Out-Law / Your Daily Need-To-Know

European Commission tightens rules on anti-competitive agreements

Out-Law News | 02 Jul 2014 | 2:52 pm | 3 min. read

The European Commission has clarified that all agreements that have the object of restricting competition will be prohibited even if the impact of those agreements is minor, under changes to be made to EU competition rules.

This could exclude more restrictive agreements from a 'safe harbour' that exists under those EU rules.

The Commission's 'de minimis notice' (5-page / 67KB PDF) already excluded agreements that contained “hardcore” restrictions on competition. It listed specific hardcore restrictions such as price fixing and market sharing as being prohibited, even if the impact of those agreements was minor. The Commission has now broadened the exclusion from the 'de minimis' safe harbour to any agreements which have the object of restricting competition. 

Unlike in the previous de minimis notice, the Commission no longer lists the specific hardcore restrictions of price fixing and market sharing but instead issued separate guidance, by reference to the Commission’s rules, practices and case law, on what restrictions of competition are likely to fall in the “by object” category. This goes beyond the original list and includes, for example, bid rigging, information sharing and collective boycott. It is also made clear that the guidance does not prevent the Commission from finding restrictions of competition by object that are not identified in that document. This means that more restrictive agreements could be excluded from the de minimis safe harbour.

Minor agreements that are not aimed at restricting competition but which have that effect in practice can still qualify for the safe harbour against prohibition.

"In cases covered by this notice, the Commission will not institute proceedings either upon a complaint or on its own initiative," the Commission said in its revised rules notice. "In addition, where the Commission has instituted proceedings but undertakings can demonstrate that they have assumed in good faith that the market shares mentioned in [the rules] were not exceeded, the Commission will not impose fines."

"Although not binding on them, this notice is also intended to give guidance to the courts and competition authorities of the Member States in their application of Article 101 of the Treaty," it said.

The change to the rules was made after the Court of Justice of the EU (CJEU) confirmed in a judgment issued in December 2012 that "an agreement that may affect trade between Member States and that has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition".

Under Article 101 of the Treaty on the Functioning of the EU there is a general ban on organisations putting in place agreements which may affect EU trade where those agreements "have as their object or effect the prevention, restriction or distortion of competition within the internal market".

However, an Article 101 exception means anti-competitive agreements can be permitted if they contribute "to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit" and do not "impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; [or] afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question".

The 'de minimis' regime provides a further carve out from the general prohibition of anti-competitive agreements. It provides a safe harbour for organisations to put in place agreements that have "non-appreciable effects on competition", according to guidance (17-page /180KB PDF) the Commission has issued alongside its new notice. Whether or not businesses can rely on the 'de minimis' safe harbour depends on the size of the market share they enjoy.

In cases where the agreements are between "actual or potential competitors" in the relevant market, the market share held by each of the parties to the agreement must not exceed more than 10% if those agreements are to qualify for the 'de minimis' safe harbour, under the new rules. In cases where the agreements are between non-competitors or non-potential competitors in a relevant market, the threshold market share figure that applies under the de minimis regime is 15%. Other threshold market share figures apply to account for more complex agreements that have the effect of restricting competition.

The Commission's new rules, however, mean competition restricting agreements "by object" cannot escape scrutiny regardless of how small a market share the participating businesses to that agreement have.

According to the Commission's accompanying guidance, it is "unlikely" that businesses would be able to claim that agreements aimed at restricting competition are legitimate on the basis that they meet the Article 101 exception.

"The fact that an agreement contains a restriction 'by object' ... does not preclude the parties from demonstrating that the conditions set out in [the Article 101 exception] are satisfied," the Commission said. "However, practice shows that restrictions by object are unlikely to fulfil the four conditions set out in [the exception]."