By way of background to the Hungarian Competition Authority’s (“Authority”) decision; during the mid-1990s, Visa and MasterCard provided in their internal rules that the amount of the interchange fee (“IF”) payable by the acquiring bank (the bank of the merchant accepting the transaction) to the issuing bank (the bank of the cardholder making the transaction) when a card transaction takes place could be jointly determined. In 1996, eight Hungarian banks (comprising the majority of banks operating on the Hungarian market) agreed to both a minimum merchant service charge (“MSC”) and a uniform multilateral interchange fee (“MIF”) applicable to both Visa and Mastercard transactions and informed Visa and Mastercard of this agreement. The MIF agreement was then put into effect in the Hungarian market and remained in effect until 31 January 2008 when the Authority commenced its investigation into all of these measures.
In 2009, the Authority determined that the joint setting of the MIF was an anticompetitive agreement in breach of both Hungarian law and Article 101(1) TFEU. The Authority declared the MIF agreement to be both a restriction of competition by object and by effect. The Hungarian Supreme Court made a preliminary reference to the CJEU seeking guidance on the interpretation of Article 101(1), including whether the same conduct can be deemed to be both an object and an effect restriction of competition or whether they were alternative conditions under Article 101(1) TFEU. As with all CJEU cases, the CJEU was assisted by the advisory opinion of an Advocate General (“AG”), in this case AG Bobek.
In his advisory opinion delivered on 5 September 2019, AG Bobek provided helpful clarity on the distinction between object and effect restrictions: “agreements that are anticompetitive by object and agreements that are anticompetitive by effect are not ontologically different. From a substantive point of view, there is no difference between them: they both restrict competition in the internal market and, for that reason, are in principle prohibited. The distinction between the two concepts is based rather on considerations of a procedural nature. It is meant to indicate the type of analysis that competition authorities are required to carry out when assessing agreements in the light of Article 101(1) TFEU.”
In response to the first question referred to the CJEU as to whether the same conduct can be deemed to be both an object and an effect restriction of competition, the CJEU first noted that the precise linguistic formulation of Article 101(1) TFEU: “all agreements…which have as their object or effect the prevention, restriction or distortion of competition…”; means that ‘object’ and ‘effect’ are alternative conditions.
In its judgment, the CJEU made reference to a long-established line of precedent that; if it is established that an agreement (or decision or concerted practice) has an anticompetitive object, there is no need to examine the effects of that agreement for there to be a violation of Article 101(1) TFEU (similar to a per se violation in the U.S.). The CJEU noted that there is no prohibition on examining the effects of an agreement when there has been a finding of an object restriction; it is simply unnecessary when the conduct has already been deemed to be anticompetitive.
As to the question of whether conduct can be both a restriction by object and by effect, the CJEU stated that if the effects of the conduct are examined when it has already been established that the conduct has as its object the restriction of competition, and it is found that the conduct also has the effect of restricting competition, then the conduct can be characterized both as an object and an effect restriction. However, the fact that conduct can be both an object and an effect restriction of competition does not relieve the national competition authority from its obligation to support its findings with sufficient evidence and to specify whether that evidence supports either a finding of an object or an effect restriction.
As to object violations more generally, the CJEU has warned on a number of occasions that the concept must be interpreted restrictively. It is clear that there are certain types of conduct (for example, horizontal price fixing agreements) which pose such harm to competition that they are deemed to be restrictions of competition by object and do not require an assessment of their effect on the market. The CJEU’s judgment in Cartes Bancaires provides guidance as to how to identify a violation by object : “Only conduct whose harmful nature is proven and easily identifiable, in the light of experience and economics, should therefore be regarded as a restriction of competition by object, and not agreements which, having regard to their context, have ambivalent effects on the market or which produce ancillary restrictive effects necessary for the pursuit of a main objective which does not restrict competition.” 
This does not mean that object restrictions are more harmful to competition than effect restrictions, nor that they should, for example, attract higher penalties. Both types of restriction are equally capable of attracting an exemption under Article 101(3) TFEU.
The judgment in Cartes Bancaires also notes that “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.” [emphasis added]
Having swiftly disposed of this first question, both AG Bobek and the Court took the opportunity to elaborate on the CJEU’s previous jurisprudence on object restrictions and, in particular, to consider the Hungarian Supreme Court’s second question of whether the agreement in question (the MIF agreement) could constitute an object violation. While declining to substantively assess the MIF agreement, such an analysis being outside the jurisdiction of the CJEU, AG Bobek gave some useful guidance as to how the national court/competition authority should conduct its analysis for the two different forms of violations.
AG Bobek stated that the analysis that should be conducted to determine whether the conduct in question is an object restriction has two stages. The first is an examination of the agreement itself and its objectives to “ascertain whether the agreement in question falls within a category of agreements whose harmful nature is, in the light of experience, commonly accepted and easily identifiable.” The second stage might more colloquially be called the ‘reality check’, where the national court/competition authority must consider the legal and economic context in which the agreement was entered into to ensure this doesn’t lead to a different conclusion than the first stage formal assessment. This contextual analysis ensures that agreements that may ultimately have pro-competitive effects are not deemed anticompetitive purely as a result of their form.
As to the nature of the analysis, AG Bobek suggested that a national court/competition authority should draw on its own experience in competition investigations and the prior case law of the CJEU. If the agreement in question is the type that “most of the time, is detrimental to competition,” then provided the second stage ‘reality check’ doesn’t contradict this, the agreement is likely to be an object restriction. In essence, in the word of AG Bobek; “if it looks like a fish and it smells like a fish, one can assume that it is a fish. Unless, at first sight, there is something rather odd about this particular fish, such as that it has no fins, it floats in the air, or it smells like a lily, no detailed dissection of that fish is necessary in order to qualify it as such. If, however, there is something out of the ordinary about the fish in question, it may still be classified as a fish, but only after a detailed examination of the creature in question”
Having laid out some helpful guidance on how a potential object violation analysis should be conducted, AG Bobek was critical that there was a lack of clarity in this case as to the basis of the object violation finding. He noted that the complexity of the conduct, affecting several markets over a significant period of time when conditions of competition in the underlying markets changed substantially, requires greater “definitional clarity and precision.” AG Bobek considered the approach of the European Commission to MIFs during the same period, finding that the changing approach of the Commission (granting exemptions, making object violation findings, accepting commitments) illustrated a lack of uniformity and consistency of approach which called into question whether an object violation was appropriate. Finally, AG Bobek criticized the Authority’s lack of reference to economic principles, studies or analysis in the underlying finding and submissions to the CJEU concerning that finding.
Unsurprisingly, the CJEU also affirmed that the substantive analysis was for the national court/competition authority, and refrained from any substantive analysis of the underlying conduct that was the basis of the Authority’s decision. Nevertheless, the CJEU also set out some guidance on the analysis that should be undertaken by the national court/competition authority when there is a suspected object violation under Article 101(1) TFEU. Also referring to the Cartes Bancaires jurisprudence, the CJEU noted that every relevant element of the conduct should be taken into account, including: the nature of the services, the real conditions and structure of the market, and the economic and legal context in which the agreement was entered into. The CJEU warned that conduct should not be qualified as a restriction of competition by object unless it can be unequivocally determined that the conduct has sufficiently serious effects on competition.
The CJEU repeated its previous jurisprudence that the concept of a restriction by object must be interpreted restrictively and can only apply to certain types of conduct which, in and of themselves, are so harmful to competition that an examination of the effects of the conduct is not necessary. If an anticompetitive object is not established and the Authority proceeds to consider whether there was an effects violation, then the national court/competition authority must consider the counterfactual of the market absent such conduct in order to assess whether there were, in fact, effects on that market. The CJEU stated that both the assessment of whether the conduct itself was an object restriction, and the assessment of the effects of the conduct on the market were assessments for the national court/competition authority to make (and not the CJEU), having regard to the facts of the case.
From a national court/competition authority’s standpoint, object violations have an important practical advantage, in that they do not require a full analysis of the effects of the relevant conduct. This means the analysis is generally less resource-intensive and can usually be concluded faster than an effects-based analysis. All factors that are likely to appeal to finance and resource-stretched courts/regulators. As a matter of practical reality, findings of effect violations of Article 101(1) TFEU are much less common. However, it is clear from both the CJEU’s judgment in this case and AG Bobek’s opinion, that potential object restrictions do not require less rigorous analysis than an effect restriction, and such a finding must be adequately supported by evidence. This is an unsurprising judgment in a well-established line of cases concerning the distinction between object and effect restrictions under Article 101(1) TFEU. The opinion of AG Bobek stands out for its remarkable clarity and comprehensive summary of the relevant jurisprudence on the topic.
*From the French. Judgment not yet available in English.