On 13 December 2012, the CJEU gave an interesting ruling on the powers of national competition authorities (NCAs) to fine parties for an anti-competitive agreement when their market shares are below those in the Commission’s de minimis
notice (the Notice).
The CJEU’s ruling also states that agreements which restrict competition by object constitute an appreciable restriction on competition, by their nature and independently of any concrete effect (Case C-226/111 Expedia v Autorité de la Concurrence).
The French competition authority (the Conseil) fined Expedia and SNCF in 2009 for breach of Article 101 TFEU, after they set up a joint subsidiary to expand the sale of train tickets over the internet.
The Conseil found that both the object and effect of the agreement to set up the joint company was to the detriment of competitors.
Expedia argued before the French Court of Appeal that the Conseil had wrongly concluded that the agreement did not fall within the Notice.
The Notice sets out market share thresholds, below which it believes an agreement, regardless of its content, will not appreciably restrict competition, provided that it does not contain so-called ‘hardcore’ restrictions such as provisions which fix prices, share markets, limit outputs, prevent passive sales or maintain resale prices.
The French Court of Appeal held that in any event NCAs are not bound by the Notice so its market share thresholds of appreciability were not decisive. Expedia appealed this decision, and the French court asked the CJEU to rule whether NCAs were precluded from bringing proceedings and imposing penalties on the grounds of Article 101(1) TFEU and national competition law where the thresholds in the Notice are not met. The CJEU concluded that they were not. In line with case law such as Pfleiderer (on disclosure of leniency documents), a Commission notice is not binding. Indeed, the Notice itself provides that it is non-binding on both NCAs and the courts of Member States. Departing from the opinion of AG Kokott, who concluded that NCAs must take “due account” of competition policy guidance, the CJEU held that NCAs may take into account the thresholds in the Notice when deciding if an agreement appreciably restricted competition but were not required to do so.
Although not a question that the French court had asked, the CJEU took the opportunity to consider the, much-debated, question of agreements which restrict competition by object. These are agreements which are, by their very nature, “injurious to the proper functioning of normal competition” such that the authority does not need to show an anti-competitive effect to prove an infringement of competition law. The CJEU confirmed that such agreements constitute, by their nature and independently of any concrete effect, an appreciable restriction on competition.
The CJEU’s conclusion strongly suggests that the assumption that an “object” agreement appreciably restricts competition is not a rebuttable presumption as many had previously thought. The CJEU confirmed the principle that an agreement would fall outside Article 101(1) if it had only an insignificant effect on the market, i.e. an even smaller effect than the thresholds of non-appreciability in the Commission’s Notice. Many commentators had, on the basis of that principle, previously concluded that a hardcore restriction could still be found not to infringe Article 101(1) if it could be shown that it did not in practice have a significant effect on the market. However, the CJEU’s statement that hardcore restrictions constitute an appreciable restriction of competition independently of any concrete effect puts these conclusions in some considerable doubt.
The main issue decided by the CJEU, that NCAs are not bound to apply the Commission’s Notice on non-appreciability, may appear at first sight to be inconsistent with the basic requirements in Article 3(1) and (2) of Regulation 1/2003. These provisions require an NCA applying national competition law to an agreement that may affect trade between Member States also to apply Article 101 TFEU, and prevent the NCA applying national competition law to prohibit such an agreement if it does not restrict competition within the meaning of Article 101 TFEU. However, the judgment can be explained on the basis that the Notice is itself non-binding and in any event requires interpretation and application to the facts of a particular case before a specific agreement can be declared not to infringe Article 101.
Other articles related to the EU & Competition Law Bulletin for February 2013:
> European Commission imposes biggest ever fine on members of screen component cartel
> Court of Justice upholds AstraZeneca abuse of dominance decision
> Statement of Objections in Samsung standard-essential patent case
> Commission conditionally approves acquisition of Orange Austria by Hutchison 3G
> New guidelines in place for assessing State aid for the deployment of broadband
> European Commission accepts commitments in three investigations: Thomas Reuters, RioTinto Alcan, e-book publishers (and Apple)
> German Parliament Adopts Amendment to German Competition Law
> Federal Cartel Office prohibits chemicals traders joint venture previously cleared in merger control
> OFT issues guidance on Competition Act procedures and extends trial of Procedural Adjudicator role
> OFT clears Vodafone/Telefonica site sharing agreement
> OFT concludes that there are no grounds for action in respect of Cathay Pacific/Virgin Atlantic information exchange
> Health and Social Care Act: Competition Law Regime