Restrictions by object after Groupement des Cartes Bancaires

Restrictions 'by object' after Groupement des Cartes Bancaires – much ado about nothing? Henning LEUPOLD European Commission, Legal Service antitrustitalia Brussels, 19 February 2015

Disclaimer The views expressed in this presentation are personal and may not be regarded as stating an official position of the European Commission. Thank you for respecting the Chatham House Rule. 2

Cartes Bancaires: the alleged restriction • Two-sided payment system: • "Issuing" cards • "Acquiring" merchants that accept the cards • Notification of new fee structure: • Fees that make issuing of cards more expensive if little "acquiring" activity • GCB: to encourage "acquiring" activity by new entrants – legitimate, to avoid free-riding • Commission: measure to foreclose new entrants to the benefit of main members of GCB – very limited scope to expand acquiring activities; fees carefully tailored so they would only affect new entrants 3

Cartes Bancaires: state of play • Commission Decision: restriction by object and effect • General Court: confirms restriction by object (no review of effects analysis) • Court of Justice: annuls General Court judgment – no restriction by object proven • Case referred back to General Court: review of Commission's effects analysis 4

Background Several judgments on restrictions by object in last few years: • GSK • Premier League • T-Mobile • Expedia • Irish Beef • Allianz • Pierre Fabre • Cartes Bancaires Next: Maxima, ING Pensii, Lundbeck, Servier 5

Cartes Bancaires: reasons for annulment • Court of Justice criticised that the General Court: • failed to consider that "revelation of a sufficient degree of harm" is essential criterion for restriction by object • wrongly considered that concept of restriction by object must not be interpreted restrictively • wrongly inferred from the agreement's capability to restrict competition that it had an anti-competitive object • failed to properly take into account the context of the measures • resorted to effects analysis to demonstrate anti-competitive object 6

What does this mean? Anything new? • "Sufficient degree of harm to competition": • "By their very nature harmful to the proper functioning of normal competition" • "So likely to have negative effects" • "Experience shows" • No need to show actual or potential effects for finding of a restriction by object • Criteria: content, objective, legal and economic context; intentions • Capability of restricting competition 7

Capability of restricting competition • T-Mobile: "sufficient" for restriction by object that agreement is "simply" capable of restricting competition • Cartes Bancaires: General Court has only shown capability but not anti-competitive object • No contradiction: • T-Mobile language: to highlight that no effects need to be shown in object analysis; to be seen in light of position of referring court • Cartes Bancaires: capability is not the only criterion for object analysis – but that doesn't mean it is redundant • Purpose of capability criterion is NOT to rebut anti-competitive object by claiming that there are no actual or potential effects – restriction by object not a rebuttable presumption 8

Sufficient degree of harm (I) • Formula consistently relied on by the Court of Justice since Société Technique Minière in 1966 (same as "sufficiently deleterious") • Demonstration of potential effects cannot be a substitute for the need to establish a restriction by object • But, doesn't it appear contradictory: • to require showing that an agreement is "so likely to have negative effects" • while at the same time requiring that no actual or potential effects of the agreement are assessed in the object analysis? 9

Sufficient degree of harm (II) • Showing a sufficient degree of harm and actual or potential effects are two different things • Different analyses are needed • Object analysis must be more abstract (but not wholly abstract): "by their very nature", "experience shows" • But what could that mean concretely? 10

Sufficient degree of harm (III) • "Established" restrictions by object - for example, price-fixing (see Cartes Bancaires) • Sometimes restriction by object not immediately identifiable –no need for "obviousness" • Test for both scenarios: content, objective, context; intentions 11

Sufficient degree of harm (IV) • Purpose of test in second scenario (non-obvious restriction): • NOT: showing harmful effects of agreement at issue • BUT: showing similarity to well-established categories of restrictions by object – for example, price-fixing, output restrictions, market/customer sharing, impediment of single market imperative • Does a practice effectively amount to (or is similar to) one of the widely accepted restriction by object categories? • Examples: • Court of Justice in Irish Beef: market-wide capacity reduction effectively amounted to output limitation • Commission in Fentanyl: co-marketing agreement effectively amounted to market-sharing 12

Content and objectives • Content: • "What was agreed" • Not only written clauses – don't always exist • Must be able to reveal anti-competitive object • Objective: • Not the same as parties' intentions • Whether the true purpose is to restrict competition • Not necessary that anti-competitive object is the sole aim 13

Legal and economic context (I) • To avoid entirely abstract analysis • Context cuts both ways: • Can exonerate an agreement – no anti-competitive object because of context • Can reveal anti-competitive object 14

Legal and economic context (II) • Includes a review of: • the nature of the good or services affected • the real conditions of the functioning and the structure of the market or markets in question • Doesn't include: an effects analysis • For example: in Cartes Bancaires, the two-side nature of the markets involved and their interaction should have been considered 15

Conclusions • No revolution – continuity of well-established case law on restrictions by object • No once-and-for-all pre-set threshold for determination of restrictions by object • Case-by-case approach in the light of experience, economic insight and common sense 16