Recent developments

On 25 June 2014, the European Commission adopted a revised De Minimis Notice.[1]   Although in line with the previous notice[2] it provides further clarity to companies as to what are agreements of minor importance and when they can benefit from a "safe harbour".  In any case, agreements containing "by object" restrictions are now systematically excluded from the "safe harbour" and always constitute an appreciable restriction of competition.

Implications for companies with low market shares

Companies with low market shares on a given market benefit from a "safe harbour" in relation to their agreements which do not have an appreciable restriction of competition.  As in the previous version of the De Minimis Notice the European Commission assesses the appreciable restriction to competition using market shares. Agreements between competitors whose aggregate market share does not exceed 10% will not be caught by the general prohibition of anticompetitive agreements (Article 101 TFEU).  The aggregate market share threshold amounts to 15% for agreements between non-competitors.[3]  Whenever there are difficulties in classifying an agreement  the lower 10% threshold applies.  The thresholds do not mean that any agreements between companies whose market shares exceeds the above thresholds constitute an appreciable restriction of competition.  In any case, in order to benefit from the "safe harbour" such agreements cannot contain "by object" restrictions to competition.

What the new De Minimis Notice says

The European Commission regularly issues guidance on its interpretation of competition law rules.  However, such guidance is not binding on national competition authorities or courts which are therefore able to depart from it.  The De Minimis Notice – adopted on 25 June 2014 – clarifies how, in its enforcement activities, the European Commission will analyse agreements of minor importance. As it explained in its press release, by excluding such agreements from its scope, the European Commission chooses to "concentrate its resources on agreements with a higher risk of distorting competition in the Single Market".

Not only does the European Commission re-affirm the market share thresholds under which companies are outside of the scope of application of Article 101 TFEU but it introduces a major change. 

Following a ruling from the Court of Justice of the European Union ("CJEU") in the Expedia case, the European Commission decided to explicitly exclude from the "safe harbour" agreements containing provisions which aim at restricting competition; the so-called "by object" restrictions.  In Expedia, the CJEU held that an agreement with such restrictions constitutes "by its very nature and independently of any concrete effect that it may have, an appreciable restriction on competition".  Hence, even if two companies have an aggregate market share below the thresholds set by the European Commission (i.e., 10% for competitors and 15% for non-competitors), their agreement will be considered to be anticompetitive if it contains a restriction by object.  Their agreement will no longer be deemed to be of minor importance and will systematically be contrary to Article 101 TFEU.

Moreover, the new De Minimis Notice adds that the "safe harbour" will not apply to agreements that contain hard-core restrictions as listed "in any current or future Commission block exemption regulation, which are considered by the Commission to generally constitute restrictions by object".  The De Minimis Notice therefore clarifies its language by unifying "by object" and hard-core restrictions into one single category.  Such restrictions include for example price fixing, output limitation and market or customer allocations.

Actions to consider

We do not expect that the publication of the new De Minimis Notice will significantly change the European Commission's approach in the application of Article 101 TFEU.

However, there may be a risk that the European Commission extends its interpretation of by object restrictions and catches an increasing number of agreements.  This could provide further uncertainty and a slightly elevated risk to the companies willing to enter into contractual relationships.  We understand that this is however a limited risk as the European Commission's intention is likely to focus on more adverse agreements (i.e. cartels).

Some recommendations:

  1. Check if your aggregated market share is below the indicated thresholds:
  1. 10% for agreements between competitors; or
  2. 15% for agreements between non-competitors
  1. But, even though your market share is below the thresholds, always verify if your agreements contain any restriction of competition in general and/or specifically anything that could be interpreted as a restriction by object.
  2. When in doubt, seek specialist guidance from external counsel.

Conclusion

The adoption of the new De Minimis Notice is a reminder of the European Commission's practice of taking into account CJEU case law and revising and adapting its guidelines and decisional practice accordingly.  Although it clarifies and re-affirms the application of the "safe harbour" thresholds, it remains to be seen how the by object/hard-core restrictions will be interpreted in the future. There is a risk that the recent trend of extending by object cases into the grey area will continue making counselling to your internal clients increasingly difficult.

“This article was originally edited by, and first published on, http://www.internationallawoffice.com/”