On 2 April 2020, the European Court of Justice ("ECJ") delivered its judgment in Budapest Bank on a reference for a preliminary ruling from Hungary's highest court. The judgment confirms the important limitations that apply before competition authorities and courts are able classify anticompetitive agreements as a restriction of competition "by object" under Article 101 TFEU.
| what you need to know - key takeaways |
- Anticompetitive agreements may infringe EU competition law by their "object" and "effect". However, the forms of conduct that harm competition by their object must be interpreted restrictively.
- A finding of an object infringement must be based on sufficient experience that the conduct by its nature is harmful to the proper functioning of competition.
- It is necessary to take into account the context of the agreement, including any serious indications that the agreement was pro-competitive, before concluding that the agreement restricted competition by its object.
- The ruling is especially relevant to allegations of anticompetitive conduct on so-called "multi-sided" markets (e.g. payment systems, digital platforms, etc.) where the interactions between related, but distinct markets, must be taken into account by the competition authority.
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The background to the case arises from a 2009 finding by the Hungarian competition authority that 22 banks, as well as Visa and Mastercard, had breached Article 101 TFEU by entering into an anticompetitive agreement to establish a uniform interchange fee for card payments (the "MIF Agreement"). The national competition authority ("NCA") found that the agreement had both the object and effect of restricting competition.
On appeal from the NCA, the Hungarian Supreme Court made a reference to the ECJ for clarification on the application of Article 101 TFEU.
Agreements may restrict competition both by object and effect
By its first question, the ECJ was asked whether a finding that an agreement has restricted competition "by object" may also, in respect of the same conduct, be classified as a restriction of competition "by effect". The ECJ confirmed that it could, but added an important qualification. Competition authorities and courts making a finding that conduct is anticompetitive by both its object and effect are not relieved from the requirement to adduce the necessary evidence for each determination. Moreover, when making such a finding, it is necessary to specify the extent to which that evidence relates to one or other type of restriction.
Conduct that harms competition "by object" must be interpreted restrictively
The ECJ then turned to the question of whether the MIF Agreement could be classified as a restriction of competition "by object". Although the ECJ did not give a conclusive answer to this question, the application of the court's analytical approach is likely to bear importance to current and future Article 101 TFEU cases.
- The ECJ began by examining the content and objectives of the MIF agreement. On this basis, the ECJ did not consider that the provisions of the MIF Agreement necessarily demonstrated that competition had been harmed, nor did it find that the MIF Agreement pursued an objective to ensure a minimum threshold for merchant fees. Instead, it found that the objectives of the MIF Agreement included ensuring a balance between issuing and acquiring activities within payment systems, which the ECJ considered relevant to the economic and legal context that arises in two-sided markets.
- Moreover, the ECJ emphasised the need for "sufficient experience" that the agreement in question is harmful to the proper functioning of competition before the conduct is classified as a restriction of competitive "by object". In order to be sufficient, such experience must be "solid and reliable" and "general and consistent", which the ECJ noted – in the context of MIF agreements – is contrary to the decisional practice of competition authorities and the case law of the European Courts.
- The ECJ then turned to the context of the agreement and the counterfactual analysis. In particular, the ECJ noted the argument submitted that, in absence of the MIF Agreement, interchange fees would have been higher (i.e. that the MIF Agreement was pro-competitive, rather than anticompetitive). In this respect the ECJ held that, if there are "serious indications" that interchange fees would have been higher absent the MIF Agreement, or at least contradictory or ambiguous evidence was submitted in that regard, the MIF Agreement cannot have restricted competition "by object". In such circumstances, it would be necessary to undertake a detailed analysis of whether the MIF Agreement gives rise to anticompetitive effects.
Comment
Practitioners have already likened and contrasted Budapest Bank with the ECJ's jurisprudence in other recent cases, such as Cartes Bancaire and Paroxetine. Both cases, for example, also emphasise the importance of a "restrictive" or "strict" approach to the classification of object infringements. But, at least arguably, the ECJ in Budapest Bank has taken a step further, by providing additional clarification on the necessary requirements that a competition authority or court must demonstrate when examining the content, objectives and economic and legal context of an agreement.
It is only upon having sufficiently taken into account these attributes, including past experiences and any evidence submitted to the contrary, that conduct may be classified as restrictive of competition "by object". Whilst it remains to be seen how competition authorities will approach allegations of object infringements in the future, there is still plenty of guidance to be found in the Opinion of Advocate General Bobek, which was delivered in the same case last year. Most particularly: "if it looks like a fish and it smells like a fish, one can assume that it is fish. Unless, at the first sight, there is something rather odd about this particular fish, such as that it has no fins, it floats in the air, or it smells like a lily, no detailed dissection of that fish is necessary in order to qualify it as such. If, however, there is something out of the ordinary about the fish in question, it may still be classified as a fish, but only after a detailed examination of the creature in question".
With thanks to Emile Abdul-Wahab of Ashurst for his contribution.
