The European Court of Justice clarifies scope of infringements "by object"

5.4.2020

The ECJ, in a new decision, has laid down comparatively concrete guidelines for determining when a conduct can be said to restrict competition by object. In so doing, the ECJ has clarified a substantial number of the doubts previously existing in relation to the exact meaning of “by object”. The ECJ, consistent with previous decisions, adopts a somewhat more restrictive approach.

The case in brief

In 1996, seven banks entered into an agreement, binding also on card issuers such as VISA and MasterCard, for a com-mon interchange fee (the fee paid to the customer’s card issuer - often the customer’s bank - by the merchant’s credit card acquirer, e.g. Nets, when a customer pays using a credit card). More banks subsequently joined the agreement.

In 2008, the Hungarian competition authorities launched an investigation into the agreement and found that the participating banks (including VISA and MasterCard) had concluded an anti-competitive agreement. The competition authorities found the agreement to be restrictive not only by object but also by effect and fined the parties to the agreement a total of EUR 5.2m.

The decision was subsequently appealed to the Budapest High Court, which annulled the decision and ordered a new investigation procedure. The competition authority brought that decision before the Hungarian Supreme Court, which in turn referred a number of questions to the ECJ for preliminary ruling. The questions concerned the distinction between “by object” and “by effect” and whether a restriction can be at once a restriction of competition by object and by effect.

The distinction between restrictions “by object” and “by effect”

Established case law holds that if a restriction is deemed to restrict competition by object, no concrete assessment of its actual market effects need be made: The anti-competitive effects of this type of restriction are usually presumed to be so great that there is no need to prove in each case the concrete effects on the market. For that reason, the competition au-thorities have traditionally pursued this type of restriction most intensively.

The ECJ, however, reminded its audience that the concept of a “restriction by object” is to be subject to a restrictive interpretation and is, by definition, to be used only on restrictions so harmful to competition that no investigation into their ac-tual effects is necessary. At the same time, the ECJ laid down that in order to decide if a given restriction is restrictive by object, there must be reliable and solid experience proving that the restriction, by its nature, is harmful to competition. If, on the other hand, there is no clearly established case law determining whether a given restriction is harmful to competition, it cannot be said to be restrictive by object.

The ECJ also laid down that a concrete case-by-case examination of the object of the restriction will be required, in light of its judicial and economic contexts. It is a requirement that the examination proves that the restriction has no other plausible object than the restriction of competition. The parties to the restriction, in turn, may attempt to prove that the re-striction is not anti-competitive by object, i.a. by alleging that the effects of the restriction in fact promote competition.

Advocate General Bobeck, in his Opinion, characterised the requisite analysis in the following way:

Simplified to a metaphorical extreme, if it looks like a fish and it smells like a fish, one can assume that it is fish. Unless, at the first sight, there is something rather odd about this particular fish, such as that it has no fins, it floats in the air, or it smells like a lily, no detailed dissection of that fish is necessary in order to qualify it as such. If, however, there is something out of the ordinary about the fish in question, it may still be classified as a fish, but only after a detailed examination of the creature in question.”

The ECJ further emphasised the role of the so-called counterfactual scenario in the assessment of whether an agreement qualifies as a restriction by object. It may be relevant, therefore, to review carefully the consequences of the agreement, including what competition would have been in the absence of the relevant restriction, to see if the agreement has in fact had anti-competitive effects.

In the concrete case, the ECJ concluded that the evidence did not warrant a conclusion that there was sufficient experience to hold that the restriction in question was severe enough not to examine the effects of the agreement. It will, however, be for the referring court to make the final decision on that issue, on the basis of the evidence produced and the preliminary ruling of the ECJ.

Can a restriction be a restriction of competition both by object and by effect?

The ECJ stated that once an agreement has been found to be restrictive by object, there is no need to examine its effects on competition. Certain forms of coordination will be considered, by their very nature, as harmful to competition. The mere finding that an agreement is restrictive by object, however, does not mean that the competent authority cannot undertake an indepth investigation if relevant.

On that background, the ECJ laid down that it will be possible for one restrictive conduct to be considered restrictive both by object and by effect.

The ECJ also noted that while the competent authority does have the possibility to establish that the same conduct is anti-competitive by object or effect, this in no way reduces the amount of evidence required in order to support such a finding, nor does it diminish the duties incumbent on the competent authority to specify the extent to which the relevant evidence relates to one or the other form of restriction.

Key takeaways

The Budapest Bank decision is yet another example of a judgment that helps us understand the way in which the ECJ views and analyses potentially anti-competitive behaviour.

First and foremost, the decision lays down that a restriction may be both restrictive by object and restrictive by effect at the same time. Another key takeaway is that a restriction cannot automatically be said to be a restriction by object. For that, a more detailed analysis of the relevant legal and economic contexts will be required, and there must be reliable and solid experience in the competition conditions on the relevant market. If that is not the case, the consequences of the relevant restriction will need to be examined in more detail.

Additionally, the decision offers some degree of guidance, reviewing a number of factors that might be relevant for the assessment of whether a given restriction qualifies as a restriction by object or not:


  • Given the necessity of assessing a restriction by object in its relevant legal and economic contexts, it will also be possible through legal and/or economic analyses to show that, for example, a concrete restriction is not a restriction by object.
  • Any procompetition effects of the restriction must also be considered in the assessment of whether it does, in fact, restrict competition at all. These effects are not, therefore, strictly reserved for assessments of whether an anti-competitive behaviour may be exempt under Article 101(3) TFEU.
  • The counterfactual scenario will be relevant too, both in connection with an analysis of the object or effects of the behaviour, and can be used i.a. as an argument that the behaviour was not anti-competitive. E.g., in the case at hand, in which the parties argued that the terms of competition would have been even worse had the agreement not existed.

Click here for the ECJ’s decision.