Re thinking the de minimis rules

In the light of Case C-226/11 Expedia, judgment of 13 December 2012, the European Commission is consulting on a revision of the de minimis Notice (http://ec.europa.eu/competition/consultations/2013_de_minimis_notice/index_en.html). This is a sensible idea, particularly as there is some tension between the current version of the Notice and the case law of the EU courts. The Expedia case opens up the opportunity to align the Notice with the case law. There is to be no change in the market share thresholds beneath which agreements which may have the effect of restricting competition will be considered not to have an appreciable effect on competition and thus are outside of Article 101(1) TFEU. The major change is found in para, 12 where the Commission says that the market share thresholds:

"… do not apply to agreements which have as their object the prevention, restriction or distortion of competition within the internal market. For instance, as regards agreements between competitors, this means that the Commission will not apply this Notice to, in particular, agreements containing restrictions which, directly or indirectly, have as their object: a) the fixing of prices when selling products to third parties; b) the limitation of output or sales; or c) the allocation of markets or customers. Likewise, the Commission will not apply these market shares thresholds to agreements containing any of the restrictions that are defined or listed as hardcore restrictions in any current or future Commission block exemption regulation, which are considered by the Commission to generally constitute restrictions by object."

 

This statement is on the one hand in line with the Court's case law as it follows the Expedia case in taking the view that agreements with the object of restricting competition must always have an appreciable effect on competition. On the other hand, there is a problem because, as Advocate General Mazák pointed out in Case C-439/09 Pierre Fabre, the concept of an agreement with the object of restricting competition is different from that of a hardcore restriction and that just because an agreement, or a clause within it, does not meet the criteria for a block exemption, it does not follow that it is necessarily in breach of Article 101(1) TFEU. The word "generally" does not provide the Commission with a get-out, since the burden of proof under Regulation 1/2003 is on the authority alleging breach of the competition rules.

 

There are a number of responses to this document. The Expedia case has been criticised for being a backwards step insofar as a more economic approach to competition law is concerned (for one example see Pinar Akman at: http://tinyurl.com/pthbmtb ). The Commission's proposed new Notice will thus simply exacerbate the problem. This criticism can be overstated as all competition law regimes are a compromise between administrability and principles. It is not unreasonable to say that there are certain agreements which have no redeeming characteristics and, because of this, there is no point in having a discussion about their effects – they may not have any negative effects because of the parties' weak market position, but they have no redeeming characteristics and so no loophole should be allowed.

 

Leaving this point aside, there are potential problems with the Commission's approach. In order for this approach to work effectively, there should be a clear, and arguably limited, list of agreements which are considered to have the object of restricting competition. This is not the case, especially as some national competition authorities have taken an expansive approach to this category of agreements. In Expedia the contract at issue could have been characterised as single branding while in Case C-32/11 Allianz Hungaria at stake were contracts which offered incentives for selling other products. The issue approach is further muddied by the Commission's assertion that, as far as it is concerned hardcore restrictions, present or future, are to be considered the equivalent of agreements with the object of restricting competition. While this is true of some of the hardcore restraints, it will not necessarily be true for all of them. This is potentially an acute problem, as it seems unlikely that the Commission will spend its time and resources on small agreements with limited significance at EU level. Enforcement will therefore be in the hands of the national competition authorities who may have differing interpretations of what constitutes an object agreement.

 

This combination of approaches between the Court, the Commission and NCAs suggests that more, relatively smaller, agreements will be caught by Article 101(1) TFEU and the enforcement process. Given as well the decision in Case C-681/11 Schenker, where the Court was very unsympathetic to an argument that there should be no liability for clear anti-competitive activity which the undertakings thought, on the basis of legal advice, technically escaped the prohibition, there should be a strong incentive on undertakings to review any agreements which could arguably fall within EU competition law.