ECJ considers what may constitute a restriction by object in the context of vertical agreements – Allianz/Generali

17 June 2013

Victoria Moorcroft

On 14 March 2013, the ECJ ruled in Case C-32/11 Allianz Hungária and others v Gazdasági Versenyhivatalon on a question from the Hungarian courts regarding agreements between car dealers, their trade association and car insurance companies.  

It concluded that to determine whether an agreement restricted competition by its object, regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms part, as well as the nature of the goods or services affected and the real conditions of the functioning and structure of the market(s) in question.  

In requiring an extensive analysis, the ECJ appears to blur the distinction between object restrictions, where an effect on competition is presumed, and other restrictions, for which it is necessary for a competition authority to show an actual effect on competition.  In doing so, the ECJ appears also to have expanded the categories of restrictions capable of being considered 'object' restrictions.  


Background

Allianz and Generali, two insurers, both agreed (separately) with GEMOSZ, the national association of authorised car dealers, annual framework rates and conditions which would apply when a car dealer carried out repairs for that insurer.  In 2004 and 2005, the individual dealer agreements (based on the framework agreement) concluded by Allianz provided that the dealers would receive higher payments if the dealer also sold a certain number of Allianz insurance contracts.  Geraldi were found to have applied a similar, non-contractual, arrangement.  

The Hungarian competition authority found that the arrangements collectively and individually infringed competition law by object.  Considering an appeal of that decision, the Hungarian courts asked the ECJ to consider whether bilateral agreements between an insurance company and individual car repairers, or between an insurance company and a car repairers' association, under which the hourly repair charges payable depend on the number and percentage of insurance policies taken out with the insurance company through the repairer, qualify as restrictions by object in contravention of Article 101(1) TFEU.    


The case law of the ECJ distinguishes between agreements which are capable of restricting competition by their very nature (so-called 'object restrictions') and those agreements which have the effect of restricting competition.  In the case of object restrictions, a competition authority does not need to establish any actual effect on competition with an infringement of Article 101(1) then considered proven, and the burden resting on the alleged infringer to show that the beneficial effects of the agreement meet the conditions for an individual exemption in Article 101(3).  For all other types of agreement, the burden lies with the authority to carry out a detailed analysis to show that competition has in fact been restricted to an appreciable extent.

Decision

The ECJ concluded that the link between remuneration for car repair services and those for insurance brokerage did not automatically mean that the agreement was a restriction of competition by object.  However, it was necessary when determining whether an agreement involves a restriction of competition by object, to have regard to its content, its objectives and the economic and legal context of which it forms a part, taking into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market(s) in question.

The ECJ indicated that relevant factors would include:

- whether the independence of the two types of services was necessary for the proper functioning of normal competition;

- that the agreement was likely to affect two markets, not just one;

- that the aim of the agreement for the insurance companies was to maintain or increase their market shares;

- that domestic law requires the dealers to be independent from the insurance companies to ensure that the policyholder is offered the most suitable policy;

- whether it was likely that competition on the market in question would be eliminated or seriously weakened following the conclusion of those agreements, given the structure of the market, the existence of alternative distribution channels and their respective importance, and the market power of the companies concerned; and

- whether the recommended prices established by GEMOSZ functioned in reality as fixed prices.

The Court concluded that if the decisions taken by GEMOSZ were themselves found to be a restriction by object, the agreements concluded between the insurance companies and the dealers, by which the insurance companies "voluntary confirmed" GEMOSZ's decision would also restrict competition by object. 

Comment

Whilst it was clear from the case law that some consideration had to be given to the context of the agreement, that consideration appeared to be limited to ensuring that an agreement that would in most contexts be a restriction by object, was still a restriction by object in the specific context.  However, in this decision, the ECJ appears to reverse that logic, concluding that an agreement of the type in question in this case, which would often be considered a restriction only if it had anti-competitive effects, could become a restriction by object through its context.  

Furthermore, the level of detail which it expects the authority to go into to prove that the restriction is a restriction by object appears to be tantamount to carrying out an effects-based analysis, such that the distinction between the two is decidedly blurred. 


The ECJ's decision is perhaps a result of the very narrow remit that the ECJ had in relation to the interpretation of Article 101 on a limited point. Nonetheless it is somewhat concerning, particularly in relation to industry-wide standard agreements such as these on matters which in the context of vertical agreements between non-dominant companies would not normally be considered an object restriction.  

It is to be hoped that the ECJ is asked again soon to consider how to assess whether a restriction is an 'object restriction' in the context of a vertical agreement, and that the GEMOSZ decision will be seen as being very specific to its (insurance industry) context and facts.