commercial conduct of one of the parties need be affected by the terms of the arrangements in question…”

The Court also unsurprisingly relied upon the overarching aims of Article 101 to justify its stance, underlining, in para. 36, that “[t]he interpretation of that provision advocated by ACTreuhand would be liable to negate the full effectiveness of the prohibition laid down by that provision, in so far as such an interpretation would mean that it would not be possible to put a stop to the active contribution of an undertaking to a restriction of competition simply because that contribution does not relate to an economic activity forming part of the relevant market on which that restriction comes about or is intended to come about.”

As you may recall, Wahl, in recommending the ECJ to annul the GC judgment, stated that “in order to be a party to a cartel (“the undertaking in question must also be under normal market conditions, a competitive constraint for the other cartel members. It is only where the undertaking in question represents a competitive pressure worth constraining that it is capable of constituting such a constraint”) (para. 51). In his view, since AC-Treuhand was not active in the market, it could not have represented a competitive constraint, and could therefore not have restricted competition in the sense of Art. 101.

Wahl’s arguments—which are set out in more detail in the previous post—concerning this first ground of appeal make sense, and would probably have been endorsed if EU competition law were a discipline like any other.

The reason why we anticipated that his Opinion would not be followed is that EU Competition law has often not been treated like other areas of the law. Be it because of its economic roots, be it because of the width of its main provisions, or be it because of it forming part of the similarly peculiar system that is EU law, EU competition law has been treated as a different animal. It is a sphere where full effectiveness, effet utile, is the main concern, and where wide interpretations prevail. Indeed, the vague wording of the provision never prevented it from encompassing not explicitly typified conduct (starting with vertical agreements).

Indeed, as we observed in a previous post (with some steamy drafting…) EU Courts have made it clear thatin the nebulous field of competition law the principle of legality has more vaporous contours”. That previous post focused on a GC statement that said that “(…) the use of imprecise legal concepts within a provision does not prevent liability being established as against a person who contravenes it. As the Commission points out, if it were otherwise, an infringement of Article 101 or 102 TFEU – which are themselves drawn up using imprecise legal concepts, such as distortion of competition or ‘abuse’ of a dominant position – could not give rise to a fine without the prior adoption of a decision establishing the infringement“. 

Although it is highly unlikely that the Treaty drafters had an AC-Treuhand type situation in mind when drafting the competition provisions, and even if the legal logic underlying AG Wahl’s Opinion is hardly disputable, we can also agree with the ECJ that there also seems to be no reason, under either the precise wording of Article 101(1) or taking into consideration the ‘spirit’ of the competition rules, why the actions of AC-Treuhand should not be caught within the embrace of Article 101(1).  After all, it participated in an agreement which met all the requirements to fall under 101. A different interpretation would seem to preclude, for instance, the liability of associations of undertakings when not directly active in the market.

As for the second limb of its first ground of appeal, AC-Treuhand argued that it was not ‘reasonably foreseeable’ that its conduct would fall within the Art. 101(1) prohibition, infringing the principle that offenses and penalties must be defined by law. In response, the Court makes clear that foreseeability depends on many factors (“content of the text in issue, the field it covers and the number and status of those to whom it is addressed”), but also that a law may be foreseeable even if legal advice is required to assess potential consequences of the given conduct, particularly in the area of professional services where the Court suggests that an elevated standard of care in evaluating legal risk applies (para. 42). That raises interesting issues that deserve a post of their own. To be continued…

Written by Alfonso Lamadrid

26 October 2015 at 12:47 pm

Posted in Uncategorized

3 Responses

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  1. Thanks for the post Alfonso and Sam, it is a really interesting judgment and I completely agree with your approach. An additional one.. Associations (not active in an affected market) can breach european competition law because it is expressly provided for in Article 101 TFEU. Sensu contrario, unless expressly (or at least clearly) stated in the LAW, all other companies that breach article 101 TFEU should be active in the affected market (competition in a market of course could be restricted by a horizontal or a vertical agreement, i.e. Treuhand has nothing to do with Consten)… However, in this case the ECJ went one step ahead and the judgment lacks motivation. Effectiveness is just not enough when the principle of legality is at issue. Maybe one day the European Court of Human Rights will have the last word in certain competition matters. Why competition law has to be different? The Spanish Supreme Court has reacted in this direction and has declared that it makes no sense that competition law has to be different to other disciplines that cover infringement which are clearly more serious than competition law (i.e Criminal Law).

    Anonimo

    29 October 2015 at 12:24 pm

    • Interesting idea.

      Playing advocate for the devil for a moment – I have no strong views in this area – I would think that associations are expressly mentioned because they are not party to the collusive agreement. In fact, their existence and operation is an alternative to an agreement. If I understand the Treuhand case correctly, the suggestion there was that the company was in some sense a party to the agreement.

      Conceptually, I don’t find that problematic. Imagine that 3 sellers of widgets and a consultancy agree to limit the production of widgets, and that the consultancy is going to be the independent referee, ensuring that no one cheats. I should think that, in the normal legal sense, that’s a contract between four parties. So why shouldn’t art. 101 be enforceable against all four?

      Martin Holterman

      3 November 2015 at 2:02 pm

  2. […] The ECJ starts off recalling the principles that companies are to determine their behavior autonomously (27) and that “passive modes of participation” (i.e. complicity/facilitation) are also caught by Art. 101 (and refers here to the recent Judgment in Treuhand (28)) (our comment on that one is available here). […]


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