Following a referral from the Spanish Supreme Court, the European Court of Justice (ECJ) has given a preliminary ruling that a system for the exchange of information between competing credit organisations does not, in principle, have a restrictive effect on competition. Rather, the question of a restrictive effect must be assessed on the facts and circumstances. If such a restrictive effect is found, the overall positive and negative aspects of the arrangement must be balanced under Article 81(3).
The referral involved a register run by Asnef-Equifax – a group of financial organisations who exchanged solvency and credit information about their customers in order to evaluate the risks undertaken when engaging in credit or lending activities. The ECJ was asked to rule on whether such an agreement infringed Article 81(1) EC if its effect was to restrict competition in the financial and credit institutions sector, and whether such an agreement could be authorised by a national competition authority under Article 81(3) EC if implementation of the agreement could benefit consumers.
Registers of this kind breach Article 81(1) EC if they reduce or remove the degree of market uncertainty, so that competition is restricted. The ECJ observed that the Treaty requires companies to determine their commercial policies autonomously and prohibits them from any direct or indirect contact which could influence the conduct of competitors or notify competitors of a company’s own proposed conduct, where this would have an effect on normal market conditions. This, however, does not deprive companies of the right to adapt themselves intelligently to the existing or anticipated conduct of their competitors.
The ECJ noted that the primary purpose of the register, and similar ones in other countries, was to reduce the risk of lending by reducing the disparity between the information available to credit institutions and that held by potential borrowers. Therefore in principle such registers were capable of reducing the number of borrowers who default on repayments, and hence improve the functioning of the credit supply system as a whole. As a result the main objective of such systems is not to restrict or distort competition. It is for the national court to determine whether the particular system under review has such an effect in the actual economic context.
When considering compatibility with competition rules, the national court should examine the characteristics of the system itself (in terms of its purpose, the conditions of access to and participation in the system, as well as the type of information exchanged). The ECJ concluded that where (i) the market is fragmented, (ii) the identity of lenders is not revealed and (iii) access is available in a non-discriminatory manner, it cannot be presumed that the mere existence of a credit information exchange is anti-competitive. Such exchanges are capable of reducing uncertainty about the potential risk of an applicant defaulting, but are not liable to reduce uncertainty about the risks of competition, as each financial organisation could still act autonomously and independently.
If a national court finds that there is a restriction of competition in these circumstances, it should then consider the effects of Article 81(3) EC. In order for this Article to apply, (i) the arrangement must contribute to improving the distribution of the services in question or economic progress as a whole; (ii) consumers must be allowed a fair share of the resulting benefit, (iii) it must not impose any non-essential restrictions on undertakings and (iv) it must not afford the possibility of eliminating competition in respect of a substantial part of the services in question.
With regard to the second of these conditions, the ECJ noted that information sharing exchanges of this sort are capable of benefiting all consumers, since they serve both to prevent situations of over-indebtedness for consumers of credit and, in principle, to lead to greater overall availability of credit. Whilst the exchange may lead to some consumers being refused credit, it is the beneficial effect on consumers overall that must be taken into consideration, not the effect on a certain category of consumers. Finally, the ECJ observed that information exchanges could lead to a greater overall availability of credit to all consumers, and potentially eliminate the need for lenders to impose higher interest rates on applicants through lack of knowledge of their personal circumstances.Source: ECJ judgment of 23 November 2006 in case C-238/05, Asnef-Equifax, Servicios de Información sobre Solvencia y Crédito, SL v Asociación de Usuarios de Servicios Bancarios