Source: https://www.howtocrackanut.com/blog/tag/article+101+TFEU
Timestamp: 2019-08-24 14:31:45
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In its Judgment of 21 July 2016 in VM Remonts and Others, C-542/14, EU:C:2016:578, the Court of Justice of the European Union (CJEU) issued an important clarification of the rules applicable to the attribution of (vicarious) liability for infringements of EU competition law, thus expanding its case law on the subjective elements (ie mens rea-like requirements) of the prohibition of anticompetitive behaviour in Art 101(1) TFEU.
In doing so, the CJEU rejected the proposal for stringent vicarious liability formulated by AG Wathelet (see my criticism here) and formulated a more stringent test for the attribution of anticompetitive behaviour of an independent agent. The test formulated by the CJEU raises some interpretative issues, though, and it deserves some comment.
It is worth reminding that the case addressed issues concerning the imputability of anticompetitive practices in which a third party services provider is engaged to the 'client' undertaking that hired those services (ie how to make the 'client' undertaking liable for the anticompetitive behaviour of one of its services providers).
The case was quite convoluted because it concerned the imputability of a bid rigging offence to a supplying company that engaged a consultant to help it formulate a bid in a tender for a public contract. After the fact, it became apparent that the consultant engaged in collusion with other tenderers in the same bid. The question was, thus, to what extent the bidder should be liable for the collusion that resulted from the allegedly independent activity of the consultant (third party services supplier) and, in any case, what level of proof of anticompetitive intent would be necessary to impose liability on the 'client' undertaking.
In addressing this issue, the CJEU rejected a parallelism between the rules applicable to an undertaking's employees to its agents, and determined that 'where a service provider offers, in return for payment, services on a given market on an independent basis, that provider must be regarded, for the purpose of applying rules aimed at penalising anti-competitive conduct, as a separate undertaking from those to which it provides services and the acts of such a provider cannot automatically be attributed to one of those undertakings' (C-542/14, para 25, emphasis added).
However, the CJEU stressed that this different treatment is based on the independence of market activity of the service provider and, consequently, it would not be justified where the client undertaking exerted significant control over the apparently independent service provider. To that effect, the CJEU determined that
Article 101(1) TFEU must be interpreted as meaning that an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services only if one of the following conditions is met:
– the service provider was in fact acting under the direction or control of the undertaking concerned, or
– that undertaking was aware of the anti-competitive objectives pursued by its competitors and the service provider and intended to contribute to them by its own conduct, or
– that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed (C-542/14, para 33, emphasis added).
Of particular relevance in the field of public procurement, the CJEU also provided some clarification regarding the unauthorised disclosure of commercially sensitive information by the agent, by stressing that
Whilst it is true that [an undertaking is liable for a competition infringement] when that undertaking intended, through the intermediary of its service provider, to disclose commercially sensitive information to its competitors, or when it expressly or tacitly consented to the provider sharing that commercially sensitive information with them ... the condition is not met when that service provider has, without informing the undertaking using its services, used the undertaking’s commercially sensitive information to complete those competitors’ tenders (C-542/14, para 32, emphasis added).
In my view, the VM Remonts Judgment should be welcome for what it does not do. That is, for its rejection of AG Wathelet's proposal for a reversal of the burden of proof, to the effect that the 'client' undertaking would have been considered liable unless it could adduce sufficiently convincing evidence (i) relating to the fact that the agent (services provider) had acted outside the scope of the functions that had been entrusted to it, (ii) regarding the precautionary measures taken by the ‘client’ undertaking at the time of designation of the agent and during the monitoring of the implementation of the functions in question, and (iii) regarding the ‘client’ undertaking's conduct upon becoming aware of prohibited behaviour--so as to demand a public distancing and positive reporting, under the analogous rules of Dansk Rørindustri and Others v Commission, C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, EU:C:2005:408.
However, regarding the positive test that it sets for the assessment of whether anti-competitive activity by an agent can be imputed to the client undertaking, the VM Remonts Judgment seems less satisfactory, in particular due to the last condition of the test in its paragraph [33], whereby 'an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services ... if ... that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed' (emphasis added).
This seems to be an adaptation of the test developed in Commission v Anic Partecipazioni, C-49/92 P, EU:C:1999:356, paragraph [87], to which the CJEU refers in VM Remonts to stress that 'an undertaking may be held liable for agreements or concerted practices having an anti-competitive object when it intended to contribute by its own conduct to the common objectives pursued by all the participants and was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and was prepared to accept the risk' (C-542/14, para 29, emphasis added).
The adaptation of this test to cases of anticompetitive behaviour by an agent seems problematic because it stretches its last part concerning the acceptance of a risk of occurrence of anticompetitive behaviour by third parties (in that case, co-conspirators). In Anic, the undertaking concerned had been attending meetings with other undertakings that formed part of a cartel. Therefore, the assessment of whether the undertaking could reasonably foresee specific types of anti-competitive conduct by its co-conspirators (formally, third parties) derives from its own participation in meetings--that is, derives from its own observation of the behaviour of other entities that participate in the anti-competitive practice.
This cannot be the case in a scenario such as that presented by VM Remonts, where the client undertaking does not participate in any meetings and where it has no (proven) knowledge of the activity of the agent. In these cases, it would seem that the first two prongs of the VM Remonts test would suffice: ie the client undertaking is liable for the anticompetitive behaviour of the agent if (a) it controls the agent or (b) is aware of the anti-competitive behaviour between the agent and third parties, and aims to contribute to it. Introducing the third condition, according to which the client undertaking can also be liable if (c) it could have reasonably foreseen anticompetitive behaviour between its agent and third parties and was prepared to accept the risk which they entailed, seems to far fetched.
Whereas in an Anic-like scenario the reasonable prediction of anticompetitive behaviour by co-conspirators derives from information directly acquired in the meetings in which the undertaking participates--that is, can be presumed under logical rules--in a VM Remonts-like scenario, any claim as to the undertaking's duty to foresee anticompetitive behaviour would be pure speculation.
If the client undertaking has no positive knowledge of the anticompetitive behaviour in which the agent [otherwise, the prong (b) of the test would apply], how is it ever going to be possible to determine that it ought to have foreseen it? If this is on the basis of its relationship with the agent, this dangerously reopens the door to a test like the one developed by AG Wathelet or, worse, creates a sort of culpa in eligendo of its agent that is equally troublesome.
If (factual) speculation is to be avoided and the imposition of vicarious liability is rejected by the CJEU in VM Remonts (para 26, although see para 27, which makes it less clear-cut), the only reasonable interpretation of the prong (c) of the test developed in paragraph [33] of VM Remonts is that it can simply never be applied. In which case, one can be forgiven for wondering if the CJEU did not pay sufficient consideration to the adaptation of the Anic test to a situation involving an independent service provider.
Tags competition law, vicarious liability, VM Remonts, agent, supervision, liability, article 101 TFEU, burden of proof, presumptions, anticompetitive procurement, anticompetitive behaviour
In its Judgment of 7 February 2013 in case Slovenská sporiteľňa, the Court of Justice of the EU (CJEU) has clarified that the fact that an agreement between competitors is concluded in order to prevent a situation of allegedly illegal competition by a third party is irrelevant for its analysis under Article 101 TFEU.
In the very clear terms of the Slovenská sporiteľňa Judgment,
18 Article 101 TFEU is intended to protect not only the interests of competitors or consumers but also the structure of the market and thus competition as such (Joined Cases C‑501/06 P, C‑513/06 P, C‑515/06 P and C‑519/06 P GlaxoSmithKline Services and Others v Commission and Others [2009] ECR I‑9291, paragraph 63).
19 In that regard, it is apparent from the order for reference that the agreement entered into by the banks concerned specifically had as its object the restriction of competition and that none of the banks had challenged the legality of Akcenta’s business before they were investigated in the case giving rise to the main proceedings. The alleged illegality of Akcenta’s situation is therefore irrelevant for the purpose of determining whether the conditions for an infringement of the competition rules are met.
20 Moreover, it is for public authorities and not private undertakings or associations of undertakings to ensure compliance with statutory requirements. The Czech Government’s description of Akcenta’s situation is evidence enough of the fact that the application of statutory provisions may call for complex assessments which are not within the area of responsibility of those private undertakings or associations of undertakings.
21 It follows from those considerations that the answer to the first and second questions is that Article 101 TFEU must be interpreted as meaning that the fact that an undertaking that is adversely affected by an agreement whose object is the restriction of competition was allegedly operating illegally on the relevant market at the time when the agreement was concluded is of no relevance to the question whether the agreement constitutes an infringement of that provision (C-68/12 at paras. 18 to 21, emphasis added).
In my view, the general principle reinforced by the CJEU is sensible and prevents undertakings from taking the law into their own hands--and, even further, from trying to disguise anticompetitive agreements behind an appearance of law-reinforcing behaviour. It clearly establishes a positive obligation for undertakings (either unilaterally or through a sectoral association?) to report instances of potential illegal competition to the competent authorities. Also, although not mentioned by the CJEU, undertakings may be able to file judicial claims (including requests for interim measures) on the basis of unfair competition rules under the relevant domestic legislation [which offers yet one more instance of potential (dis)coordination between unfair competition and antitrust rules in the EU; see Ulrich's reflective piece Anti-Unfair Competition Law and Anti-Trust Law - A Continental Conundrum?].
Moreover, in the view of the CJEU, the existence of such avenues for legal reaction / opposition exclude the possibility to apply the exemption of Article 101(3) TFEU:
35 Even if [the first] condition were met [regarding the protection of conditions for healthy competition and, in the broader sense, thus seeked to promote economic progress], the agreement at issue in the main proceedings does not appear to meet the other three conditions – more particularly, the third condition, whereby an agreement must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of the objectives referred to in the first condition laid down in Article 101(3) TFEU. Even if, as stated by the parties to that agreement, the purpose was to force Akcenta to comply with Slovak law, it was for those parties [...] to lodge a complaint with the competent authorities in that respect and not to take it upon themselves to eliminate the competing undertaking from the market. (C-68/12 at para. 35, emphasis added).
Again, the general position of the CJEU seems highly appropriate. However, a feeling remains that the CJEU's Slovenská sporiteľňa Judgment may be too blunt and that the assessment of fulfillment of the conditions could be refined by leaving a door open for a justification in view of Article 101(3) TFEU in some (extreme) cases where lack of reaction on the part of the established industry could result in irreversible changes to market structure, or where other (superior) conflicting interests may be affected. Indeed, a reading of paragraph 35 of the Judgment seems to disqualify the standard position that it is possible to exempt any agreements prohibited under Article 101(1) TFEU if the four conditions of Article 101(3) TFUE are fully met (as indicated by the CJEU only in para. 31).
In any case, as a matter of principle, it must be welcome that the CJEU has excluded the "an eye for an eye" principle and strongly pushed for undertakings to resort to the established regulatory and judicial avenues in order to try to prevent instances of illegal competition in their markets. At the same time, it seems to generate some (positive) pressure on sectoral regulators and the courts to integrate competition law analysis (or competition implications) when deciding on the existence of potential illegal competition or intrusion in a given market.
Tags CJEU, an eye for an eye, article 101 TFEU, competition, illegal competition, intrusion