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ECJ tightens preconditions for finding “by object” antitrust law infringements in case of novel or atypical conduct

On 2 April 2020, the European Court of Justice (ECJ) issued its judgment in C-228/18 Budapest Bank. In this much-anticipated ruling the ECJ has further tightened and clarified the conditions for finding “by object” antitrust law infringements, ie finding intrinsically anti-competitive infringements without an examination of their actual market effects.

Budapest Bank raises the bar for EU antitrust authorities when dealing with conduct that is novel or atypical and that has pro-competitive effects – conduct that could be relevant to cases involving multi-sided markets or platforms. The judgment is also a significant milestone in a legal challenge against a Hungarian national antitrust authority decision on multilateral interchange fees (MIF).


The background to the ECJ’s preliminary reference ruling is a 2009 decision of the Hungarian national antitrust authority (the GVH) on Hungarian domestic MIFs applied to transactions using Visa and MasterCard cards. In such systems, MIFs are paid by banks acquiring payments (acquiring banks) to banks that issued payment cards to consumers (issuing banks).

Since the 1990s, similar MIFs have been subject to a number of European Commission (Commission) decisions (eg Visa II, Visa III, MasterCard I, MasterCard II) and ECJ judgments (eg MasterCard, Cartes Bancaires), culminating in the imposition of a regulatory cap on certain MIFs by Regulation (EU) 2015/751 (the Interchange Fee Regulation).

MIFs are also currently being litigated in a number of private damages actions across Europe. Most of the cases have largely revolved around two key questions: whether the existence of any MIF at all was illegal and/or whether MIFs were set at an anti-competitively high level. However, the GVH’s 2009 decision – which fined Visa and MasterCard EUR1.75 million each and penalised seven banks – was different. The GVH found an infringement not because the MIFs existed or because they were too high, but because the banks set Visa and MasterCard MIFs at identical levels. The GVH found that this amounted to price fixing, and therefore an infringement “by object”. During an appeal of the GVH’s decision, the Hungarian Supreme Court referred four questions to the ECJ. In particular, it asked how such conduct can qualify as an infringement “by object”, given the special characteristics and the multi-sided nature of the payment card markets.

The judgment of the ECJ

To assist the Hungarian Supreme Court, the ECJ provided a detailed judgment on how to assess “by object” infringements. The ECJ’s analysis is loaded with scepticism about the arguments of the GVH and of the Commission, which supported the GVH during the preliminary ruling procedure.

The ECJ applied its standard framework to determine whether the conduct qualifies for an infringement by object: it first examined its contents, then its objectives, and finally its legal and economic context.

Regarding the content of the agreement, the ECJ noted that it did not fix prices directly. However, the agreement could be considered to have indirectly fixed a floor to the fees that acquiring banks charged to merchants (the merchant service charge, or MSC). The agreement also standardised a cost element – the MIF – across two competing payment systems. Nonetheless, the ECJ ruled that the agreement would only constitute an infringement “by object” if it can be established that it was, by its nature, harmful to competition.

Concerning the objectives pursued by the agreement, the ECJ considered the conflicting claims made by the GVH and the parties. While the GVH claimed that the agreement was designed to set a floor for MSCs, the parties insisted that it aimed to create a balance between issuing and acquiring activities within the two card payment systems. In addition, the Hungarian Supreme Court claimed in its reference that the agreement may have had additional pro-competitive effects, boosting competition between card systems on factors other than the MIF. While the ECJ left it to the Hungarian Supreme Court to decide which of these claims is supported by the evidence, it provided two key points as guidance. First, it held that if any pro-competitive effects existed the conduct cannot qualify as an infringement “by object”. Instead, the authority must examine the conduct’s actual effects, through a full counterfactual analysis, before it can determine whether it infringes Article 101(1) TFEU. Second, the ECJ held that “sufficiently solid and reliable experience” is needed to establish that the conduct is by its very nature harmful to competition. The ECJ expressed doubts that such experience existed. In particular, the ECJ said that the GVH’s past decision-making practice as well as previous EU court judgments indicate the opposite – that they all confirm the need for an effects analysis.

Finally, regarding the context of the agreement, the ECJ noted the parties’ claim that competition between card systems has exerted an upward pressure on MIFs, because issuing banks preferred issuing cards with higher MIFs. The parties claimed that this was different from normal conditions in a market economy, where competition usually drives prices downwards. The ECJ held that this claim was highly relevant, and that the Hungarian Supreme Court cannot find an infringement “by object”, if it finds “serious indications” that, in the absence of the agreement, such upward pressure would have existed. According to the ECJ, in that case an antitrust law violation can only be found after fully analysing the effects of the conduct.

The case will now resume in the Hungarian Supreme Court. Although the ECJ did not conclusively determine the outcome of the national court’s procedure, the GVH is likely to face an uphill battle to defend its finding of an infringement “by object”.

Comment: Implications for novel and atypical conduct and multi-sided markets and platforms

Tightening the preconditions of “infringements by object”

Budapest Bank continues the trend of other recent ECJ judgments that tightened the conditions under which authorities can find infringements “by object”, eg Cartes Bancaires and most recently Generics UK. While Budapest Bank applies the same key principles as these judgments, it also further develops some of them, particularly with regard to conduct that is novel or atypical or which also has pro-competitive effects. For example, in Budapest Bank, just as in Cartes Bancaires and later in Dole and Generics UK, the ECJ held that prior experience of the adverse effects of a conduct is relevant when determining if it qualifies as a restriction “by object”. However, probably due to the atypical nature of the conduct, in Budapest Bank the ECJ expanded the criteria on what can amount to such prior experience – it held that an infringement by object can only be found if prior experience of the conduct is “sufficiently solid and reliable” (para 76) and “sufficiently general and permanent” (para 79). AG Bobek in his opinion had queried whether the Commission’s decisional practice (on which the GVH had said it was relying at the hearing) and the ECJ judgment in MasterCard (which the Commission at the hearing had said was the source of its decisional practice) amounted to a robust and reliable wealth of experience supporting the categorisation of a restriction “by object”. The ECJ adopted a similar approach, noting that the decisional practice of the GVH and the EU case law demonstrated precisely the need to carry out a full effects analysis. It remains to be seen what else could also qualify as a source of prior experience in future cases. For example, AG Bobek suggested that it might be relevant to consider whether there is “sufficient consensus among economists” and even to examine the decisions of “authorities or courts outside of the European Union applying similar antitrust rules”. However, in its judgment, the ECJ stopped short of discussing how these sources might be appropriate when determining prior experience in relation to a particular conduct.

Budapest Bank also illustrates how authorities should take into account pro-competitive effects when determining if a conduct qualifies as an infringement “by object”. Recently, in Generics UK, the ECJ considered the same question, and held that authorities cannot find an infringement “by object” if the conduct has “demonstrated and relevant”, “sufficiently significant” pro-competitive effects that are “specifically related to the agreement concerned” so that they justify a “reasonable doubt” as to whether the conduct caused a sufficient degree of harm. However, on the facts of the specific case, in Generics UK the ECJ rejected pro-competitive effects as “not only minimal but probably uncertain”, and therefore it remained unclear what level of certainty was needed to rule out a finding of a “by object” infringement. This is now clarified by Budapest Bank: the ECJ held that “serious indications” (para 83) of or “contradictory or ambivalent references” (para 82) to such pro-competitive effects are sufficient to exclude an infringement “by object”.

Impact on complex markets and multi-sided markets and platforms

The ECJ’s judgment does not change much about how authorities and courts can establish the most obvious antitrust law violations, such as price fixing. However, it does further tighten the conditions for authorities to establish “by object” infringements in relation to conduct that is atypical, novel or complex, which might be the case in many agreements related to multi-sided markets and platforms.

European MIF cases

The case will probably have a very limited impact on other ongoing MIF cases across Europe. Its facts and the infringement found are very specific, and only relate to a situation where the parties set the MIFs of two competing card systems at the same level. Instead, in most other cases across Europe, the key issue is whether the level of a certain MIF was anti-competitive.

A&O is acting for ING Bank in this case.