Seminar 4: Article 101(1): what is a restriction of competition? (31 October 2013)

The task for this and the next seminar is to consider two aspects of Article 101. Here we look at the Commission’s attempt to codify the parameters of Article 101(1) in 2004 by a soft law document (different in nature from the Guidance Paper on Article 102) and the links between it and the case law of the Court. What emerges from the case law is some confused discussion on the nature of restrictions by object.

We have seen that in the context of Article 102 the shift to an effects-based assessment has been problematic in part because it isn’t clear what effects we’re looking at and what presumptions arise in finding those effects. It might however be interesting to discuss why the arguments in the Article 101 context are on the notion of object.

Reading
Communication from the Commission – Notice – Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C101/97 paragraphs 1-31 (available here)
Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis) [2001] OJ C368/13(here)
Over this summer the Commission embarked on a consultation with a view to redrafting this document, if you are interested, see here.
Joined Cases C-501/06 P etc. GlaxoSmithKline Services Unlimited v Commission [2009] ECR I-9291 paragraphs 40-67 only

Case C-209/07 S Competition Authority v BIDS [2008] I-8637

Case C-226/11 Expedia Inc. v Autorité de la concurrence and Others, judgment of 13 December 2012

Case C-32/11 Allianz Hungária Biztosító Zrt. and Others v Gazdasági Versenyhivatal, judgment of 14 March 2013

Stefan ‘European Competition Soft Law to Court: A Matter of Hard Principles?’ (2008) 14(6) European Law Journal 753.

14 comments on “Seminar 4: Article 101(1): what is a restriction of competition? (31 October 2013)

  1. Jonas von Kalben says:

    In its “Guidelines on the application of Art. 81 (3) of the Treaty” the Commission emphasises the differences between agreements that have a restriction of competition as their object and agreements that have a restriction of competition as their effect (para. 19 et seq.). In doing so the commission points out that “restrictions of competition by object” have such a high potential of negative effects on competition, that there is no need to show actual effects on the market and that it can be presumed that they lead to a reduction in consumer welfare (para. 21). Agreements that have restriction of competition as their effect (supposedly) “must affect actual or potential competition to such extend that on the relevant market negative effects on prices, output, innovation or the variety of quality of goods and services can be expected with a reasonable degree of probability” (para. 24). In footnote 31 the commission also stresses that “the object of Art. 81 is to protect competition on the market for the benefit of consumers”. Again, it appears that according to the commission, regardless of the form of agreement, there is a necessary link between restriction of competition and restriction of consumer welfare.

    On the contrary, the ECJ in GlaxoSmithKline para. 63 stresses the fact that there is nothing in Art. 81 (1) EC (Art. 101 (1) TFEU) “to indicate that only those agreements which deprive consumers of certain advantages may have anti-competitive object” and that the Courts have held that “Article 81 EC aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such.” It follows that “for a finding that an agreement has an anti-competitive object, it is not necessary that final consumers be deprived of the advantages of effective competition in terms of supply or price”.

    The question arises to which extend the “Guidelines” have legal effects. As the commission points out that “Although not binding on them, these guidelines also intend to give guidance to the courts and authorities of the Member States in their application of Article 81 (1) and (3) of the Treaty” (Guidelines on the application of Art. 81 (3) of the Treaty, para. 4). Even though the Commission intends to de facto affect the interpretation of the courts and authorities of the Member States, it rightly recognizes that there is no such legal effect whatsoever (unless directly adopted by the courts and authorities themselves). It has already been pointed out in class, that as “Soft Law” the “Guidelines” may have legal effects in form of the restriction of the Commissions discretion because of superior legal principles such as legal certainty, legitimate expectations or equality (see also Stefan, European Competition Soft Law in European Courts: A Matter of Hard principles?, ELJ, 753, 769 and 772). However, even the Commission can not be bound by “Soft Law” that contradicts “Hard Law” such as case-law of the courts. No superior legal principle gives legal effect to “Soft Law” that modifies “Hard Law”. (see also Stefan, European Competition Soft Law in European Courts: A Matter of Hard principles?, ELJ, 753, 764). Hence, it can be argued that the “Guidelines” of the Commission have no legal effects in so far as they – contrary to the case law of the courts – establish a necessary link between restriction of competition and restriction of consumer welfare. Of course there are de facto effects of the “Guidelines” as they are an orientation for undertakings. As long as the “Guidelines” contradict with the case law of the courts, these de facto effects lead to legal uncertainty and false expectations.

  2. Tiago Andreotti says:

    I would like to refer to Jonas comments regarding the status of the Guidelines and legal certainty.

    We do start from the same premise, that legal certainty is an important aspect of any legal system, but I do not agree with the conclusion that by contradicting the case law of the courts, the “Guidelines” provisions lead to legal uncertainty.

    On paragraph 4 of the “Guidelines” it is clearly stated that they present the Commission’s interpretation of the conditions for exception contained in Article 81(3), which purports to create a methodology for the application of the Treaty provision. It is expressly said that they are not binding on courts and authorities of Member States.

    As mentioned in the comment, even though the “Guidelines” are not binding on courts to follow the rules provided therein on competition aspects, they are binding on the Commission to the extent that they restrict the Commission’s discretion in pursuing a line of enforcement that contradicts what has been established in the Guidelines. The Stefan’s article cites some Court’s decisions and AG Opinions that seem to confirm this (E.g. Archer Daniels Midland v. Commission). Therefore, the use of the term “soft law” to these kind of legal instruments that are not in the specific category of legislation but that do have binding effects on public authorities is misleading, as they are not so “soft” after all.

    Where then, does legal certainty stands? The Commission, due to its self imposed restriction, may not bring cases that contradict what has been provided in the guidelines because ECJ case law said so based on overarching general legal principles. The Commission has not only de facto tied its own hands, but has also done so legally, because whoever has Competition Law being enforced on them by the Commission will be able to rely on the guidance standards as a defense to the Commission’s action.

    On the other hand, Competition Law itself didn’t change. Other authorities may bring enforcement actions without the need to establish the link between restriction of competition and restriction of consumer welfare as provided in the Guidelines since they are not binding on other bodies besides the Commission.

    I might be missing something here because I don’t have a very strong understanding of EU Law, but from the readings it is clear to me that there is no legal certainty problem on this scenario – the Commission may be held to the Guidelines standards and the Court will enforce it based on general legal principles while the non guideline Competition Law standard can still be used by the other authorities. The effect may be that there will be less enforcement actions by the Commission, but the legal landscape is clear on the standards that businesses are held to on Competition Law; it may be more complex, but not uncertain.

  3. Delphine Defossez says:

    Article 101 TFEU is dealing with competition in the sense of a rivalry between market participants as opposed to monopoly power of article 102. Here consumer welfare plays a bigger role; the consumer can vote with their wealth and may decide from whom they want to buy a certain good. One should keep in mind that perfect competition law is impossible to achieve.
    The same idea that we saw for article 102TFEU is also used for article 101(3); the distinction between effect and object. However, in the case of article 101(3), this distinction is totally workable. When the Commission can prove that a restriction of competition by object exists, it does not have to prove the actual effect on the market, as it is presumed that the restriction has an impact on consumer welfare. Restriction of competition by effect is partly based on the principle laid down in Dassonville case, whereby the Court held that any measure that can directly or indirectly, actually or potentially hinder the free movement of goods is prohibited by EU law. However, the measure may be justified.
    The link between consumer welfare and distortion of competition, in the application of article 101 TFEU, is pretty strong. It might seem logical as not all agreements will be considered as falling under the scope of article 101 TFEU. In secondary legislation, the Commission has made clear which agreements will be prohibited per se. The others will have to be assess with the test established by the Court.
    Nevertheless, in the rulings of the CJEU it can be deduced that in its view, article 101TFEU does not only protect consumer but it also protects the ‘structure of the market’.

    To comment on what has been previously said I would like to mention the fact that the Guidelines paper has been drafted well before the cases were decided by the Court. Therefore, I do not see why we need to discuss in length the legal certainty problem that could arise, as in my opinion the Guidelines did only serve the purpose of stating how the Commission wishes to interpret article 101TFEU. However, it is still up to the Court to decide which angle it will take to resolve a case. We can see that some part of the guidelines have influenced the Court; for instance the consumer welfare. But the Court still adapted them in a way that it though fit the best with the facts and previous case laws.
    The major problem of the guidelines is that the Commission restricts its freedom, as the Guidelines are binding on the Commission only (para. 4). The main restriction the Commission imposed on itself is the fact that it needs to establish a link between restriction on competition and consumer welfare. one may wonder why the Commission took such a decision. Nevertheless, the only foreseeable effects of the guidelines, in my view, will be the diminution of cases bring in front of the Court by the Commission. Even though the Commission restricts its power in the guidelines, the guidelines does not affect secondary law, such as the Regulation on block exemptions. Therefore, we may say that the Commission kept a door open to still exercise its power broadly.
    The de minimis doctrine may play an important role in a case. This type of doctrine does not exist for article 102TFEU.

  4. Marita Szreder says:

    As explained by Stefan, although not legally binding, soft law instruments can produce legal effects. This is a result of the application of inter alia the general principle of legitimate expectations. It is worth noting, however, that this principle is not absolute and often the ability of the appellants to rely on soft law as against the Commission is very limited. While in theory the Commission limits the scope of its discretion by issuing guidelines/notices/communications, in practice those instruments are often drafted in a way that leaves the doors open for the Commission to depart from them. For example, in the guidelines on the application of article 81(3) of the Treaty, at paragraph 1.6 it states that “guidelines must be applied reasonably and flexibly” and then at paragraph 23 refers to another set of “non-exhaustive guidelines”. Guidance on the Commission’s enforcement priorities in applying Article 82, which we considered two weeks ago constitutes an even clearer example of this phenomenon (though, I note that there are various reasons for phrasing that document in this way, as discussed during the seminars). This is not to say, that this is necessarily a bad thing – all in all it is not possible to predict in advance all possible circumstances. Yet, the inability to predict/describe all possible scenarios also means that soft law instruments are usually drafted at a high level of generality; a factor which also decreases the ability to rely on those documents. It also raises the question of what is the added value those documents? Do they actually serve the interests of legal certainty, openness and transparency?

    Given the above, it is not surprising that the Commission documents most frequently analysed by the Court are the leniency notice, guidelines on fines and the de minimis notice (according to Stefan, chart 2). All three documents are characterised by a level of concreteness, making it possible for the appellants to rely on them in Court. For example, paragraph 4 of the de minimis notice gives the appellants a concrete assurance that fines will not be imposed by the Commission if they assume in good faith that the agreement is covered by the notice.

    On a separate note: the analysis performed by Stefan reveals a change in approach of the Court to soft law instruments and notes that at first the Court and AGs were reluctant to cite soft law instruments. This, however, does not necessarily mean that they were not influenced by them. While it is hard, if not impossible, to measure such influence, it points to a way in which those documents were/are potentially useful in the development of competition policy.

  5. Itsiq Benizri says:

    I would just underline two points.

    First, the fact that the ECJ does not follow the Commission guidelines reminds me my last week comment. I suggested that France Telecom, TeliaSonera and Post Denmark revealed a different approach of a same goal: it is not that the ECJ was not considering harms to consumers; it’s rather that the Court was appreciating it through harms to the structure. But these new cases lead me to go further. Actually, it seems that the Commission and the ECJ do just have a different approach of european competition rules. Indeed, the Commission only focus on consumer welfare, while the ECJ has a more global approach, considering that competition rules should not only be evaluated with regard to consumer welfare, but ALSO to competitors and market structure. Thus, it might be possible to consider that it is not that the Court appreciate harms to consumers with a different method in its interpretation (indirect/direct). It is also not that the Commission left an ancient approach for a new one. It is, actually, that the Commission would like to appreciate consumer rules ONLY with regard to consumer welfare, while the ECJ seems to refuse to follow such an interpretation, and prefer to keep its “multidirectionnal” approach.

    Second, about the so called “soft law” guidelines, I think that three points should be discussed. First, is it appropriate to consider these guidelines as a “soft law” instrument ? Actually, I think that “soft law” probably became something like “governance”: a concept which qualifies everything which unusual and which does not fit in any classic and well known category. Some years ago, they might have been called “sui generis”. Now, we give a name to such instruments, but these new names seem to be synonyms of “sui generis” in their own specialized fields. So, if it is not “classic power”, than it is “governance” ; if it not “classic law”, than it is “soft law”. Of course, I am exagerating, to make it short. But here is the idea. Anyway, discussing if it is or not a good concept or, at least, the appropriate one would probably very interesting, but I guess it is not that much the point here, for this seminar. Moreover, it would be a really hard discussion. So, without trying to judge this qualification, let’s say that these guidelines have normative instruments, whatever the name you give them, they do, and that is the most important. And that is my second point: these guideline have normative effects. I don’t think we could say that they don’t because the Court did not follow them. First, because law remains law even if a judge does not apply it (for instance, because there is a higher rule). Second, because the Commission follows them. By analogy, it is a kind of application of the maxim “patere legem quam ipse fecisti”. Finally, my last point is that there is, indeed, a problem of legal uncertainty, considering that the ECJ does not follow the guidelines of the Commission. It is absolutely true that the Commission made it clear: the guidelines are not binding for the Court. However, since the Commission uses them, and especially, since the Court uses more and more such guidelines and other soft law instruments according to Stefan, peple tend to refer to them more and more. First, because the Commission is an important institution: the “guardian of the Treaties”, and it plays of course a major role in competion law. Second, because the Court itselfs refers to them. It is true that it is not necessarily at all to follow them. However, the more the Court will refer to them, the more actors on the market will do the same. When they will know that the Court does not always follow them, they will understand that they could not totaly rely on them. However, the result will be legal uncertainty: “The Commission totaly follows it, the Court takes it into account, and I can use them without being sure of the result”…From this point of view, no guidelines at all might be better than not followed by everyone guidelines. Say you will do x and I would be out of trouble as long as I do x. But don’t say you will do x if it is totaly possible that I will get in troubles even if I did nothing except what you said I could. “Do or do not, there is no try”, would have say the little green man.

  6. Céline Estas says:

    The first element which attracted my attention is the value of the De minimis notice. In my opinion, the interesting part is I.4. where the Commission recognises that the notice will bind its practice. The Commission also recognises in this paragraph that undertakings can base their own evaluation on the notice. All these elements demonstrate that undertakings may legitimately argue a breach of the principle of legitimate expectations if the Commission departs from this notice. This is the reason why I found Expedia Judgment clarifying: it clearly states in §28 that a departure of the Commission from the content of the notice would be in breach of the principle of legitimate expectations and other general principles of law. In fact, this statement acknowledges the consequences of such a departure, where the notice only gave us vague commitment of the Commission that its practice would be limited by the notice. On the other hand, I understand that the undertakings may be mislead by this notice as it constitutes only guidance for the national courts and authorities. However, it seems clear from the notice that only the proceedings lead by the Commission are at stake. The Expedia Judgment just recalls it in a clearer way.

    Then, concerning the relation between the Communication and the case law of the ECJ, Stefan noticed that the soft instruments used by the Commission should not deviate or contradict the case law of the Court (p. 764). It appears however unsure in the Communication as the Commission clearly intends to detail issues not treated in the case-law. This behaviour may be seen as problematic but it is consistent with the aim of giving clarity to the practice of the Commission, and the ECJ may still contradict it in its future judgments (“is without prejudice to the case law of the Court of Justice and the Court of First Instance concerning the interpretation of Article 81(1) and (3), and to the interpretation that the Community Courts may give to those provisions in the future.” (1.7.)). Indeed, one should notice that in GSK, the ECJ detailed that “Article 81 EC aims to protect not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such”. In my opinion, this statement clearly recalls that the structure of the market should not be forgotten in the assessment of a restriction by object, where it is unclear in the Communication, which only states that: “the objective of Article 81 is to protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources” (2.2.1.). So, one should not forget that the power to interpret the articles of the Treaties belongs to the ECJ.

    To sum up, from my point of view, the use of soft law instruments is confusing, and it is a need that the ECJ clarifies the significance of these instruments.

  7. Mariajo says:

    I’d like to make two points, which I assume are the two main points to be discussed in tomorrow’s session. One is the legal value of the Guidelines issued by the Commission in the context of Article 101 TFEU. The other is the issue of a restriction of competition “by object” vs “by effect” under Article 101 (1) TFEU – and how that assessment relates to Article 101 (3) TFEU.

    As to the legal value of the guidelines, I understood from taking together the Expedia case and the Article by Stefan, that these guidelines will be considered as binding in particular vis-à-vis the Commission. They will be binding however not qua themselves, but qua the general principle of legal certainty and protection of legitimate expectations (Stefan’s thesis). From the wording of the Guidelines (“Although not binding upon them, this notice also intends to give guidance to the courts and authorities in the Member States..”) it is obvious that the COM would like to see it’s Guidance to be applied by national authorities and courts. The CJ made clear however, that the courts and authorities in the Member States are certainly not bound by the Guidelines (“the competition authority of a member state may take into account the thresholds established in paragraph 7 of the de minimis notice, but is not required to do so” – Expedia at 31).

    Now, to me there is a rather big problem here. And it comes into existence with Regulation 1/2003. Regulation 1/2003 abolished the requirement to notify the COM of an agreement running afoul of Art. 101 (1) and not falling into a block exemption regulation. Undertakings are since then under a duty to ‘self-assess’ their agreements. Obviously, they need detailed guidelines for this, hence the notices issued by the COM. On the other hand, with Regulation 1/2003 the prosecution of violations of Article 101 was decentralized. That means that national authorities took over competences previously reserved to the COM. Therefore, if an undertaking adapts its agreements to the guidelines of the COM, it could still be prosecuted by a national authority, since the national authority is not bound by the guidelines. I find that problematic from a legal certainty angle. Actually I think the AG in this case was right to point out that the principle of sincere cooperation would require national competition authorities (I am not so sure about the national courts..) to at least have regard to the notices of the commission (at paragraph 39). I think this would also mean that a NCA should explain why it departs from a COM notice.

    The second point of discussion is the concept of a restriction of competition “by object”. Apparently, the difference between restriction of competition “by object” and “by effect” is one of a sliding scale. There is no closed list, according to the case law, of restrictions “by object”. In the cases all agreements were held to constitute restrictions by object in violation of Art. 101 (1) TFEU (in Allianz Hungaria apparently even vertical agreements which neither fix resale prices, nor allocate markets – the AG found this disturbing; me too). Now, I wonder – what then are agreements that only restrict competition “by effect” ? And could they be justified under Art. 101 (1)? Or just by resort to Art. 101 (3)? But then how could a restriction of competition by “effect” be justified by the efficiency defence – which is in itself an effects analysis… I am confused.

  8. Sara Perez says:

    The Court of Justice’s decision in Allianz Hungaria confused my understanding of when to apply restrictions of competition by object and restrictions of competition by effect. The Court held that agreements that have an anti-competitive object are prohibited where they are “injurious to the proper functioning of normal competition” and therefore in these instances it is not necessary to look at the effects on competition. Restriction of competition by object implies a presumption that agreements or practices are so injurious to competition that the effects on competition do not need to be established. However, the Court maintains that when considering whether an agreement is a restriction of competition by object part of the analysis is, “to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question” (¶ 36). Here, the Court appears to be looking at the effects of competition, or conducting an analysis for a restriction of competition by effect.
    It seems that the Court in Allianz Hungaria has now made it easier to conclude that agreements constitute a restriction by object under Article 101(1) TFEU. Rather than having the high burden of proving that an agreement or practice would be so injurious to competition without showing the associated effects, the Commission has, it appears, a lower burden by only needing to show the “nature of the goods or services affected” and the “structure of the market in question.”
    I was also confused about how, going forward, the Court of Justice would treat vertical agreements as opposed to horizontal agreements. Is there still a higher threshold of anticompetitive conduct that needs to be proven when vertical agreements are at issue?

  9. Theodosia Stavroulaki says:

    After reviewing the reading material I could easily reach the conclusion that article 101 TFEU is applied in a more coherent and economics based approach than article 102 TFEU. But what is really important is that although the Commission’s Guidelines regarding the application of article 101.3 TFEU are based on economic approach, they provide a clear guidance on all factors that are assessed under an article 101 TFEU competition law analysis. As, it is stated in the Commission’s Guidelines, the objective of Article 101 TFEU is to protect competition on the market as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources. The Commission’s assessment under Article 101 TFEU mainly consists of two parts:
    • the first step is to assess whether an agreement between undertakings, which is capable of affecting trade between Member States, has an anti-competitive object or actual or potential anti-competitive effects. In this framework, the distinction between restrictions by objects and effects is important. According to the Guidelines, once it has been established that an agreement has as its object the restriction of competition, there is no need to take account of its concrete effect, which means that no actual anti-competitive effects need to be demonstrated. Such a presumption is based on the serious nature of restrictions, such as market sharing and price fixing, and on experience showing that this kind of restrictions are likely to produce negative effects on the market and to jeopardize the objectives pursued by the Community competition rules. On the other hand, in the case of restrictions by effect, there is no presumption of anti competitive effects, since for an agreement to be restrictive by effect, it must affect actual or potential competition to such an extent, that on the relevant market negative effects on prices, output innovation or the variety or quality of goods and services can be expected with a reasonable degree of probability.
    • the second step, which only becomes relevant when an agreement is found to be restrictive of competition, is to determine the pro-competitive benefits produced by that agreement and to assess whether these pro-competitive effects outweigh the anti-competitive effects. The balancing of anti-competitive and pro-competitive effects is conducted within the framework laid down by Article 101. 3 TFEU. Article 101.3 does not distinguish between agreements that restrict competition by object and agreements that restrict competition by effect, since article 101.3 applies to all agreements that fulfill the four conditions contained therein.

    Although the basic framework regarding the evaluation or agreements that may restrict competition by object or by effect as well as the balancing of anticompetitive and pro-competitive effects seems clear and easy to apply, it would be interesting to examine which are the main issues that appear when Courts apply the above analyzed framework. Taking into account the cases under examination I would like to comment on the following:
    -In all cases the Court makes a clear distinction between agreements that restrict competition by object and agreements that restrict competition by effect. The wording the Court uses in all cases under examination is the same and reminds us the Court’s formalistic approach when it analyses general concepts in the framework of article 102 TFEU, such as “the special responsibility or the “market power” of dominant firm. However, although in both cases the Court uses a formalistic approach, there is a clear distinction between the application of article 101 TFEU and of article 102 TFEU. In particular, in the framework of article 101 TFEU the distinction between restrictions by object and restrictions by effect is based on economic principles under which restrictions by object have such an adverse effect on competition that should not be necessary for the purposes of applying article 101 TFEU to demonstrate any actual effects on the market. This approach has two essential benefits: 1) The goal of deterrence effect is achieved in an efficient way 2) The competition authorities and the Courts do not waste too many resources in order to prove the anticompetitive effects of a restriction which have a high potential of negative effects on competition. On the other hand when we analyzed article 102 TFEU cases, I had the feeling that in some cases the criteria the Court used were too subjective, arbitrary and were not always based on economic principles.
    -Although as I analyze above, the Court’s approach when applying 101 TFEU cases is clear and in line with basic economic principles, I was quite confused with the Court’s conclusions in the GlaxoSmithKline as well as the Hungarian case C-32/11. With regard to the GlaxoSmithKline case I take the view that the Court kept distance from the Court’s of First Instance analysis regarding the nature of a restriction by object and by effect in order to underline that that the protection of the single market is more important than the protection of consumers and that in case these two objectives contradict the protection of the single market might be of higher importance. Such an approach is clear in my opinion if we take into account the following Court’s statements in paragraph 64 and 65: “….Article 81 aims to protect not only the interests of competitors or of consumers, but also the structure of the market, and in so doing, competition as such. Consequently, for a finding that an agreement has an anticompetitive object, it is not necessary that final consumers be deprived of the advantages of effective competition in terms of supply or price. It follows that by requiring proof that the agreement entails disadvantages for final consumers as a prerequisite for a finding of anti-competitive object and by not finding that that agreement had such an object, the Court of First Instance committed an error of law”. Following the above statement one question came to my mind: Would the Court’s approach be the same if the protection of the single market was not considered as the major objective? Why other objectives, such as the protection of innovation and as a result the improvement of medicines in terms of quality are not as important as the protection of the single market? I consider that the Court’s analysis did not provide clear arguments on these issues. Concerning the second case, I was quite confused with the Court’s approach regarding the definition the restrictions by object. The Court states that the respective agreements between the insurance companies and the car dealers could amount to a restriction by object in the event that the referring court found that it is likely that having regard to the economic context, competition on that market would be eliminated or seriously weakened following the conclusion of those agreements. In this context the Court states that in order to determine the likelihood of such result, the referring Court should take into consideration the structure of that market, the existence of alternative distribution channels and the market power of the companies concerned. It seems that in this case the Court takes the view that the conclusion whether an agreement amounts to a restriction by object or effect depends on the structure of the market, the market power of the parties as well as the existence of distribution alternative distribution channels. In particular, It seems that the Court proposes an effects- based analysis of the agreements concerned in order to conclude whether the possible restriction caused by them are by object or by effect. I consider that this approach is not in line with the traditional case law regarding the application of article 101 TFEU and I wonder whether this approach is related with the importance of the two relevant markets in question, the car repair services and the car insurance.

  10. Samantha Palladino says:

    I think I may have missed something fundamental, or perhaps this is what is meant by “some confused discussion” in the cases. The guidelines, and each case that we read, made a point to mention the “alternative nature” of Article 101(1) and emphasized the word “or” between object and effects. Where there is an anti-competitive object, there is no need to examine the effects on competition of the practice in question. However, then the court, in for example, Allianz, goes on to write “where, however, the analysis of the content of the agreement does not reveal a sufficient degree of harm to competition, the effects of the agreement should then be considered.” (at para 34). Unless I am reading this incorrectly, this seems to me like the court is in fact looking at effects even before an effects-type analysis; sufficient degree of harm to competition would be effects of the practice. Also, if there is a de minimus exception to the applicability of Article 101, then it would also seem to me that effects must always be considered; whether something has only de minimus impact and does not appreciably restrict competition, requires considering the extent of the impact, or effects, of the practice in question.
    Also, I think that including “object” and not just “effect” enables Article 101 to capture more behavior; competition law is not only about punishing or preventing what has already occurred and harmed the market and consumers, but also penalizing the act itself, regardless of whether it actually caused harm. This makes sense to me. I do not understand why there is such an emphasis on “object” with respect to Article 101 though, and not with respect to other provisions; it seems logical to me that competition law should likewise capture anti-competitive behavior always.

  11. Haukur says:

    I think that part of the confusion that we see in the cases as regards how to interpret restriction by object rises from the shift towards an effects based approach outlined in the 2004 guidelines. From a formalistic perspective the difference between intentions off doing something, are easily distinguishable from the effects of what you are doing. Under formalistic approach there are certain blacklisted collusive practices that you are either doing or not, and which can be identified in a binary manner.

    Assessment of the effects of intentions under the effects based post 2004 approach subtly blurs the previous distinction between an objective and the effects of an agreement. Blacklisted practices can no longer be identified in the either-or fashion, but now depend a more dynamic assessment of likely effects of the agreed-to intentions. Thus an agreement, which at a face value seems harmless, may nonetheless mask a hidden collusive agenda that is only revealed by assessing the potential economic effects. However, after having undertaken this dynamic assessment, there is not much distinct substance left for the supposed subsequent assessment of collusion by effect.

    The only thing that seems to separate the two categories under the current approach is the question of negligence. I would suggest that collusion by object could only be achieved through objective intention, while collusion by effect can occur unintentionally through negligence.

    The Stefan article was ok for what it was doing. Counting references in official documents and putting certain legal instruments in conceptual boxes. The problem with using old-school legal conceptual orthodoxy on the EU legal phenomenon is that most often the instruments don’t fit the conceptual boxes. That to a large extent applies to the categorisation of the Commission notices as soft law instruments as opposed to hard law instruments. This proposed dualistic legal worldview simply does not grasp the dynamics of the multi-layered legal system of the EU.

  12. Sylvi says:

    The commission’s two-part framework (“does the agreement restrict actual or potential competition that would have existed without the agreement,” and “does the agreement restrict actual or potential competition that would have existed in the absence of the contractual restraints”) emphasizes the impact of the agreement in question on the consumer. Throughout the guidelines, it is clear that the guidelines link restrictive measures with consumer welfare. I therefore did not quite understand its presumption that an agreement with restrictive intent is de facto harmful to the consumer – that “once it has been established that an agreement has as its object the restriction of competition, there is no need to take account of its concrete effects.” Also, at least in BIDS, the court stated that in determining the restrictive nature of an agreement, “close regard must be paid to the wording of its provisions and to the objectives which it is intended to attain,” and that the arrangements in question should only be “analysed in the light of their actual effects on the market” when determining whether an agreement falls under the 81(3) exemption, not in determining its restrictive nature. I may have misunderstood the reading, but I don’t really see the point of differentiating between object and effects – if the ultimate focus of 81(3) is indeed the impact on the consumer, if an agreement with other “legitimate objectives” in addition to restriction ultimately benefits the consumer, shouldn’t it fall under the exception?

  13. Karin Fløistad says:

    I find the article on the legal effects of soft law especially interesting. As is demonstrated the Courts refer extensively to soft law measures and this is also true in many national courts. The courts always have to decide the particular case at hand and cannot refuse to do so. Whenever there is a question of interpretation of law in a given case the Courts will be tempted to use all available sources to solve the case including instruments that are labeled soft law. This is particularly so if the soft law measure is specifically on the question in the case and other hard law does not really provide the Court with arguments that ultimately will give an answer.

    But the problem with this is of course that then the terminology becomes slightly ambigous. In terms of principles of legal certainty and predictability this is not a satisfactory solution. Furthermore, if the soft law measure has an impact as it it was hard law the adoption proces of the soft law measure may be rendered more difficult. Often the adoption depends on the classification as soft law which again means it will not have the effect compared to hard law measures.

  14. giorgiomonti says:

    One point that none of you seem to have commented on is the Commission’s precise approach in the Guidelines. You noted that GSK does not sit easily with the Guidelines in terms of the general aim of competition law, but the Guidelines also prescribe a method of analysis.

    I think Tiago’s point on two parallel systems of law is interesting: that is the Commission going one way and the national courts possibly going another. Yes, this is complex rather than uncertain, but the upshot is the same: undertakings are confused. I think actually there could even be three parallel systems, because as you noted the AG in Allianz actually thought that national competition law could legitimately take a line different from that taken by EU law.

    I wonder if the legal uncertainty/arbitrariness point of soft law is overplayed in some of the comments. As Marita notes we can perhaps distinguish between those notices that are fairly prescriptive (notice on fines) and others that are more flexible. we expect a lot more fidelity to the former. Moreover, as a number of you noted the COM is bound by soft law notices insofar as departure must be justified by some good reasons (which are justiciable, that is to say a court can quash a Commission decision that does not follow the soft law instrument and does not give good reasons for not so doing). Uncertainty probably returns when one comes to the procedures by which cases are resolved: if you have a lot of informal decisions this avoids the bindingness of the guidelines.

    Possibly another line of attack when evaluating Guidelines is their legitimacy, or lack of. This is especially so if the legal effect is that the COM’s actions are evaluated on the basis of the Guidelines. That is, legality is exclusively judged by loyalty to the Guidelines.

    some of you compared 101 with 102. This is worth developing: (i) is there an object/effect division in 102? (ii) is the role of intent in 102 not stronger in say predation cases? and might the answer to these two questions actually be found in Post Danmark. Recall that before this case the test for below cost pricing was that P<AVC means that there is intent to exclude. so this is an object-type analysis. so as Itziq said in his comments last week, in 102 you've this set of successive presumptions: intent = likely effect on competition = effect on consumer. The Post danmark says: if you fall outside the box of abuses we have formulated so far then one can find an abuse based on effects. so then is the ECJ admitting that all its cases under 102 have so far been object cases? (this does not mean they are formalistic, it just means that they rest on a double presumption of effects, and this is justified by the nature of the conduct in question).

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