Chillin'Competition

Last week, the Commission announced that it has fined Mondelez for engaging in a series of practices aimed at restricting intra-EU trade. There is nothing new or special about Mondelez’s conduct.

The decision comprises bread-and-butter cross-border limitations (which have always been sanctioned as restrictive by their very nature under Article 101 TFEU) and unilateral conduct with the very same object. The latter included the refusal to sale a product to a broker and the decision to cease supplies. Both have been found to amount to an abuse of a dominant position.

The above does not mean that the decision is uninteresting. It is, but for a different reason. We have seen much talk, in the context of the ongoing review of Article 102 TFEU enforcement, about ‘by object’ abuses and, more generally, about whether it is necessary to show anticompetitive effects in relation to every potentially abusive practice.

The Mondelez case provides, against this background, two examples of practices that are deemed abusive without the need to establish their restrictive impact in the relevant economic and legal context. As is clear from the press release, this is so because their very object is to restrict intra-EU trade (and as such inherently anticompetitive in the EU legal order).

As explained earlier this year, the Court of Justice demands that Articles 101 and 102 TFEU be interpreted consistently. If restrictions to intra-EU trade are, in principle, restrictive by object under the former, it is only logical that they are treated in the same way under Article 102 TFEU. I, for one, look forward to reading the decision and finding out how the Commission goes about the question.

Mondelez is interesting for another reason. It reveals that the Intel doctrine (whereby dominant the firms have the chance to show that a practice is incapable of restricting competition) will sometimes prove plain ineffective from the perspective of a dominant firm. By the same token, there will be instances where any claims about the lack of effects can be summarily dismissed by an authority.

It would be wrong to assume, in other words, that Intel requires an authority to engage in analysis of effects in every instance. For the same reason, it would be wrong to present the doctrine as an obstacle to the administrability of Article 102 TFEU. The more egregious the infringement, the more limited the relevance of Intel and the less likely the need to engage in an analysis of effects.

Conduct aimed at limiting intra-EU trade (the quintessential example of egregious conduct, alongside cartels) is only incapable of restricting competition in very limited instances, namely (i) where the absence of cross-border trade is attributable to the regulatory context, not to the practice; and (ii) where allowing such trade would empty an intellectual property right of its substance (as in Erauw-Jacquery).

The extent to which arguments of this kind have limited traction when intra-EU trade is at stake became apparent in the Valve case, discussed here. That case related to the application of Article 101 TFEU, but the insights would be relevant, almost word for word, in the context of Article 102 TFEU.

As I say, one decision to look forward to reading.

AG Szpunar Opinion in FIFA v BZ was delivered yesterday. The opinion is remarkable, from the perspective of an EU competition lawyer, for several reasons.

It stands out, first, because of how categorical the Advocate General is when interpeting the law. It is unusual that, in the context of a preliminary reference, an Opinion states unambiguously that a practice amounts to a restriction of competition by object and that, in addition, it does not meet the conditions set out in Article 101(3) TFEU.

In principle, it is for the referring court (which has all the necessary information) to apply EU law to the facts of the case.

The Opinion is also remarkable because of how it approaches the question of whether the rules at stake have, as their object, the restriction of competition. Anyone familiar with the relevant case law will realise that the methodology chosen by AG Szpunar departs from the principles laid down in Cartes Bancaires and the judgments that followed.

The preliminary reference submitted by the Cour d’appel de Mons concerned some aspects of FIFA’s Regulations on the Status and Transfer of Players (‘RSTP’). These rules foresaw a system of sanctions (in addition to compensation) applicable to the clubs that sign players that have terminated the contract without just cause.

In essence, the regulations seek to disincentivise the signing of players that are in breach of their contractual duties and they also seek to disincentive some aggressive practices by clubs (the latter may feel tempted to induce players to terminate their contracts abruptly).

Do these rules have, as their object, the restriction of competition? The abovementioned case law makes it clear than an answer to this question must consider the content of the rules, their aim and the economic and legal context of which they are a part.

According to the Opinion, the European Commission had taken the view, in its submission, that the relevant provisions of the RSTP were not anticompetitive by their very nature. It is not difficult to see how the Commission might have reached this conclusion.

One could plausibly argue that the purpose of the system of sanctions at stake in the case is to prevent the sort of buccaneering conduct that could negatively affect the integrity of competitions and could easily escalate (and would typically benefit wealthier clubs). If that is the case, the object of the regulations would not be the restriction of competition, but a different one.

It is imperative to bear in mind, in this regard, that clubs taking part in organised sports are not mere competitors (and thus not competitors in the usual sense). They cooperate as much as they compete, and cooperation involves, by necessity, restricting their freedom of action at least to some extent so that their common objectives can be attained.

AG Szpunar did not take into account these factors, which are key to make sense of the relevant economic and legal context. Instead of relying on the criteria laid down in the case law, the Opinion focuses on the impact of the rules.

More precisely (para 53), the Advocate General sees the ‘consequences’ of a termination without cause as ‘draconian’. In the same vein, he argues that the rules are designed to have a ‘deterrent effect’.

By focusing on the consequences of a breach, the Opinion infers an anticompetitive object from the effects of the rules. In other words, AG Szpunar relies on their impact to conclude that they are restrictive by their very nature.

By blurring the line between object and effect, the Opinion embraces a methodological approach that departs from the one laid down in the case law.

Under the methodology consistently followed by the Court, the question is not whether the relevant regulations have a deterrent effect (which they undeniably do). The question, instead, is what the object of this deterrent is.

If it turns out that the disincentive pursues an aim that is not anticompetitive, then it is not prohibited as a restriction by object (but could well have, as the European Commission argued in this case, restrictive effects).

And the experience of decades shows that, in the context of cooperative joint ventures (such as organised football), these disincentives often do not have an inherently restrictive object, but one that ensures the adequate functioning of the co-opetitive arrangement (Cartes Bancaires is an example that comes to mind again; Gøttrup-Klim is another one).

The reference to cooperative joint ventures takes me to the third reason why the Opinion is remarkable. By adopting an expansive interpretation of the notion of ‘by object’ infringement, Advocate General Szpunar sees competition law as a discipline that has a frequent and proactive role to play in the regulation of such ventures.

This position would have involve a major departure from the position that the Court has taken so far. After all, Wouters was an acknowledgement that Article 101 TFEU is ill-suited to second-guess the decisions taken by governance bodies on co-opetitive structures and thus will only intervene in exceptional circumstances.

The trio of judgments issued last December did not fundamentally change this balance. As I explained here, these judgments only interfere at the margins with governing bodies.

This long-standing position would change fundamentally if the scope for the application of the Wouters doctrine were significantly reduced (as would be the case if the notion of restriction by object where interpreted in the way suggested by AG Szpunar).

(As ever, I have nothing to disclose).