Home News & Events COMPETITION LAW NEWS: ECJ overturns EU Commission decision on Restriction 'by object' applicability

COMPETITION LAW NEWS: ECJ overturns EU Commission decision on Restriction 'by object' applicability

Sunday, 28 September 2014 20:12

In what is deemed by practicing lawyers in the Competition Law field to be a landmark European Court of Justice [ECJ] judgment, the Court overturned a decision given by the EU Commission and a judgment given by the General Court, on the grounds that a so called ‘restriction’ has been mistakenly classified as a restriction “by object” and this in respect of the Groupement Des Cartes Bancaires Case.

Groupement Des Cartes Bancaires is an economic interest group established under French law, comprising of one hundred and forty eight [148] banks. The group was established to manage a system for bank card payments and withdrawal which system allowed bank card users to make payments to and withdrawals from ATMs within the group. Over 75% of bank card payments in France are administered the relative system. The disputed measures were fees adopted by Groupement Des Cartes Bancaires which allegedly had the effect of preventing smaller banks issuing cards at a lower price than the larger banks within the group. Groupement Des Cartes Bancaires claimed that on the contrary, the fees had been introduced in order to encourage new competitors to participate in the market, to install more ATMs and to prevent “free-riding” on investments made by the major banks.

The EU Commission had concluded that the measures constituted a “by object” restriction under Article 101(1) TFEU, as their purpose was to keep the price of payment cards artificially high to the detriment of new entrants/smaller banks within the group. Accordingly, the EU Commission ordered Groupement Des Cartes Bancaires to abolish the fees which order led Groupement Des Cartes Bancaires to take matter before the General Court which court held that EU Commisison had been correct in concluding that the relative fees had the restriction of competition “by object”. The General Court further determined that it was not required to examine the pleas which contested the analysis in the decision of the effects of the measures.

The Groupement Des Cartes Bancaires filed an appeal before the ECJ submitting that the Groupement Des Cartes Bancaires had wrongly applied the restriction of competition “by object” criteria.

The ECJ agreed with Groupement Des Cartes Bancaires’ submissions, demanding a narrow approach to the restriction “by object” criteria arguing that unless it is clear that the restriction in question, by its very nature, harms competition, the EU Commission had to demonstrate the restriction’s likely adverse effect on competition. Demonstrating that a measure is only capable of restricting competition does not cross the threshold required to determine that it is a “by object” restriction, except where it is deemed to be clear cut.

This judgment delivered by the ECJ therefore confirms that the concept of restrictions “by object” should be only reserved for those types of clauses which by their very nature cause serious harm to competition. The ECJ was indeed critical of the manner in which the EU Commission had sought to widen the concept of restrictions “by object” to other types of market behaviour.

The EU Commission has over the years adopted an increasingly generous or wide interpretation of what constitutes “by object” clauses under the EU competition rules [Article 101(1) TFEU]. Under the above-mentioned Article 101(1), clauses which by their very nature, are deemed to seriously harm competition, are regarded as restrictions by object.

In these cases the Commission can find the undertakings involved in breach of Article 101(1) without an obligation to investigate the effect thereof on competition in the relevant market.

Indeed, to try to clarify the concepts of restrictions “by object” and those which require a market assessment of their effect, in June 2014, the EU Commission had published a revised De Minimis notice and certain policy papers.

By way of conclusion, the ECJ held that the EU Commission had failed to carry out an appropriate market analysis to prove that the effect of the relative restriction in question has had an adverse effect on competition.

The ECJ’s judgment can be downloaded here.