On 25 June 2014 the EU Commission issued revised rules providing a safe harbour for certain minor agreements from the prohibition on anti-competitive agreements (within the so-called "De Minimis Notice"). The new Notice does not change the market share thresholds under which the parties can presume their agreement does not appreciably restrict competition in breach of the prohibition. The EU Commission has, however, codified its recent practice that agreements restrictive of competition by "object" will always be regarded as appreciably restricting competition, regardless of the size of the parties or the (lack of) impact of the agreement on competition in practice. The types of agreement categorised as "object" restrictions have increased in recent years, and therefore the risks of breaching the rules are higher than ever.

1. Background

Article 101 of the Treaty on the Functioning of the European Union ("TFEU") prohibits agreements and concerted practices which effect trade within the EU and which have the object or effect of preventing, restricting or distorting competition (unless the agreement can be justified under the exemption factors set out in Article 101(3) TFEU)).

The EU Courts have long held that only agreements which are capable of appreciably restricting inter-state trade and competition fall within the scope of Article 101 TFEU. In order to assist companies self-assess their agreements, in 2001 the EU Commission published its De Minimis Notice. This set out market share thresholds under which it can be presumed that an agreement does not appreciably restrict competition; the Notice states that the EU Commission will not take action in relation to any such agreements. The resulting safe harbours are useful in providing certainty to companies that their agreements will not be investigated if the conditions set out in the Notice are met (albeit that the relevant market definition and therefore market shares will not always be straightforward to calculate).

Agreements between companies exceeding the market share thresholds within the Notice do not automatically breach the prohibition, but will need to be assessed individually on the facts (unless they fall within the scope of one of the "block exemptions" published by the EU Commission, a number of which contain market share caps at a higher level than those within the Notice).

The safe harbour within the 2001 De Minimis Notice did not apply to certain specified types agreements which raise the most serious competition law concerns, such as agreements between competitors to fix prices, share markets or limit output, and agreements between suppliers and buyers to fix resale prices or restrict the territory into which the contract products or services can be resold.

However, the EU Courts' case law remained clear that even such "hard core" agreements would need to be capable of appreciably restricting competition to fall within the scope of Article 101 TFEU, albeit that in many cases this test would be relatively easily met, even where the parties' market shares fall materially below the market share thresholds within the Notice.

2. Revised De Minimis Notice

The EU Commission consulted on potential revisions to the De Minimis Notice in the course of 2013, and on 25 June 2014 published a revised Notice (see here).

No change to market share thresholds

Importantly, there are no changes to the market share thresholds within the Notice. Therefore the safe harbour from Article 101 TFEU in principle remains where:

  • In relation to "horizontal" agreements between actual or potential competitors, the combined market share of the parties (including their wider corporate groups) does not exceed 10% on any of the markets affected by the agreement.
  • In relation to "vertical" agreements between companies at different levels of the supply chain, the market share of each of the parties (including their wider corporate groups) does not exceed 15% on any of the markets affected by the agreement. 

Where there is a cumulative network of parallel agreements between different parties restricting competition, the market share threshold is reduced to 5%. The Notice states that such a cumulative network of agreements is unlikely to be an issue if it covers less than 30% of the relevant market.

Changes to the Notice

The majority of the changes to the Notice are cosmetic changes to update the text to reflect other changes in the EU competition law regime. However, there are two main substantive changes:

  • Firstly, instead of specifying a list of agreements/restrictions which fall outside the scope of the safe harbour as per the approach in the 2001 version, the new Notice provides that it does not apply to any agreements constituting restrictions by "object" and/or which are listed as "hard core" restrictions within any current or future block exemptions.
  • Secondly, the new Notice states that, even aside from the Notice's safe harbours, any restrictions by "object" are automatically assumed to have an appreciable restriction on competition, regardless of whether there are any concrete effects on the market.

This latter change is stated to reflect a 2012 ruling by the Court of Justice of the EU ("CJEU"), in the Expedia case. It effectively means that the EU Commission's position is that any agreement by "object" which restricts competition will be regarded as appreciable, and in practice as infringing Article 101 TFEU (unless justified under Article 101(3) TFEU), regardless of factors such as the size of the parties, the market coverage of the agreement, and its economic realities.

Agreements containing restrictions by "object" may still fall outside the scope of Article 101 TFEU if they do not appreciably affect trade between EU Member States (in which case national law would instead apply).[1] However, this effect on trade concept is interpreted very widely in practice, and EU law may therefore apply to agreements concerning a limited part of a market. Moreover, EU Member State national competition authorities and courts may choose to apply the EU Commission's approach to appreciability to the equivalent national competition rules.

Restrictions by "object"

These changes are particularly important given that the concept of restrictions by "object" has been interpreted ever more widely by the EU Commission and the EU Courts, as well as Member State authorities, in recent years. "Object" restrictions are essentially those which are deemed to be so serious that by their very nature they are capable of damaging competition. There is no need therefore for the Commission to conduct an "effects" analysis to demonstrate that such agreements could have any actual or likely effect on the market in practice (therefore making it much easier for the Commission to meet its burden of proof).

It has always been clear that cartel agreements such as price-fixing fall within this concept, as well as serious vertical agreements such as resale price maintenance. However this category has gradually been expanded to include agreements where it is less obvious they would automatically have such a deleterious effect on competition (such as so-called "pay for delay" patent dispute settlement agreements in the pharmaceutical context (see here), and certain information sharing arrangements between competitors (see here)). The line between "object" and "effect" restrictions is not always clear.

Working document on "object" restrictions

At the same time as publication of the new De Minimis Notice, the EU Commission has published a "staff working document" (see here) setting out those restrictions which have been found in previous cases to fall within the "object" category. This is stated to serve as a practical check-list to assist companies to assess whether their agreements are covered by the De Minimis Notice or not. However, this does not prevent the EU Commission or Courts (or indeed Member State authorities) from categorising new forms of agreement as "object" restrictions, as has already occurred in a number of novel cases.

3. Conclusion

The EU Commission's renewal of the De Minimis Notice and its safe harbour provisions is welcome. However, it is disappointing that the EU Commission has as a result of the relatively ambiguous statements of the CJEU in the Expedia judgment adopted a "per se" position which assumes that all object restrictions automatically constitute appreciable restrictions on competition in all circumstances, regardless of the economic reality (despite the previous case law to the contrary).

In particular in light of the expanding definition of "object" restrictions, even agreements involving small players and which may have little impact on competition in practice may breach the rules.

Competition law compliance is therefore more important than ever.