The European Commission (EC) has launched a public consultation on the revision of the Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the TFEU (de minimis Notice). The de minimis Notice provides guidance on when agreements between undertakings are not considered to appreciably restrict competition and, therefore, do not fall within the scope of Article 101(1) TFEU.
Existing De Minimis Notice
Under the current de minimis Notice, agreements between undertakings are not considered to appreciably restrict competition within the meaning of Article 101(1) TFEU if:
- In relation to horizontal agreements (i.e. agreements between actual or potential competitors, such as cooperation on joint R&D and production), the combined market share of the parties to the agreement does not exceed 10% on any of the relevant markets affected by the agreement; or
- In relation to vertical agreements (e.g. distribution agreements, franchising), the market share of each of the parties to the agreement does not exceed 15% on any of the relevant markets affected by the agreement.
The 15% and 10% market share thresholds may be reduced to 5% if there is a cumulative foreclosure effect because of parallel networks of agreements.
However, the EC identifies in the de minimis Notice a number of so-called “hardcore” restrictions of competition which, if contained in an agreement, remove the safe-harbors provided. Such hardcore restrictions include:
- Fixing prices when selling products to third parties;
- Limiting output or sales; or
- Allocating markets or customers.
The fact that an agreement may exceed the market share thresholds set by de minimis Notice does not necessarily mean that the agreement infringes Article 101(1) TFEU; it could still be, for example, that the agreement only has a negligible effect on competition or that it is not capable of appreciably affecting trade between Member States.
How Is the Existing De Minimis Notice to Be Revised?
The EC does not propose to revise the market share thresholds as they apply today under the de minimis Notice. The EC proposes to only slightly revise the existing de minimis Notice so that it: (i) is consistent with recently amended competition rules (such as the Horizontal and Vertical Block Exemption Regulations); and (ii) reflects the latest developments in the case-law of the European Court of Justice (CoJ) – in particular the recent Expedia judgment.
It is important that the revised de minimis Notice take into account Expedia since the CoJ made two crucial findings:
- First, the CoJ found that, in order to determine whether or not a restriction on competition is appreciable, a National Competition Authority (NCA) may, but is not required to, take into account the thresholds established in the de minimis Notice. In essence, while the de minimis Notice limits the EC’s discretion when considering what an appreciable restriction on competition is, NCAs are not bound by it.
- Second, the CoJ clarified that anti-competitive by object agreements appreciably restrict competition by their very nature (regardless of any effect they may have). This means that, even if the market share thresholds set by the de minimis Notice are not exceeded, agreements which have an anti-competitive object cannot escape Article 101(1) TFEU.
In addition, the EC’s proposed revisions include language that ensures that the de minimis Notice will not need to be updated every time another competition law instrument is subject to revision. Inter alia is achieved by a statement that hardcore restrictions include any restrictions that are considered or listed as hardcore restrictions in any current or future EC block exemption regulation.
Overall a Successful Story
The fact that the EC proposes to only make little changes to the de minimis Notice – even though more than 10 years have passed since its introduction – indicates that, in general, it has been working well within the applicable EU competition law framework. Under the proposed revisions, companies whose market shares do not exceed the above thresholds will continue to benefit from a safe-harbor – provided that the agreements to which they are parties do not contain hardcore restrictions on competition.
NB: The EC consultation closes on October 3, 2013. Parties interested in making contributions may find all relevant information here. The adoption of the revised Notice is expected to take place in the course of 2014.