The concept of ‘appreciable restriction of competition’ in ‘object’ cases under Article 101(1) TFEU – AG Kokott in Expedia

Christopher Brown

On 6 September 2012 AG Kokott issued her Opinion in Case C-226/11 Expedia Inc.  The case results from a preliminary reference made by the French Cour de cassation in proceedings between Expedia and the French competition authority, the Autorité de la concurrence.  The case touches on some interesting (and surprisingly under-developed) issues under the law on anti-competitive agreements contained in Article 101 TFEU – in particular, what a competition authority (and, by extension, a private law claimant) has to do to show that an agreement which restricts competition by object (rather than by effect) does so appreciably.

The facts of the Expedia case, in brief, were that Expedia and the French railways operator, SNCF, had entered into a joint venture for the sale of tickets and other travel services, as a result of which Expedia obtained privileged access to a particular website created by SNCF.  The Autorité de la concurrence took exception to this arrangement, finding it to constitute an agreement whose object was to restrict competition, contrary to Article 101(1) TFEU and its French equivalent.  Fines were imposed on Expedia and SNCF as a result.  It appears that Expedia’s appeal primarily focussed on whether the Autorité was right to have concluded that there was an appreciable restriction of competition: Expedia argued that the parties’ market shares were below the thresholds set out in the European Commission’s de minimis Notice (10% combined market share in the case of horizontal agreements; 15% share at either level of the supply chain in the case of vertical agreements), and so, according to Expedia, the Autorité was precluded as matter of EU law from finding that the agreement appreciably restricted competition.  And absent an appreciable restriction, the agreement did not infringe Article 101(1).

In essence, the Cour de cassation has asked the CJEU whether this argument is correct.  AG Kokott’s Opinion is emphatic that it is not.

First of all, she dismisses the argument that the Autorité is bound to follow the de minimis Notice.  Among other things, she (correctly) observes that the Notice merely expresses the Commission’s view of the law and is said in terms not to be binding on domestic courts or authorities.  That said, the authorities must, in accordance with their ‘sincere cooperation’ duty under Article 4(3) TEU, take “due account” of competition policy guidance such as the de minimis Notice when applying the EU competition rules (Opinion, para 38).

Taking account of the Notice does not mean, however, that authorities are prohibited from pursuing anti-competitive agreements under the market share thresholds set out in the Notice.  AG Kokott first makes the point that an assessment of whether an agreement appreciably restricts competition depends on the general economic and legal context of the agreement at hand (para 41).  She then adds, rather cryptically, that “there may special national or regional competition problems in the various markets in the Member States to which the respective authority and the respective court must be able to react effectively” and that “there may be objective differences in the enforcement practice of competition authorities, even though all those authorities belong to the European Competition Network”.  It is unclear what the Advocate General is getting at here, but, with respect, it is hard to see how any differences in the enforcement practice of domestic competition authorities could have any bearing on the objective question of whether a restriction of competition caused by an agreement is appreciable.

More interestingly, the Advocate General then goes on to deal with the question of whether the competition authority need do anything more than establish that the agreement has as its object the restriction of competition.  Does it, in addition, need to show that such restriction is appreciable?  More specifically, do the market share thresholds in the de minimis Notice have any role to play in the case of ‘object’ restrictions?

The argument that it is insufficient ‘merely’ to prove that an agreement has an anti-competitive object goes something like this. Ever since the seminal early case of Völk v Vervaecke, a case about an agreement between a German supplier of washing machines and a distributor for Belgium and Luxembourg which granted the latter exclusive distribution rights, including absolute territorial protection (an ‘object’ restriction), it has been clear that:

“an agreement falls outside the prohibition in Article [101] when it has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question.”

More recently, the CJEU has held, in Pedro IV Servicios, that an agreement containing an RPM provision would only infringe Article 101 if it “perceptibly” restricted competition, and in Ziegler v Commission, the General Court confirmed that agreements which restrict competition by object infringe Article 101 only if they have an appreciable effect on competition and on inter-State trade.

AG Kokott’s view, however, is that an appreciable anti-competitive effect can be presumed in ‘object’ cases, even where market shares are below the Notice’s thresholds.  Whilst the case law requires that the restriction of competition be appreciable in both ‘object’ and ‘effect’ cases, “that does not mean that the requirements concerning proof of appreciable effect are the same in both cases” (para 48, emphasis in the original).

She makes the point, correctly, that the ‘object’ and ‘effect’ criteria in Article 101 are disjunctive: once it has been shown that an agreement has as its object the restriction of competition, it is not necessary to go on and show anti-competitive effects.  Indeed, this leads to the most compelling argument against a requirement to prove an appreciable restriction (and against a ‘safe harbour’ for agreements with an anti-competitive object): it would clearly defeat the purpose of such disjunctive wording, and be inimical to policy objectives, if a competition authority were required in every case to prove anti-competitive effects for the purposes of showing an ‘appreciable’ restriction.  Likewise, a rule which effectively allowed firms to enter into ‘object’ agreements, provided their market shares were under a certain threshold, would be “practically [inviting them] to refrain from effective competition with each other and join together in restraint of trade” (para 52).

On that basis, AG Kokott concludes that the market share thresholds contained in the de minimis Notice are irrelevant when considering whether an ‘object’ agreement appreciably restricts competition.  This self-avowed interpretation of the terms of the Notice thus departs from the wording of the Notice itself, which disapplies the market share thresholds only in cases of so-called ‘hard core’ restrictions of competition law – perhaps in an attempt to correct (what the AG sees as) an inaccurate reflection by the Notice, at least on its face, of the EU Courts’ case law.  But the Opinion, if a correct statement of the law, still begs at least one important question: can the presumption be rebutted, and if so how? Whilst the language deployed by the Advocate General suggests that it is not rebuttable, that would seem to sit uneasily with cases such as Völk.

Finally, it is worth pointing out that in one of her arguments in support of her conclusion, the Advocate General wades into the debate on the much-discussed concept of an ‘object’ restriction.  She says (at para 50) that:

“Agreements with an anti-competitive object are recognised as having harmful consequences for society. They can hardly be regarded as de minimis infringements. On the contrary, it must be presumed that undertakings which enter into an agreement with an anti-competitive object always intend an appreciable effect on competition, irrespective of the size of their market shares and turnover.”

With respect, such a presumption is difficult to reconcile with the consistent case law of the Courts to the effect that the parties’ subjective intentions are irrelevant to the categorisation of the agreement.  Whilst the AG’s point was made in a different context, it does not help in understanding the true boundaries of the ‘object’ concept, which remains, more than 50 years after its introduction, a contentious one (for two excellent recent contributions to the academic debate, see Bailey, “Restrictions of competition by object under Article 101 TFEU” (2012) Common Market Law Review 559 and Mahtani, “Thinking outside the object box: an EU and UK perspective” (2012) European Competition Journal 1).

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