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Friday, 1 August 2014

EU: Tighter control of anti-competitive agreements

The European Commission has tightened up on small agreements that restrict competition. For years various iterations of its Notice on agreements of minor importance (referred to by recalcitrant legal Latin-speakers as the de minimis exception) condoned agreements between parties so small as to have, effectively, no market power. Their activities would rarely have an appreciable effect on competition, although the exception never allowed the cardinal sins of price fixing and market sharing, the effect of which is always deemed to be appreciable.
The Notice has to be renewed from time to time, like much competition legislation, because markets evolve over time. The latest Notice (25 June), or more precisely the Guidance that comes with it, gives a free pass to agreements between competitors (actual or potential) whose market share does not exceed 10 per cent, and between non-competitors whose share does not exceed 15 per cent. Nothing new there. How to measure market share remains a bit of a mystery, explained in further guidance from the Commission: franchised dealers will always be considered to have a high market share, because broadly speaking (and of course it is not quite what the block exemption says) they enjoy fairly exclusive rights in their locality.
Importantly, though, the new Notice (and the Guidance) extend the non-exception for hardcore restrictions to cover all restrictions which have the object of restricting competition. It will still avail agreements which have that effect but which were not created with a view to achieving it, a distinction which might be difficult to draw in practice.
This change makes good sense, as focusing only on price fixing and market sharing was always a rather narrow approach. It will still be possible to gain exemption from the prohibition (a different matter from exception), but the Commission does make clear in its guidance that it is very unlikely that an agreement aimed at restricting competition (as opposed to that merely being an ancilliary effect) will qualify for exemption – it is unlikely to produce a benefit for consumers, and will inevitably impose restrictions which are not indispensable to the achievement of its objectives. Businesses which might previously have thought they were safe might have to think again.
The Notice applies only to the application of EU competition rules: but national competition laws form a seamless part of the EU-wide regulation of anticompetitive conduct, and the Guidance is expressly aimed at national competition authorities and courts as well. We have our own, slightly different, de minimis rule in the UK, but it should no longer be relied upon for “restrictions by object”.

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