Chillin'Competition

For a long time, it was cliche to say that the notion of restriction of competition was and would always be shrouded in mystery. The numerous cases with which the Court of Justice and the Commission have dealt in the past decade make this cliche sound increasingly less accurate.

The law has reached the stage where it provides a structured set of principles that have greatly clarified the meaning and scope of Article 101(1) TFEU.

Two recent developments add to the existing body of knowledge, if only to confirm the consistent trends that we have been tracing in the blog over the years. Two weeks ago, the Court delivered its judgement in EDP. It is very much in line with the Opinion of AG Rantos already discussed in the past months (see here and here).

A second, more recent development relates to the regulation of football agents’ activities by FIFA, which has given rise to litigation at the national level (and a pending reference for a preliminary ruling before the Court of Justice; more precisely in Case C-209/23).

Politico informed here about the Commission’s position on the matter, which seems to support FIFA’s efforts to cap the fees that agents can obtain from transfer deals.

These two developments shed light on two important questions: first, they exemplify how the Court goes about identifying the object of agreements; second, they illustrate how the question of whether a clause is ancillary and that of whether it restricts competition by object are two separate stages that should not be conflated (but have been erroneously conflated, in particular in sports cases).

Identifying the object of agreements: price-fixing and market-exclusion

It has long been clear that the form of an agreement cannot determine, alone, whether it is restrictive of competition by object (for an extended discussion, see here).

The Commission’s submission in FIFA Agent Regulations provides a useful example of this point (the sort of example that captures the idea in a classroom context).

Formally speaking, FIFA’s rules deal with prices: they set a limit as to how much agents can make. One could be tempted to call them a price-fixing arrangement. This fact does not mean in any way, however, that these rules are caught by Article 101(1) TFEU (let alone by object).

What matters, as the Court has consistently held, is substance, not form. What matters, in other words, is the objective purpose of the fee cap, irrespective of how one calls it.

In line with the case law, the Commission appears to take the view that the cap on fees introduced by the FIFA can be rationalised on grounds other than a restriction of competition. According to Politico, the authority explained in its submission that these fees can address effectively the perverse incentives that agents may have to force a transfer (and thus pocket the corresponding fee).

From this (substantive) perspective, the object of the cap on fees would not be fundamentally different from the clauses at stake in, for instance, Cartes Bancaires: both rules would seek to ensure that a cooperative joint venture works adequately and that some undesirable incentives that could affect its functioning are tackled.

The Commission’s submission is remarkable for another reason: the vocabulary it uses. Politico quotes the authority as emphasising that the sports-related rationale advanced by FIFA is ‘plausible’. This reference to the plausibility of the explanation is drawn from Generics (para 89).

EDP provides another good illustration of these ideas. The Court holds that establishing whether an agreement (or clause) restricts competition by its very nature requires identifying is ‘precise object’ in the relevant economic and legal context (para 97).

Only following this assessment is it possible to come to a preliminary conclusion about whether the said agreement or clause is caught by Article 101(1) TFEU (for instance, because the object of the agreement is to restrict competition by dividing up markets or, as the Portuguese authority claimed in the case, by excluding a potential competitor).

EDP reminds us that there is an additional safeguard (para 103): the parties may always provide evidence that the agreement or clause is a source of pro-competitive effects. Where the pro-competitive effects raise a reasonable doubt about its nature, the ‘by object’ categorisation will be ruled out.

Ancillary restraints and ‘by object’ are two separate stages

In EDP, the Court deals with a point in an unceremonious manner, as if it were self-evident. However, this point is a frequent source of confusion. The judgement therefore makes a valuable contribution, in particular in light of the issues at stake in some pending cases.

The Court evaluated the compatibility of the market-exclusion clause in a fully orthodox way. It explained that the assessment of a restriction makes it is necessary to ascertain, first (paras 87-94), whether the clause is ancillary to the main agreement (which would mean that it escapes Article 101(1) TFEU altogether).

If it turns out that the clause is not ancillary, one needs to consider, second (paras 95-106), whether it has a restrictive object.

In other words: it is not because the clause fails to meet the criteria to qualify as an ancillary restraint that it is restrictive of competition. It would still be necessary to determine whether it is caught by Article 101(1) TFEU (be it by object or effect).

Some readers might think that the above is nothing more than a statement of the obvious and that, of course, ‘ancillary restraints’ and ‘by object’ are two separate stages of the analysis.

Other readers, however, may be reminded of recent developements, which show that ‘ancillarity’ and ‘by object’ are sometimes conflated. They have been conflated, in fact, in sports cases, including in the context of the FIFA Agents Regulation case.

In ISU, for instance, AG Rantos identified this error of law in the General Court judgment (see here for an analysis).

Two national courts (the Landgericht Dortmund and the Madrid Juzgado de lo Mercantil) appear to have incurred in this same error of law when evaluating the compatibility of FIFA’s cap on agents’ fees with Article 101(1) TFEU. The latter, for instance adopted interim measures only last week (see here).

If you read Spanish, you will see that the Juzgado de lo Mercantil claimed, in contradiction with the case law (and, it would appear, the Commission’s own analysis) that, if the FIFA rules are not ancillary, they could only be justified under Article 101(3) TFEU.

The Court will have the chance to address and clarify these matters soon, first in ISU and Superleague, then in the very FIFA Agents Regulation case. Electrifying times ahead.