CORE Attorneys is a Swiss boutique law firm focusing on competition law, regulatory and distribution law matters.
In its ruling of 29 June 2023 in the Super Bock Bebidas SA case (Case C-211/22), the European Court of Justice (ECJ) held that the vertical agreement fixing minimum resale prices does not in itself constitute an impermissible «restriction of competition by object» within the meaning of Article 101(1) TFEU. The decision was based on a preliminary ruling procedure. At its centre was the question whether a vertical agreement fixing minimum resale prices (resale price maintenance) can automatically be qualified as a restriction of competition by object or whether the latter can be presumed in the case of resale price maintenance.
In line with its consistent case law, the ECJ once again explicitly demands a restrictive interpretation of restrictions of competition by object. Accordingly, the national competition authorities and courts have to prove that an agreement sufficiently affects competition by finding that the agreement «in itself presents a sufficient degree of harm to competition» (para. 34 of the ECJ judgment in the matter Super Bock). The high standards for the finding or narrow interpretation of restrictions of competition by object are of great importance, since an analysis of the specific effects in a particular case may only be dispensed in the affirmative. Otherwise, it is up to the competition authorities to prove anti-competitive effects to the companies in order to establish an impairment.
According to the ECJ, this evidence must be based in particular on the content of the agreement, its objectives, the full economic and legal context and, within that context, on the nature of the goods and services affected, as well as the actual conditions of the functioning and structure of the market or markets in question. The ECJ thus reaffirms its consistent practice of a restrictive or narrow interpretation of so-called restrictions of competition by object.
In previous decisions, the ECJ has noted that in order to establish such object restrictions, it must be shown that the restrictions in question are «[…] by their very nature harmful to the proper functioning of normal competition […]». (ECJ, Judgment C-67/13 P of 11 September 2014, para. 58 – Groupement des cartes bancaires (CB) v. European Commission) or that it can be shown on the basis of all available evidence that the relevant conduct «[…] can have no other explanation than the commercial interest of the parties to the agreement not to engage in competition on the merits […]» (ECJ, judgment C-307/18 of 30 January 2020, para. 111 – Generics (UK) Ltd et al. v Competition and Markets Authority). As a consequence, this means that for each agreement its overall context must be analysed on a case-by-case basis and it must be examined whether there is actually a restriction of competition by object, regardless of how serious an agreement may appear at first glance and whether it concerns e.g. prices or price elements. The ECJ’s decision thus reaffirms that a form-based approach without consideration of the respective context is not appropriate.
According to the ECJ, alleged pro-competitive effects must also be considered within the economic and legal context. And if the parties to the agreement invoke its pro-competitive effects, these aspects must be taken into account as elements of the context of the agreement: «Provided that they are demonstrated, relevant, intrinsic to the agreement concerned and sufficiently significant, those effects may give rise to reasonable doubt as to whether the agreement concerned caused a sufficient degree of harm to competition […]»(para. 36 of the ECJ judgment in the matter Super Bock). The ECJ thereby confirms its case law, as stated for example in the Generics UK judgement (ECJ, judgment C-307/18 of 30 January 2020, para. 111 – Generics (UK) Ltd et al. v Competition and Markets Authority).
Against this background, the ECJ finds it irrelevant that resale price maintenance is considered a hardcore restriction under the EU Block Exemption Regulation on Vertical Agreements (Vertical Block Exemption Regulation; VBER) and the corresponding Guidelines, which fall outside any corresponding exemption (safe harbour). Accordingly, the concept of restriction of competition by object is narrower than that of a hardcore restriction. The relevant economic and legal context must also be taken into account regarding these hardcore restrictions. There is precisely no simple formalism.
The ECJ ruling is also highly relevant for Switzerland, especially since the Swiss competition authorities are guided in their practice by EU law and its implementation by the European Commission and the EU courts. An in-depth case-by-case analysis and a restrictive interpretation of alleged restrictions of competition by object, namely of the «Swiss hardcore restrictions» or presumptions under Art. 5 paras 3 and 4 of the Cartel Act, must also be demanded when applying Swiss antitrust law. In particular, all agreements must be assessed in their respective economic and legal context.
However, the practice of the authorities and courts in Switzerland interprets agreements pursuant to Art. 5 paras 3 and 4 of the Cartel Act in an unlawfully increasingly extensive and purely form-based manner without taking the relevant context into account. This was also recently stated by the renowned Professor emeritus and former Vice President of the Swiss Competition Commission Roger Zäch in a spectacular essay in the journal Aktuelle Juristische Praxis (Roger Zäch, Restriktive Auslegung von Preisabreden im Sinne von Art. 5 Abs. 3 KG, AJP 2023, pp. 686-698). Certain conduct that is unproblematic due to its context is regularly punished with heavy fines as the most serious infringements of competition law based on formal criteria alone (e.g. reference to prices or price elements) and without any proof of effective restraints of competition. While this is be justified, for example, in the case of bid rigging on the basis of economically sound theories of harm, it leads to incorrect judgments for other forms of cooperation such as horizontal cooperation on R&D or specialization, joint ventures, purchasing alliances or sustainability cooperation, even though these also partly relate to competition parameters such as prices and quantity by definition. In these cases, it is widely recognized from an economic perspective and also according to the recently revised EU Horizontal Guidelines that, depending on the circumstances, they have a pro-competitive or at least competition-neutral effect. Current Swiss authority and court practice threatens to prohibit and impose heavy fines even on pro-competitive or at least competition-neutral conduct, in particular the before-mentioned horizontal cooperation.
The motion submitted by Mr Olivier Français, member of the Council of States, at the end of 2018 (Motion 18.4282 – «Die Kartellgesetzrevision muss sowohl qualitative als auch quantitative Kriterien berücksichtigen, um die Unzulässigkeit einer Wettbewerbsabrede zu beurteilen«) must ultimately be seen against the background of the aforementioned unlawfully extensive interpretation of the presumptions threatened with sanctions in the practice of the Swiss authorities and courts. Politics is thus addressing a widespread unease that the appellate courts are no longer fulfilling their control function in the area of competition law and are themselves still the drivers of an unlawfully extensive practice, which in the end impairs competition more than it protects it and leads to great, investment-inhibiting legal uncertainty for companies. This development is hostile to the economy and the rule of law and therefore to be rejected. The motion is part of the partial revision of the Cartel Act proposed by the Federal Council. It is currently being (pre-)discussed in parliament and the respective commissions. It is therefore now up to parliament to put limits on the identified and harmful over-regulation.