Relaxing whilst doing Competition Law is not an Oxymoron

Archive for April 19th, 2017

Derogations from competition law (and yes, endives)

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There are good chances that many of you have read/heard me say before (the last time towards the end of this speech) that whilst competition law is important, there are many more important things, some of which should not be subject to the competition rules, or even to competition.

Most jurisdictions contemplate legislative or judge-made specific derogations from application of the competition rules. Those derogations, and the way they are interpreted, are actually quite telling about a given society and its values:

In the EU, for instance, the Treaty provides for derogations for services of general economic interest [something largely and effectively called into question in a stream of cases in which I have been working for some time now; see here for one of them]. for defense or for agriculture. The EU Courts have also recognized that certain areas enjoy precedence over competition law (this is the case, for example, of collective bargaining agreements (in Albany). Then there are also a number of exceptions or special rules that apply regarding some areas (e.g. sports) or national interests (see Art. 21 of the Merger Regulation).

And in the US, well, there is an antitrust exemption for baseball….

The preliminary reference (C-671/15) in the French endives (argh..) case brings these key issues back to the fore. Last week we sort-of-commented jokingly on AG Wahl’s Opinion (see here), but today we want to go beyond easy endive puns and instead put the issues on the grill. Whilst the case is about the boundaries of the agriculture derogation, the rationale applies to policing the confines of any exemption or derogation.

The legislative exemption as such is not the subject of the debate (it is accepted that some forms of coordination and concertation on the part of producers are needed for them to carry out the functions that EU law attributes them, namely those of adjusting production to demand, reducing the costs of production and stabilizing producer prices). In fact, both Art. 42 TFEU and the case law give precedence to the Common Agricultural Policy over competition policy. The case at issue is rather about practices (in this case a fixing of minimum prices, the agreement of quantities placed on the market and the exchange of strategic information) not referred to in the “general derogations” but that are somehow linked to those objectives (some argue that so much that they should benefit from “specific derogations”). In a nutshell, AG Wahl considers that only practices that are strictly necessary for the fulfillment of the tasks attributed to producer organisations may escape the reach of competition law. Conversely, he understands that practices that merely contribute to those tasks cannot be exempted from the competition rules.

This is an approach that fits squarely within the principle that exceptions are to be interpreted narrowly. Actually, a very similar logic has been endorsed by the CJEU, the Commission and national competition authorities regarding collective bargaining in the wake of Albany. Admittedly, as we know well in the competition field, requiring indispensability (something to be “strictly necessary”) equates to setting a pretty high burden, more than a requisite of “necessity and proportionality” more typically applied for State measures to be able to benefit from derogations under EU Law or, within competition law, to sporting regulations following Meca Medina. Another valid analogy could be drawn with Deutsche Telekom, where the Court ruled that the existence of sector regulation only precludes the application of the competition rules when it eliminates any possible scope for autonomous action on the part of the firms at issue.

Interestingly, when attempting to discern what is strictly necessary to the fulfillment of the tasks assigned to producer organizations, AG Wahl places the greater emphasis not so much on the actual necessity link but rather on the identity of the undertaking(s) adopting the practice (or perhaps in doing so he bridges the two elements). In essence, he considers that only practices adopted within a given producer organization (or association thereof) actually in charge of managing the production and marketing of the product concerned can escape the competition rules. On the other hand, he proposes that practices within or with entities not responsible for marketing for their members products be subject to competition law. This is interesting but in my view (and this is just a first thought or a thought in progress) not may always be such a bright line, as some agreements with third parties might in some cases be necessary to practically implement what is decided within a given organization (admittedly, these questions of severability are pretty thorny and largely unresolved; for a related comment on this point see the discussion on “fruit agreements” here).

We won’t go into how he applies these principles to the facts of the case (which at first sight I think makes perfect sense if you agree with the bright lines proposed) as we are more interested in the general logic. More than other times, these are our first impressions after a quick read. As always, your thoughts would be most welcome.

Written by Alfonso Lamadrid

19 April 2017 at 11:53 am

Posted in Uncategorized