Chillin'Competition

Last week’s post explained why formalism does not work when evaluating whether an agreement restricts competition. The fact that a clause provides for price-fixing or market-sharing does not mean that it necessarily amounts to a ‘by object’ infringement.

More importantly, the case law does not support the formalistic interpretation of Article 101(1) TFEU. Time and time again, the Court has emphasised that any conclusion needs to consider the relevant economic and legal context of which the agreement is a part.

All the case law? As in Asterix’s Gaul, there was a small pocket of formalism. In Binon, the Court of Justice held that vertical price-fixing is restrictive of competition by object (Binon, para 44). The conclusion was reached on the back of the form of the restraint alone.

Binon is an old case. As such, it was very obviousy at odds with the most recent case law. For instance, it contradicts Generics (and the body of judgments that followed) in that it suggests that the pro-competitive effects of the agreement can only be considered under Article 101(3) TFEU. Binon also ignores the relevant economic and legal context.

Against this background, there were already powerful reasons to argue that Binon was no longer good law (a point I raised in this paper addressing the implications of Generics and Budapest Bank for vertical restraints).

Last week’s judgment in Super Bock confirms that the Binon era is over. The questions raised by the Tribunal da Relação de Lisboa referred explicitly to vertical price-fixing and, more precisely to whether it is necessary to engage in a contextual analysis when determining whether it restricts competition by object.

In unequivocal terms, the Court of Justice rules (para 35) that a ‘by object’ infringement can only be established after considering the content of an agreement, its objectives and the economic and legal context of which it is a part (that is, the principles that it has consistently applied over the past decade).

What is more, the analysis of the pro-competitive effects of the agreement is part of the assessment of the economic and legal context under Article 101(1) TFEU (para 36) – and not simply under Article 101(3) TFEU, which Binon, in contradiction with the rest of the case law, suggested.

The conclusion that follows from the above is that the analysis is invariably context-specific and cannot be grounded, alone, on the formal features of an agreement. For the same reasons, a hardcore restaint within the meaning of the Vertical Block Exemption Regulation is not necessarily a restriction of competition by object.

The value of Super Bock is that it shows, once again, that the Court of Justice consistently places substance above form. This is true of the EU legal order at large. Given the importance of price competition, I was not certain that the ECJ would move away from Binon. The uncertainty is over, and the substance-based approach knows no exceptions.

It makes sense to clarify a couple of key points. First, considering the context of an agreement does not mean assessing its anticompetitive effects. Object and effect remain two separate stages, and the substantive analysis of the former should not be conflated with the latter.

Second, the context-specific analysis that the case law requires may be less straightforward to administer than a formalistic approach, but it minimises the risk of under- and over-enforcement. ‘By object’ is not the same thing as a ‘per se’ restraint. It is artificial to try and force US concepts into EU law.