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Archive for January 17th, 2020

The notions of competition, potential competition and restriction in the case law: an excerpt (II)

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Summary

It becomes apparent when discussing the case law that there is a certain overlap between the various concepts discussed in this section (competition, potential competition and restriction). The same ideas are relevant across the board, but are examined from slightly different perspectives, or for different purposes. The need to consider the counterfactual, for instance, is relevant not only when discussing the notion of competition, but also when evaluating whether a practice is capable of having restrictive effects. It would seem that each of the concepts captures discrete aspects of a single overarching set of principles. The fragmentation of the case law (and, more precisely, the fact that each of the concepts has generally been examined in isolation) helps explain the ongoing confusion around some of them, and about how they fit together.

            It is worth summarising the fundamental principles underlying the concepts discussed above. First, the evaluation of the restrictive nature of an agreement, whether by object or effect, can never be undertaken in the abstract. The analysis is always a case-specific inquiry that must be undertaken in light of the economic and legal context of which the practice is a part. Second, the restrictive nature of an agreement is evaluated in light of objective factors. The subjective intent of the parties (for instance, that their subjective intention was pro-competitive) is neither a necessary nor a sufficient condition to establish a restriction (or to rule out one). The question is whether the objective purpose of the agreement is pro- or anticompetitive. Third, the range of factors that are relevant when figuring out the object of an agreement include the features of the relevant market (for instance, whether there are barriers to entry, or whether it is of a two-sided nature), its structure and the position of the parties, rivals and suppliers/customers therein. These factors are also relevant when establishing the effects of a practice. It does not follow, however, that there is an overlap between the two stages (object and effect). The factors are considered for different purposes at each stage.

            It seems possible to define, in light of these principles, what the evaluation of the object of an agreement involves in practice. The relevant question is whether the objective purpose of the practice is the restriction of (actual or potential) competition which would have existed in its absence. If the agreement is a plausible source of pro-competitive gains, it is in principle not restrictive by object. As explained in T-Mobile, implicit in this analysis is the capability of the agreement to restrict competition. Capability is a necessary – but not sufficient – condition to establish a ‘by object’ infringement. Accordingly, if it appears that an agreement is not liable to restrict competition, it falls outside the scope of Article 101(1) TFEU altogether. Such an agreement would not restrict competition, whether by object or effect. As the Court held in Murphy, it is open to the parties to provide evidence in this sense.

            The evaluation of the counterfactual reveals whether a practice is capable of restricting (actual or potential) competition that would have existed in its absence. The overview of the case law has identified two instances leading to the conclusion that the agreement is not caught by Article 101(1) TFEU. First, it may turn out that the practice is objectively necessary to attain a pro-competitive aim (for instance, preserve the know-how and the reputation of a franchising system), and thus that its object is not the restriction of competition. Second, it may be the case that any restriction of competition would be attributable to legal barriers to entry, and not to the parties’ behaviour. As explained above, only lawful entry counts as competition for the purposes of Article 101(1) TFEU. Thus, if competition is precluded by, for instance, an intellectual property right, it is not attributable to the parties’ behaviour, but to the legal context of which the agreement is a part.

Written by Pablo Ibanez Colomo

17 January 2020 at 8:38 am

Posted in Uncategorized