04 Jun 2013
[by Pinar Akman] One of the most important holdings of the Court of Justice in recent times is buried in paragraph 37 of the 8-page long Expedia judgment, which surprisingly has had few competition lawyers shouting from the rooftops. In essence, the Court has declared that anyobject agreement which has an effect on trade between Member States has an appreciable effect on competition. In other words, object agreements (with an effect on trade between Member States) can no longer make use of the de minimis doctrine. This represents an important change in the jurisprudence of the Court and, unfortunately, not an ideal one.
The significance of this judgment cannot be overstated. The Court of Justice has changed its previous case-law (eg Völk v Vervaecke) which had consistently held that any agreement had to have an appreciable impact on competition to breach Article 101 TFEU. This impact had to be proved on a case-by-case basis regardless of whether the agreement had the object or effect of distorting, preventing, or restricting competition. This approach reflected the view that agreements of minor importance (ie those with an unappreciable impact on competition) would not be prohibited by the EU competition rules. In Expedia, the Court of Justice has decided that for object agreements there is an (irrebuttable?) presumption that they have an appreciable effect on competition. According to the Court, ‘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. This is so regardless of the size and market share of the undertakings involved in the agreement’; Expedia, . This finding represents a big step backward in terms of EU competition law adopting an economic approach, as it holds that even an agreement between parties with insignificant market power can breach competition law.
The Expedia case was a preliminary reference from the French Cour de cassation. The case arose out of the French Competition Authority’s imposing fines on Expedia and SNCF (France’s state-owned railway company) which had together created a joint subsidiary to expand the sale of train tickets and travel over the internet. In February 2009, the French Competition Authority found that the partnership between SNCF and Expedia creating ‘Agence VSC’ constituted an agreement contrary to Article 81 EC (now Article 101 TFEU) and to Article L. 420-1 of the French Commercial Code, the object and effect of which is to promote that joint subsidiary in the market for travel agency services provided for leisure travel to the detriment of competitors. Consequently, the Authority imposed financial penalties on Expedia and SNCF. Expedia argued, on appeal before the Paris Cour d’appel, that the Authority had overestimated the market share of Agence VSC. Without ruling on this point, the Cour d’appel held that it was possible for the Competition Authority to bring proceedings against practices implemented by undertakings whose market share is below the thresholds specified by the relevant article in the French Commercial Code (setting a threshold equivalent to the Commission’s de minimis notice) and by the de minimis notice. Subsequently, the Cour de cassation made a preliminary ruling request to the Court of Justice and asked whether Article 101(1) TFEU and Article 3(2) of Regulation (EC) No 1/2003 must be interpreted as precluding the bringing of proceedings and the imposition of penalties by a national competition authority if the relevant market share falls below the threshold. Essentially, the Court asked whether the thresholds specified by the Commission in the de minimis notice were binding for the Member State authorities as well.
Unsurprisingly and uncontroversially, the Court of Justice explained that the de minimis notice is not binding in relation to Member States (Expedia, ) and that a Member State competition authority may take into account the thresholds established in the de minimis notice, but is not required to do so (ibid, ). This holding of the Court is neither surprising nor controversial since this interpretation is obvious not only from the Court’s previous case-law but also from the wording and nature of the de minimis notice itself. If the Court of Justice had stopped here, Expedia would have been an expected decision, reiterating the existing case-law. However, Expedia – unnecessarily – went further. Although the French Cour de cassation’s question had been answered at this point, the Court of Justice went on. In the penultimate paragraph to the substantive part of the judgment, the Court decided to state that, as noted above, ‘[i]t must therefore be held 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’; .
In a common law context, this statement would have been an obiter dictum and therefore not binding for future cases since it is not about the essential part of the case which must be interpreted on the basis of the question that was set by the French Court. The French Court did not ask such a general question to the Court; it asked specifically about whether the national authority is precluded from finding practices anticompetitive where the de minimis thresholds are not reached. However, the EU legal system is not a common law system and therefore there is no such thing as obiter dicta;indeed, strictly speaking, there is no such thing as binding precedent either. Having said that, the Court of Justice’s finding in Expedia has far reaching consequences: it will most likely be applied by the Court itself in future cases and has guiding value for the national courts and authorities in the EU. This is why in practice it will most likely work like a binding precedent.
At the expense of repeating what has now become a cliché, this is not a judgment in line with a modern economic approach. It is unacceptable in a modern system of competition law to suggest that an agreement where the parties have, let’s say, 2% market share will have an appreciable effect on competition provided that there is an effect on trade between Member States. It is not good law also because the Court of Justice seems to significantly change a long line of case-law in practically an obiter dictum statement which essentially deprives it of context. Doing this in a case where not only the accused undertaking but also the French Government and the European Commission questioned the French court’s assessment of the agreement as an object agreement (see Expedia, ) just aggravates the situation. It can only be hoped that the Court will soon reverse its own holding in Expedia.
Case C-226/11 Expedia Inc v Autorité de law concurrence and Others (not yet published). For an exception in the competition law blogs’ world, see eg Nicolas Petit and Alfonso Madrid’s writing at .
‘Agreement’ is used to encompass decisions of undertakings and concerted practices in the sense of Article 101 TFEU.
Case 5/69  ECR 295.
This article uses the word ‘may’ and therefore leaves the Authority discretion to bring proceedings or not where the market share thresholds are not exceeded.
The ‘Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (de minimis)’ states that in cases covered by the notice the Commission will not institute proceedings; . Moreover, agreements between undertakings which affect trade between Member States do not appreciably restrict competition within the meaning of Article 101(1) TFEU if the aggregate market share held by parties to the agreement does not exceed 10% on any of the relevant markets where the undertakings are actual or potential competitors; . Although the de minimis notice excludes hard-core restrictions from its scope at , the Court’s de minimis doctrine has always applied to all agreements, that is until Expedia.
Under Article 3(2) of Regulation No 1/2003, the application of national competition law may not lead to the prohibition of such agreements if they do not restrict competition within the meaning of Article 101(1) TFEU.
Note that the ‘effect on trade between Member States’ is a jurisdictional criterion that can be quite easily satisfied as the concept of ‘trade’ covers all cross-border activity.