Chillin'Competition

Over the summer, I discussed Advocate General Rantos’ Opinion in in Case C‑331/21, AdC v EDP (see here for my post). I focused primarily on the notion of restriction by object. The case wonderfully illustrates why formalism fails when identifying ‘by object’ infringements.

While it may be tempting to claim that every market-sharing (or price-fixing) agreement between competitors is caught by Article 101(1) TFEU by its very nature, the case law abundantly shows (most recently in Super Bock) that it is not true. AdC v EDP will add to this body of case law when it comes out.

The Opinion hides a valuable gem that is equally crucial to make sense of the case law, that clarifies some perceived inconsistencies and that, as far as I have been able to see, has not been discussed elsewhere. It is a tricky point that lends itself to confusion and deserves to be addressed in some detail.

Advocate General Rantos is a case study on how restrictions by object are identified in theory and practice. It elaborates on every single key aspect. The anaytical sequence can be summarised around the following points:

• First, the clause is typically the relevant unit of analysis of restrictions by object.
• Second, whether or not the clause in question is restrictive by object is considered in light of the relevant economic and legal context, which certainly includes (if there was any doubt) the analysis of the agreement.
• Third (and this is where the Opinion kicks in), once the contextual analysis reveals that the clause is restrictive by object, it is no longer relevant that other clauses within the agreement are not (following the second step, in other words, there is no second bite of the cherry).

This clarification was particularly relevant in the context of the case. The question raised by the national court concerned specifically a market-sharing clause. We know that even restraints that, at first glance, come across as problematic (including price-fixing and market-sharing itself), are not necessarily restrictive by object.

As already discussed at length in the preceding post, the case law and administrative practice provide many examples showing that the agreement is a key aspect of the evaluation of the relevant economic and legal context. It often sheds light on the object of individual clauses. It may show that such clauses are not anticompetitive and/or that they do not restrict competition at all.

As explained by the Commission in its 2014 Guidance on restrictions by object, a price-fixing clause in an agreement between competitors may not be a ‘by object’ infringement when it is introduced in the context of a (pro-competitive) joint production agreement. In Erauw-Jacquery the contextual analysis led the Court to conclude that the export prohibition in the case (in principle a no-no) was not caught by Article 101(1) TFEU because of the role it fulfilled in the overall agreement.

Sometimes, the analysis of the clause in light of the agreement reveals that it is ancillary to the latter. In Pronuptia, for instance, the Court distinguished between the restraints that were integral to the operation of the franchising agreement (and thus fell outside the scope of Article 101(1) TFEU altogether) and those that were not (such as territorial exclusivity).

However (and this is where Advocate General Rantos’ contribution is particularly valuable), once the analysis of the clause in its economic and legal context reveals that its object is anticompetitive, it does not matter whether other clauses in the agreement are not restrictive by their very nature.

In other words: the agreement informs the contextual assessment of the object of the clause. Once the object is figured out (and it turns out that it is restrictive by its very nature), whether or not other clauses are pro-competitive is no longer relevant.

To some extent, this point is obvious. The parties to an agreement can try and disguise a cartel arrangement in an agreement that has a broader scope and set of aims. The fact that the rest of the agreement would be beyond reproach would not allow them to escape the prohibition (and the fines that come with it).

In other respects, however, it is a point that is worth making. For the sake of simplification, we often refer to the agreement, not the clauses (for very good reasons).

More to the point, Advocate General Rantos’ analysis is helpful because it helps us make sense of what might seem a tension in the case law but that, upon closer inspection, is not.

Thanks to the judgments delivered over the past five years, the picture on restrictions by object is as clear as it has ever been. Landmarks such as Generics and Budapest Bank make it clear that, where a restraint is a plausible source of pro-competitive gains, it is not restrictive by object (see here for an analytical framework I prepared when the second of these judgments came out).

Reasonably, someone may be tempted to reply to the above by asking: has the Court not held, in ANSEAU-NAVEWA and BIDS, that an agreement (or clause) may restrict competitio by object even if it has other, pro-competitive aims? Would this fact not show that the above interpretation is incorrect?

Advocate General Rantos gives us part of the answer to that question and shows that there is no tension between the two lines of case law.

It may well be that an agreement, taken as a whole, has other pro-competitive aims. As explained in the Opinion, however, this point is irrelevant once it has been established that a particular clause is restrictive by object (that is, once it is shown that it has no plausible objective purpose other than an anticompetitive one in light of the relevant economic and legal context).