Commission Tightens Rules of Exemption Under the EU De Minimis Safe Harbor

by Foley & Lardner LLP
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On June 25, 2014, the European Commission (Commission) adopted revised rules on agreements of minor importance which do not appreciably restrict competition (the so-called “De Minimis Notice”) and providing a safe harbor from the general EU prohibition on anti-competitive agreements (Article 101(1) of the Treaty on the Functioning of the European Union (“Article 101(1) TFEU”)). While businesses can rely on the De Minimis safe harbor depending on the size of the market share they enjoy, the application of the safe harbor presupposes, however, that the agreements do not contain any hardcore restrictions on competition such as price fixing and market sharing or any restriction by object. As clarified in the new provisions, any agreements that have the object of restricting competition will now systematically be excluded from the safe harbor even if the impact of those agreements is minor. The Commission broadens the scope of the exclusion to any “by object” restrictions which always constitutes an appreciable restriction of competition.

The new De Minimis Notice does not change the market share thresholds under which companies are able to assess whether their agreements have an appreciable impact on competition in breach of the prohibition. Accordingly, agreements entered into between actual or potential competitors whose combined market share does not exceed 10 percent on any of the relevant markets affected by the agreement are exempt. Equally, agreements entered into between non-competitors where the market share of each company is below 15 percent are not caught by Article 101(1) TFEU. For agreements exceeding the market share thresholds set out in the De Minimis Notice, they do not automatically breach the prohibition but they will need to be assessed individually.

The new adopted provisions clarify, however, that the De Minimis Notice will not provide a safe harbor for agreements containing hardcore restrictions of competition referred to as restrictions “by object.” “By object” restrictions are those considered to be so serious that by their very nature and regardless of any effect they may have, they are capable of damaging competition. Any agreements which are restrictive “by object” will always constitute a violation of Article 101(1) TFEU and cannot benefit from the safe harbor.

The revised rules are intended to reflect the latest changes brought by the 2010 vertical and horizontal block exemption regulations and more importantly, the European Court of Justice’s decision in Expedia. In this ruling, the Court held that an anti-competitive agreement “by object” constitutes an appreciable restriction on competition and cannot be considered as minor because they have by definition an appreciable impact on competition. This is a change with the previous case law applying the De Minimis doctrine to all agreements of minor importance restricting competition “by object” or “by effect” to the exclusions of those containing hardcore restrictions.

As further detailed in a separate guidance paper, the Commission provides a list of the types of restrictions that have already been considered as “by object” restrictions in previous cases, knowing that a restriction “by object” also includes any restriction listed as hardcore in any current or future Commission block exemption regulations. While intended to serve as a practical check-list to help companies in assessing whether their agreements are covered by the De Minimis Notice, it does not prevent the Commission or the EU courts from finding new types of agreement as object restrictions that are not listed in the guidance paper.

As a result of the broader definition of “by object” restrictions, agreements which have the object of restricting competition — including those involving small players and likely to have limited impact on competition — cannot benefit any more from the De Minimis safe harbor. Such agreements will no longer be deemed to be of minor importance and will systematically be viewed as contrary to Article 101(1) TFEU.

While the Commission recognizes that businesses are not precluded from claiming that their agreements containing “by object” restrictions may still be permitted if the restrictions are objectively necessary for the existence of the agreements or for the protection of a legitimate goal, in practice, and as stated in the Commission guidance paper, it is unlikely that such restrictions will fulfil the Article 101(1) TFEU exception.


 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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