Chillin'Competition

Last year, in an editorial published in JECLAP, I asked whether Article 106 TFEU would change EU competition law. I pointed out that some rulings, including the General Court’s in ISU, gave the impression that Article 106 TFEU doctrines were slowly creeping into the case law dealing with Articles 101 and 102 TFEU.

The two (eagerly awaited) Court of Justice judgments in ISU itself and Superleague suggest that this transformation of EU competition law may well be under way, at least in relation to firms that have, de iure or de facto, the power to decide who gets to compete with them.

The key takeaway, in my view, is that organisations with such a regulatory or quasi-regulatory function are subject to the sort of obligations that apply to Member States pursuant to Article 106 TFEU. A distinct, stricter tier of competition law appears to govern the activities of such organisations.

Article 106-like obligations include, in particular, the respect of the principle of equality of opportunity and the duty to adopt rules that are transparent, objective, non-discriminatory and reviewable.

Any deviation from these obligations, when implemented by such organisations, presumptively amounts, it would seem, to a restriction of competition (and, more precisely, a by object infringement within the meaning of Article 101(1) TFEU and an abuse of a dominant position).

Article 102 TFEU in Superleague

The Superleague judgment starts with the application of Article 102 TFEU to FIFA’s and UEFA’s rules on the organisation of football competitions (and which may constrain third parties’ ability to run rival tournaments).

Some aspects of the ruling are strictly canonical, and capture the case law of the past decade (concerning, in particular, the ‘as efficient competitor’ principle). There are also interesting references to the notion of competition on the merits (on which I will follow up soon).

I find it particularly intriguing that the Court expressly refers to the object or effect of restricting competition in the context of Article 102 TFEU (see para 131 of Superleague: ‘conduct may be categorised as “abuse of a dominant position” […] where it has been proven to have the actual or potential effect – or even the object – of impeding potentially competing undertakings at an earlier stage‘; emphasis added).

In other respects, however, the judgment is genuinely innovative. As much as some recent General Court judgments, the Court relies upon the Article 106 TFEU case law applying to State measures, such as GB-Inno-BM, Merci convenzionali porto di Genova or MOTOE).

The overarching point seems clear: where an organisation is, de iure or de facto, in a position that is comparable to that of an undertaking enjoying exclusive rights, it is subject to strict non-discrimination obligations, aimed at preemptively addressing the risk of an abuse (para 138 of Superleague).

In the specific circumstances of the case, the Court strongly signals that rules on the prior approval of football competitions are not necessarily abusive. However, they must be subject to appropriate constraints if they are to be compatible with Article 102 TFEU.

Where an organisation has the regulatory means to decide go gets to compete with it, the judgment explains, there must be a substantive and procedural framework detailing how its regulatory powers are to be exercised (para 147 of Superleague). In the same vein, the organisation must avoid imposing sanctions in a discretionary manner (para 148 of Superleague).

Restrictions by object by sports organisations

The appeal in ISU focused on Article 101(1) TFEU, and more precisely on whether rules limiting (or prohibiting altogether) athletes’ ability to take part in some championships restrict competition by object. The Commission had taken issue with the so-called ‘eligibility rules’ laid down by the International Skating Union (and which went through various iterations over the years).

As I wrote a while ago, the General Court’s ruling introduced a novelty in its analysis of restrictions by object, in that it appeared to inject Article 106 TFEU case law (such as MOTOE) into the assessment. It also relied upon judgments like OTOC to substantiate its findings (even though the relevant passages from OTOC concerned the effects of the rules, as opposed their object).

The innovations introduced by the General Court have now been validated by the Court of Justice. Thus, the rules set by an organisation with a regulatory function must respect the principles of transparency, objectivity, non-discrimination and reviewability if they are to comply with Article 101(1) TFEU. Where they do not, they will amount to a restriction of competition by object.

Paras 131 to 149 of ISU depart in some respects from the canonical approach to the identification of restrictions by object (interestingly, and somewhat paradoxically, paras 101 to 108 of ISU are arguably the best and most elegant summary of the said canonical approach).

The analysis in ISU focuses more on the effects of the eligibility rules (and, more precisely, on the fact that they give the International Skating Union discretionary power and thus the ability to restrict competition and impose disproportionate sanctions) than on their object.

The ISU judgment appears to conflate, in other words, one and the other (and, similarly, borrow from the former to establish the latter). This cross-fertilisation had been carefully avoided in the past (establishing the object of an agreement in the relevant economic and legal context is indeed different analytically and conceptually from showing its effects).

However, it is not entirely impossible to rationalise the Court’s approach. When it comes to bodies with a regulatory function, the absence of checks is treated as a presumptive restriction of competition, without it being necessary to assess its impact. As already mentioned, a stricter tier of EU competition law appears to have been introduced.

The relationship between ancillary restraints and restrictions by object

There is another aspect of ISU that is worth emphasising. In para 113 of that ruling, the Court clarifies that the ancillary restraints doctrine applies only to agreement that do not have, as their object, the restriction of competition.

This point is, arguably, self-evident. The ancillary restraints doctrine presupposes that the overall agreement to which the clause relates is not restrictive by its very nature (if the agreement does not have an anticompetitive object, and the clause is objectively necessary to its operation, the latter escapes Article 101(1) TFEU altogether).

It is valuable and important, however, that the Court is explicit about this point. The issue may come back in future sports cases, and in particular the one dealing with agents’ regulation (which I discussed here). If the rules at stake in the case are found to be ancillary within the meaning of Meca Medina, it would mean, by implication, that their object is not anticompetitive.