Implications
New de minimis notice
Actions to consider
Recommendations
Comment
On June 25 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 regarding 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.
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 on competition. As in the previous version of the de minimis notice, the 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 on anti-competitive agreements (Article 101 of the Treaty on the Functioning of the European Union (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 exceed the thresholds constitute an appreciable restriction of competition. In order to benefit from the safe harbour, such agreements cannot contain 'by object' restrictions to competition.
The commission regularly issues guidance on its interpretation of competition law rules. However, such guidance is not binding on national competition authorities or courts, which can depart from it. The de minimis notice – adopted on June 25 2014 – clarifies how, in its enforcement activities, the commission will analyse agreements of minor importance. As it explained in its press release, by excluding such agreements from its scope, the commission has chosen to "concentrate its resources on agreements with a higher risk of distorting competition in the Single Market".
The commission has not only reaffirmed the market share thresholds under which companies are outside of the scope of application of Article 101 of the TFEU, but also introduced a major change.
Following the European Court of Justice (ECJ) ruling in Expedia, the commission decided to explicitly exclude the provisions in safe harbour agreements which aim at restricting competition (known as 'by object' restrictions). In Expedia, the ECJ 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 commission (ie, 10% for competitors and 15% for non-competitors), their agreement will be considered anti-competitive 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 of the TFEU.
Moreover, the new de minimis notice adds that the safe harbour will not apply to agreements that contain hardcore 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 notice therefore clarifies its language by unifying by object and hardcore restrictions into a single category. Such restrictions include:
- price fixing;
- output limitation; and
- market or customer allocations.(4)
It is not expected that publication of the new de minimis notice will significantly change the commission's approach to the application of Article 101 of the TFEU. However, there may be a risk that the commission will extend its interpretation of 'by object' restrictions and catch an increasing number of agreements. This could provide further uncertainty and a slightly elevated risk to the companies willing to enter into contractual relationships. However, it is understood that this is a limited risk, as the commission's intention is likely to focus on more adverse agreements (ie, cartels).
Recommendations include the following:
- Check whether the aggregated market share is below the indicated thresholds:
- 10% for agreements between competitors; or
- 15% for agreements between non-competitors.
- Even if the market share is below the thresholds, verify whether the agreements contain any restriction of competition in general, or anything that could be interpreted specifically as a restriction by object.
- When in doubt, seek specialist guidance from external counsel.
The adoption of the new de minimis notice is a reminder of the commission's practice of taking into account ECJ case law and revising and adapting its guidelines and decisional practice accordingly. Although it clarifies and reaffirms the application of the safe harbour thresholds, it remains to be seen how the 'by object' and hardcore restrictions will be interpreted in future. There is a risk that the recent trend of extending 'by object' cases into the grey area will continue, making counselling to internal clients increasingly difficult.
For further information on this topic please contact Gavin Bushell or Charles Paillard at Baker & McKenzie by telephone (+32 2 639 36 11), fax (+32 2 639 36 99) or email (gavin.bushel@bakermckenzie.com or [email protected]). The Baker & McKenzie website can be accessed at www.bakermckenzie.com.
Endnotes
(1) Commission notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the TFEU (de minimis notice).
(2) Commission notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the TFEU (de minimis), OJ C 368, 22/12/2001, Pages 13 to 15.
(3) The de minimis notice provides for a 5% threshold when competition is restricted by the cumulative effect of agreements, both for competitors and non-competitors.
(4) With the de minimis notice, the commission published a staff working document, providing guidance on restrictions of competition by object. This accompanying document – which contains several excerpts from relevant cases – provides a useful snapshot of what the commission considers to be 'by object' restrictions.
