Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European General Court incorrectly assessed whether restriction of competition was “by object”, (Sep 11, 2014)

By Linda O’Brien, J.D., LL.M.

The Court of Justice of the European Union (ECJ) annulled a judgment of the General Court, holding that the court could not correctly assess whether the pricing measures adopted by French Groupement des cartes bancaires had the restriction of competition as their object, according to an announcement today.

European Union (EU) law prohibits agreements, decisions by associations of undertakings, or concerted practices which have as their “object” or “effect” the prevention, restriction or distortion of competition within the internal market. These measures constitute a restriction of competition “by object” if they reveal in themselves a sufficient degree of harm to competition, such as horizontal price-fixing by cartels for example. Measures which restrict competition because of their object can be prohibited by EU competition law without the need to examine the actual effects that those measures may have on the market.

The economic interest group, French Groupement des cartes bancaires (the Grouping), was created by French banking institutions so the holders of bank (CB) cards issued by a member of the Grouping may make payments to affiliated traders and make withdrawals from automatic teller machines. In 2002, the Grouping adopted three pricing measures: (1) a fee under mechanism for regulating the acquiring function (MERFA) payable by the members of the Grouping whose issuing activity of CB cards exceeded their activity in affiliating new traders to the system; (2) a membership fee for new members, which consisted in a fixed sum and a supplementary membership fee for members whose number of CB cards in stock exceeded a certain threshold at a given moment; and (3) a fee per CB card issued, payable by ‘dormant’ members of the Grouping who were inactive or not very active before the date of entry into force of the new pricing measures.

In October 2007, the European Commission (EC) concluded that the pricing measures adopted by the Grouping were contrary to EU competition law because of their object and their anti-competitive effects and required the Grouping to cease the infringement immediately and refrain from adopting any similar measure in the future. The Grouping brought an action before the General Court for the annulment of that decision. The General Court dismissed the action on the ground that the Commission could properly conclude that the pricing measures at issue restricted competition because of their anti-competitive object and constituted an unlawful decision of an association of undertakings and found that it had no need to examine the effects of the measures on the market. The Grouping appealed the judgment of the General Court to the ECJ, submitting that the General Court had erred in law in the application of the concept of the restriction of competition by object.

In its judgment today, the Court of Justice found that the General Court did not correctly assess whether there was a restriction of competition by object. The General Court failed to recognize that the essential legal criterion for ascertaining whether coordination between undertakings involves a restriction of competition “by object” is the finding that such coordination reveals in itself a sufficient degree of harm to competition. In its judgment, the General Court had inferred that the object of the measures at issue is to impede the competition of new entrants on the market for the issue of payment cards in France, since they require the banks subject to them either to pay a fee or to limit their issuing activities. The Court of Justice held that, although the General Court set out the reasons why the measures at issue are capable of restricting competition, it in no way explained in what respect that restriction of competition reveals a sufficient degree of harm in order to be characterized as a restriction “by object.”

The General Court was entitled at the most to infer that the measures at issue had as their object the imposition of a financial contribution on the members of the Grouping which were content to benefit from the acquisition efforts of other members. Such an object cannot be regarded as being, by its very nature, harmful to the proper functioning of normal competition, all the more so since the General Court took the view that combatting free-riding in the CB system was a legitimate objective.

In addition, the Court of Justice found that, while purporting to examine the “options” left open to the members of the Grouping by the measures at issue, the General Court in fact assessed the potential effects of the measures, not their object. It therefore indicated itself that the measures at issue cannot be considered ‘by their very nature’ harmful to the proper functioning of normal competition.

Therefore, the ECJ annulled the judgment of the General Court and referred the case back so the court could examine whether the measures at issue could be prohibited on account of their anti-competitive effects.

Companies: French Groupement des cartes bancaires

News: Antitrust