When asked for a preliminary ruling by the Hungarian Supreme Court (case C-228/18), the Court of Justice clari- fied the notion of restriction “by object” and provided detailed guidance on how to assess such a restriction.
The Budapest Bank case concerns an agreement between seven banks which introduced uniform multilateral interchange fees (MIF) applicable to transactions using Visa and MasterCard cards (the MIF Agreement). MIFs are the fees paid to the card holder’s bank (the issuing bank) by the merchant’s bank (the acquiring bank) for each credit card transaction.
In that context, the referring court asked the Court of Justice whether an interbank agreement which fixes at the same amount the interchange fee payable, where a payment transaction by card takes place, to the banks issuing such cards can, in the light of Article 101(1) TFEU, be classified as an agreement which has as its object the prevention, restriction or distortion of competition.
In its judgment of 2 April 2020, the Court recalled that, in order to determine whether an agreement between undertakings or a decision by an association of undertakings reveals a sufficient degree of harm to competition to be considered a restriction of competition “by object” within the meaning of Article 101(1) TFEU, regard must be had to the content of its provisions, its objectives and the economic and legal context of which it forms a part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question.
Moreover, the Court underlined that the concept of restriction of competition “by object” must be interpreted restrictively. The concept of restriction of competition “by object” can only be applied to certain types of coordination between undertakings which reveal a sufficient degree of harm to competition for it to be found that there is no need to examine their effects. Only agreements which are, by their very nature, harmful to the proper functioning of competition can therefore exempt competition authorities from the obligation to prove the actual effects on the market of the agreements in question.
When examining the content, objectives and context of the MIF Agreement, the Court developed some key criteria to be taken into consideration in the assessment of potential “by object” infringements.
In particular, as regards the objectives pursued by the MIF Agreement, the Court considered that the pro-competitive effects of the agreement constitute a relevant element. Indeed, if it can be established that setting the interchange fees at a uniform level may have led to intensifying competition or preventing an excessively high level of interchange fees, a restriction of competition on the payment systems market can only be found after an assessment of the effects of that agreement, thus excluding a finding of a restriction “by object”.
In addition, the Court emphasised that, in order to justify an agreement being classified as a restriction of competition “by object”, there must be sufficiently reliable and robust experience for the view to be taken that that agreement is, by its very nature, harmful to the proper functioning of competition. With regard to the MIF Agreement, the Court found that it was not possible to conclude on the basis of the information available to it that sufficiently general and consistent experience exists for the view to be taken that the harmfulness of such an agreement to competition justifies dispensing with any examination of the specific effects of that agreement on competition. It would therefore be necessary to examine whether, having regard to the situation which would have prevailed if that agreement had not existed, the agreement was restrictive of competition by virtue of its effects.
Finally, it results from the judgment of the Court that the analysis of the opposite situation is also relevant when examining the existence of a restriction “by object”. It is therefore necessary to examine the scenario which would have existed with no MIF Agreement. If there were to be strong indications that, if the MIF Agreement had not been concluded, upwards pressure on interchange fees would have ensued, so that it cannot be argued that that agreement constituted a restriction “by object” of competition on the acquiring market in Hungary, an in-depth examination of the effects of that agreement should be carried out.
In line with the Cartes Bancaires case, the Court is clearly continuing its efforts to tighten the conditions under which an agreement can be classified as a restriction “by object”. To do so, competition authorities may certainly not rely on the apparently suspicious character of an agreement but are required to carry out a (possibly highly) detailed analysis of the relevant economic and legal context and rely on robust experience.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information on this case and/or for general advice on competition law.