Relaxing whilst doing Competition Law is not an Oxymoron

Case C-228/18, Budapest Bank: all the pieces are now in place (and we know what a restriction is)

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Putting the pieces together | SmartBrief

The Court has just delivered another key ruling on restrictions of competition (see here for the French version). The judgment, just like AG Bobek’s Opinion in the case, is valuable in that it clarifies all the remaining controversies around the notion. The principles of the case law have been confirmed in an explicit way that does not seem to leave much scope for ambiguity. In addition, the judgment provides a template of how the analysis is to be conducted in practice.

The fundamental contributions of the judgment are the following (some of the points are explained at length below):

  • The analysis of the counterfactual is relevant at the ‘by object’ stage (and the ‘by effect’ stage too): This question has been widely discussed (including in this blog) in recent years. While the case law was sufficiently clear already, Budapest Bank is valuable in that it provides a concrete example of how the counterfactual may be relevant to rule out that an agreement is restrictive by object or effect (and thus not caught by Article 101(1) TFEU). Paras 82 and 83 deserve particular attention in this regard (and they probably raise the single most relevant points of the judgment).
  • The ‘by object’ category is only appropriate where there is sufficient experience about a practice: Budapest Bank fleshes out the contribution made in Cartes Bancaires. If there is no consensus about a practice (its nature, its pro- and anticompetitive effects), the Court explains, the ‘by object’ category is not appropriate.
  • The analysis of the object of the agreement is a case-by-case, context-specific inquiry: It is not unusual to hear that the ‘by object’ category is a ‘shortcut’ aimed to make it easier and/or faster to establish restrictions. Budapest Bank shows that this characterisation does not reflect the reality of the case law. The inquiry is context-specific and makes it necessary to consider the peculiarities of the economic and legal context, and this in light of a series of indicators (including the counterfactual, the pro-competitive effects that the agreement is capable of achieving and the regulatory context).
  • The objective purpose of the agreement needs to be effectively established: The judgment gives a clear answer to a key question: what if the agreement pursues two or more objectives simultaneously? What is the object of the agreement? What counts, the Court explains, are the objectives that are effectively established, not the objectives that are invoked (para 69). This is in line with Paroxetine.

Establishing the object of an agreement is a case-by-case, context-specific inquiry

It has become commonplace to characterise the ‘by object’ category as a ‘shortcut’. According to this view, it is sufficient to check whether the agreement is on the ‘list’ of ‘by object’ infringements to establish a restriction. Thus, it would be enough to take a ‘quick look’ to conclude that it is prima facie prohibited.

Budapest Bank shows that this characterisation of the case law (that seems to apply the logic of the US system to the EU legal order) has little to do with the way in which the ECJ conducts (and has always conducted) its analysis. The evaluation of the object of an agreement can be very detailed (the analysis of the question covers no fewer than 35 paragraphs) and can be as complex as showing that the same agreement has anticompetitive effects.

Accordingly, it is not sufficient to show that some clauses are suspicious (or that they are ‘on the list’). For instance, the Court explains that even an agreement that eliminates competition on a large fraction of the costs of two undertakings (or that sets a ceiling on the level of commissions to be paid) is not necessarily restrictive by object (paras 77 and 78).

Once again, the Court points out that the analysis is not complete without an evaluation of the relevant economic and legal context. The context is taken so seriously that, at several stages of the analysis, it explains that, without all the relevant information, it cannot come to a conclusion about whether the agreement has, as its object, the restriction of competition.

What sort of evidence is relevant at the ‘by object’ stage?

Unlike some judgments delivered in the context of a preliminary reference, Budapest Bank sets out in detail how the analysis is to be conducted in practice. The analysis complements Paroxetine very effectively.

In Paroxetine, the Court outlined what an authority needs to show to discharge its legal burden of proof: that the agreement has no plausible purpose other than the restriction of competition. Budapest Bank, in turn, is explicit about the sort of evidence that the parties may put forward to show that the agreement does not amount to a ‘by object’ infringement. The relevant factors in this regard are:

  • Economic analysis: The parties may show, in light of formal economic analysis, that the object of the agreement is not anticompetitive. In this regard, Budapest Bank builds on Cartes Bancaires (which acknowledged that the two-sided nature of a market can shed light on the rationale of a practice).
  • Experience (or, rather, the lack of experience): In Budapest Bank, the Court holds that the ‘by object’ category is only appropriate where there is robust and reliable (‘solide et fiable’) experience about the nature of the agreement (para 76). In this sense, the Court suggests that there should be a consensus about the status of the practice (see also para 79). Absent a consensus, the analysis of its effects becomes necessary.
  • The pro-competitive effects of the agreeement: Paroxetine (in line with AG Bobek and Kokott) made it clear that the pro-competitive effects of an agreement are relevant as part of the evaluation of the economic and legal context. Budapest Bank confirms this point. Thus, the idea that these effects can only be considered under Article 101(3) TFEU can finally be put to rest. The pro-competitive dimension is also a factor when ascertaining whether there is a restriction in the first place (para 82).
  • The counterfactual: Even if it was implicit in the preceding case law, it is useful to see the Court explain how the counterfactual (that is, the conditions of competition that would have existed in the absence of the agreement) can be considered. The parties claimed that the agreement was not restrictive by object because, in its absence, the conditions of competition would have been worse. The Court clarifies that evidence in this sense is acceptable (paras 82-83). It makes sense to copy these two paragraphs below[1] (in French for the moment). If there was any doubt, the Court also points out that the counterfactual is also relevant at the ‘by effect’ stage (see, in addition to para 82, paras 55 and 75).

Paragraphs 82 and 83 also show that the applicable threshold is one of plausibility (as suggested in Paroxetine too). It would be enough for the parties to establish that there are, a priori, serious indications that the agreement is capable of improving the conditions of competition that would otherwise have existed. If the evidence meets this threshold, the agreement is not restrictive by object and an analysis of effects is necessary.

[1] ’82. Dans l’hypothèse où la juridiction de renvoi devrait également constater l’existence, a priori, d’indications sérieuses de nature à démontrer que l’accord CMI a entraîné une telle pression à la hausse ou, à tout le moins, d’éléments contradictoires ou ambivalents à cet égard, ces indications ou éléments ne sauraient être ignorés par ladite juridiction dans le cadre de son examen portant sur l’existence, en l’occurrence, d’une restriction « par objet ». En effet, contrairement à ce qui semble pouvoir être déduit des observations écrites de la Commission à cet égard, le fait que, en l’absence de l’accord CMI, le niveau des commissions d’interchange résultant du jeu de la concurrence aurait été plus élevé est pertinent aux fins de l’examen de l’existence d’une restriction résultant de cet accord, une telle circonstance ayant précisément trait à l’objet anticoncurrentiel reproché audit accord s’agissant du marché de l’acquisition en Hongrie, à savoir que ce même accord a limité la réduction des commissions d’interchange et, par voie de conséquence, la pression à la baisse que les commerçants auraient pu exercer sur les banques d’acquisition afin d’obtenir une réduction des commissions de service.

83. Qui plus est, s’il devait exister des indications sérieuses que, si l’accord CMI n’avait pas été conclu, il s’en serait suivi une pression à la hausse sur les commissions d’interchange, de telle sorte qu’il ne saurait être soutenu que cet accord a été constitutif d’une restriction « par objet » de la concurrence sur le marché de l’acquisition en Hongrie, il conviendrait de procéder à un examen approfondi des effets dudit accord, dans le cadre duquel, conformément à la jurisprudence rappelée au point 55 du présent arrêt, il y aurait lieu d’examiner le jeu de la concurrence si cet accord n’avait pas existé afin d’apprécier l’incidence de ce dernier sur les paramètres de concurrence et de vérifier ainsi si celui‑ci a effectivement entraîné des effets restrictifs de la concurrence’.

Written by Pablo Ibanez Colomo

2 April 2020 at 7:16 pm

Posted in Uncategorized

5 Responses

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  1. Very good analysis and well written piece, Pablo. However, it is still important to stress what the Court said at the end of paragraph 63 – “Partant, il ne saurait pas non plus être exclu d’emblée qu’un accord tel que l’accord CMI (MIF in English) soit qualifié de restriction « par objet » en ce qu’il neutralisait un élément de concurrence entre deux systèmes de paiement par carte”. Here the Court seems to confirm that “neutralizing” an element of competition is something which is, in one way or the other, relevant for determining the type of restriction.

    Jaime Rodriguez

    2 April 2020 at 7:47 pm

  2. I await the English version with interest, but it is typical that this comes out just after I have submitted a paper!

    Angus MacCulloch

    3 April 2020 at 3:30 pm

  3. I can imagine the joy of some in reading this judgment. It is not easy reading. Yet, the reference to practice which is “solid/reliable” or “suffisamment générale et constante” is a bit surprising (what is “reliable experience” anyway? what is “sufficiently general”?). In the past EU Courts often rejected arguments based on the fact the conduct at issue was considered an infringement (let alone a “by object” one) for the first time (or that the time of the infringement there were no precedents), so it could not be a “by object” restriction (under 101 or the comparable case law under 102). For example, the “pay-for-delay” judgments of the GC reject that argument, and the ECJ in paroxetine (a Grand Chamber judgment) does not make any reference to “solid/reliable experience” about the effects of the conduct in order to qualify the conduct as restrictive “by object”.
    In para 230 of Servier the GC says:
    “… les pratiques figurant à l’article 101, paragraphe 1, sous a) à e), TFUE ne forment pas une liste exhaustive de collusions prohibées (arrêt du 20 novembre 2008, Beef Industry Development Society et Barry Brothers, C‑209/07, EU:C:2008:643, point 23) et que, même si l’expérience acquise peut incontestablement venir conforter le caractère intrinsèquement préjudiciable à la concurrence de certains types de coopération (arrêt du 11 septembre 2014, CB/Commission, C‑67/13 P, EU:C:2014:2204, point 51), le fait que la Commission n’ait pas, dans le passé, estimé qu’un accord d’un type donné était, de par son objet même, restrictif de la concurrence n’est pas en soi de nature à l’empêcher de le faire pour l’avenir à la suite d’un examen individuel et circonstancié des mesures litigieuses (voir arrêt du 8 septembre 2016, Lundbeck/Commission, T‑472/13, sous pourvoi, EU:T:2016:449, point 438 et jurisprudence citée).”
    The way the reference to the “experience” has become part of the case law is, in my view, strange. First time it appears is in para 51 of CB (now cross-referred in para 36 of Budapest Bank), but in CB the ECJ made a descriptive, and not a prescriptive statement. The ECJ does not use that standard later in the judgment. This “experienced based” test had been proposed by the referring court years before in T-Mobile (C-8/08) but not mentioned by the ECJ in its judgment. The same “descriptive” statement contained in CB as regards certain practices is made in a couple of later judgments, but it is not used as “the standard” to examine the practice at issue later in those judgments. This reference to experience does not appear in the “digest” of case law of the ECJ, what would tend to confirm its descriptive nature.
    However, now that descriptive statement appears to become a prescriptive one.
    I would add that the Budapest Bank judgment does not really use the word “consensus” (that is your interpretation, I think). What would the “consensus” be anyway? Consensus in academia? Consensus by competition authorities? Consensus by lawyers/economists? Clearly, the fact that there are several precedents by competition authorities and the Commission does not appear to impress this time the ECJ (see para 79).
    Does this judgment mean that a “type” of conduct will first have to be considered “by effect” and only after a few cases are upheld by the judges will the competition authority be able to conclude that they are restrictive “by object”? Was there any precedent in the case law to make such change in the enforcement of EU competition law? Will this chamber judgment become the standard or rather the outlier? Will it apply beyond some very specific type of “unusual” cases? For a judgment that supposedly clarified things, I have more questions than answers after reading it.


    5 April 2020 at 10:59 am

    • Dear Joan,

      Since I read the Hungarian, not the French version of this judgement, thus there could be some differences in the wording, however I would like to share my insights concerning “solid/reliable” experience.

      In my reading the logic of the judgement is the following: (i) if there is a practice at hand, which is obviously a by object infringement (see para 51 of AG Bobek’s Opinion for the beautiful fish metaphor 🙂 ), then the assessment of effects could be omitted (para 62); however (ii) there is a possibility for a conduct to not fall within the (i) category, yet to be regarded as a by object infringement of Article 101 (para 63). The question to which this judgement provides an answer is “Can I still regard something as a by object infringement, if I have some evidence that could potentially indicate to the contrary and if yes, then what are the necessary steps in order to do so?”

      Therefore the “solid/reliable” experience did not become a prescriptive part of the by object test. The only difference is that if a conduct cannot be – based on “solid/reliable” experience – considered as an obvious by object infringement, then the authorities/courts shall rely on a counter-factual analysis and on detailed and context-specific analysis in order to establish sufficient degree of harm (paras 75-79 and 82-83).

      I also have the feeling that this further categorization within the category of by object infringements is partially an answer of the Court to the commonly voiced critique of by object being a “shortcut” and a further logical development of the approach adopted in CB concerning the “restrictiveness” of applying the object box.


      8 April 2020 at 3:05 am

      • Dear maxim,
        That’s a possible interpretation. My Hungarian is limited. The structure of the judgment and the flow of arguments is somewhat complex, in my view. It will be read in different ways by different parties for years to come (even more if, as if often happens, the English version ends up slightly diverging from the French one, the one used to actually draft the judgment).
        BTW, I note that paroxetine is not a Grand Chamber judgment, sorry for mistake… But Hoffmann-La Roche (the recent one) was a Grand Chamber judgment, and the “experience” test is nowhere mentioned despite the fact that the alleged infringement had “novel” features. There is probably a reason why such “experience” would be mentioned in a few recent cases (well, actually only one, at least in a prescriptive way), but not in others (the great majority), but I am afraid that such differences do not contribute to the overall readability of the case law (despite Pablo’s strenuous efforts).


        8 April 2020 at 9:18 am

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