Article 101 (1) TFEU prohibits agreements, vertical  or horizontal, “which have as their object or effect the  restriction or distortion of competition.” Competition  lawyers in the European Union are brought up on the idea  that there are two types of competition law offences under  Article 101 TFEU: restrictions by object and restrictions  by effect. In layman’s terms, restrictions by object are  those that are by their very nature so deleterious to  competition that their negative effect on the market can  be presumed.

Underpinning their basic belief is the European Court  of Justice’s 1966 ruling in Société Technique Minière v.  Maschinenbau Ulm1  that the words object and effect must  be read disjunctively. Where a restriction is found to be  by object, it is not necessary for the authority or the court  to prove that the restriction had anti-competitive effects. 

Not surprisingly, over the decades of evolving decisional  practice and case law, those restrictions that were  intuitively “hardcore” were found to be restrictions  by object: naked price fixing, geographic market  allocation, output limitations – all of which are horizontal restrictions – but also certain vertical practices that are  obviously harmful to competition, such as territorial  restrictions in distribution agreements or export bans. 

The “object box” has evolved over time, and some forms  of conduct may from time to time be downgraded from  object restriction to effect restriction. However, of much  bigger concern to companies and practitioners is that in  recent years the European Commission has tended to  fold an increasing number of restrictions into the object  box – rather more restrictions than one may intuitively  have expected, thus avoiding the need for it to carry out  a detailed effects analysis while increasing the burden on  the companies to prove countervailing efficiencies.

It is thus a welcome development that the ECJ, in  Groupement des cartes bancaires (CB),2  made it clear  that restriction by object class must remain somewhat  exclusive. We can compare it to entering a VIP lounge at  the airport. Indeed, even before the ECJ’s recent ruling,  Advocate General Nils Wahl had already made that point  in his conclusions delivered in March 2014.

AG Wahl acknowledged that classifying conduct on  the basis of a standardised approach, rather than on a  case-by-case basis, saves valuable enforcement resources  and increases predictability as well as deterrence. But  these advantages, he noted, can only materialize where  the object restrictions are clearly defined. Over the years  case law has blurred the distinction between restriction  by object and restriction by effect. The increasing use  of quantification methods in the process of qualifying  conduct has generated confusion between the  identification of object restrictions and the effects analysis  that needs to be carried out for all other cases. This, Wahl  pointed out, could lead to inconsistencies: a conduct  qualified as sufficiently deleterious to competition  based on economic theory could thus be prohibited even  when in a particular case it did not appreciably restrict  competition according to the same economic theory  (e.g. horizontal price fixing between companies with tiny  market shares). 

Wahl said: “Nonetheless, and despite the fact that, to  some extent, case-law has contributed to blurring the  boundary between the concepts of restriction by object  or restriction by effect, I take the view that recourse to  that concept must be more clearly defined.” He continued,  “Because of these consequences, classification as an  agreement which is restrictive by object must necessarily  be circumscribed and ultimately apply only to an  agreement which inherently presents a degree of harm.  This concept should relate only to agreements which  inherently, that is to say without the need to evaluate their  actual or potential effects, have a degree of seriousness  or harm such that their negative impact on competition  seems highly likely. Notwithstanding the open nature of  the list of conduct which can be regarded as restrictive  by virtue of its object, I propose that a relatively cautious  attitude should be maintained in determining a restriction  of competition by object.” 

The ECJ followed AG Wahl’s recommendations.  It recalled that “certain types of coordination between  undertakings reveal a sufficient degree of harm to  competition that it may be found that there is no need  to examine their effects,” because “certain types of  coordination between undertakings can be regarded,  by their very nature, as being harmful to the proper functioning of normal competition”. To qualify conduct  as a restriction by object, “regard must be had to the  content of its provisions, its objectives and the economic  and legal context of which it forms a part. When  determining that context, it is also necessary to take  into consideration the nature of the goods or services  affected, as well as the real conditions of the functioning  and structure of the market or markets in question”.  The “essential legal criterion for ascertaining whether  coordination between undertakings involves such a  restriction of competition ‘by object’ is the finding that  such coordination reveals in itself a sufficient degree of  harm to competition.” 

The ECJ went on to state that the “concept of restriction  of competition ‘by object’ can be applied only to certain  types of coordination between undertakings which reveal  a sufficient degree of harm to competition that it may  be found that there is no need to examine their effects,  otherwise the Commission would be exempted from the  obligation to prove the actual effects on the market of  agreements which are in no way established to be, by  their very nature, harmful to the proper functioning of  normal competition. The fact that the types of agreements  covered by Article 81(1) EC do not constitute an  exhaustive list of prohibited collusion is, in that regard, irrelevant.” The ECJ also confirmed that the methodology  used to qualify the conduct at issue must not overlap with  the effects analysis to be conducted where a restriction  does not meet the by-object standard.

It remains to be seen whether this ruling will have a  significant impact on the Commission’s future practice.  In recent years, the Commission has stretched the concept  of object-restriction significantly, and its Staff Working  Document on “by object” restrictions of 25 June 2014  lists some cases as examples that actually do not belong  in that class. But this should not discourage us; one  should never exclude the hope that things can change for  the better.