Anti-competitive operations

At the centre of
the structure supporting consumers’ use of their bank cards are organisations which, with an elaborate set of rules, aim to make two markets operate harmoniously.

On the one hand are those who provide the cards – agreeing with their customers that they can make payments on them. On the other is the market for those who, in the jargon of the industry, ‘acquire’ payments – agreeing to reimburse merchants when they accept cards. The organisations at the centre make the general and detailed rules which enable this system to work.

In C-67/13 P CB and C-382/12 P MasterCard (CJEU, 3rd Chamber, 11 September 2014) the court considered appeals in two complex cases concerning the rules. The Commission took action against two organisations; in CB, the group that deals with many card transactions in France, and in MasterCard, the well-known MasterCard group; concluding the rules operated in an anti-competitive way, particularly in the way that prices and fees were set.

The cases covered a lot of ground. They were not identical; but two issues stand out.

A key issue in MasterCard concerned the relationship between article 101(1) TFEU
and article 101(3) TFEU (though in fact the decisions were taken under article 81 EC, so long have the cases taken to make their way through the courts).

This is an old problem.
If an agreement has some anti-competitive effects, but is broadly pro-competitive, should one take the pro-competitive effects into account in assessing whether the agreement is caught by article 101? Or
should one only take them into
account in deciding whether the agreement should be exempted under article 101(3)?

Refusal to consider the overall effect of the agreement seems unreasonable. For instance, selling a business may be impossible without some restrictive covenant, yet overall it is beneficial to competition that businesses can be sold.

Yet to allow too wide a
scope for such arguments is inconsistent with article 101(3), which lays down conditions to exempt beneficial agreements. The conflict is less acute now the procedural rules governing exemption have been rationalised, but it remains an important point of principle.

This was an issue in MasterCard, and the CJEU insisted upon a narrow approach. An agreement with anti-competitive effect can be saved under article 101(1), only if the anti-competitive elements are ancillary to the main operation and strictly necessary. It is not enough that the agreement would be more difficult or less attractive without the questionable term: it must be ‘impossible’ to operate without it.

In CB the principle issue concerned the distinction between anti-competitive ‘object’ and ‘effect’. It is long-standing law that either will condemn an agreement. But what is meant by ‘object’? One may assume the distinction is between intention and objective effect. But that is
not so.

It turns out the real distinction is between effects that are so likely one can presume, without detailed analysis of the actual facts, that they must have occurred, and effects which are less certain. There is restriction by ‘object’ in the case of terms “which reveal a sufficient degree of harm to competition that it may be found that there is no need to examine their effects”.

Indispensable restrictions

The practical result in MasterCard was that the court dismissed the appeal because the undertakings could not show that restrictions were truly indispensable. In CB it allowed the appeal, because the Commission could not show the anti-competitive consequences of the agreement were so clear that they could be presumed without detailed analysis.

Despite the differences in result, there is a common thread here. Proof of ‘object’ is a means by which the Commission can avoid detailed examination of the actual consequences of an agreement on the market. Proof of ‘ancillary restraint’ is a means by which undertakings can avoid the sort of detailed analysis of consumer benefit that exemption requires. Each of these rules allows one side
or the other to take a sort of shortcut. The overall message from these cases is that such shortcuts are to be reserved for the clearest cases. SJ