Common use of TFEU Clause in Contracts

TFEU. 35 The CJEU considered that just because an agreement tends to restrict competition between distributors of the same make, it does not follow that it automatically escapes the prohibition because it increases competition between producers. The CJEU decided that this type of argument is irrelevant, however, because if it “appears” the object is to restrict competition, the concrete effects do not need to be considered.36 The more analytical approach advocated by STM is supported by the Court when it says “to arrive at a true representation of the contractual position the contract must be placed in the economic and legal context in the light of which it was concluded by the parties”.37 The Court does not thereby imply that certain agreements are presumed to automatically distort competition by object.38 Nonetheless, the judgment is somewhat incongruous with the sentiments set out in STM. What is more pertinent is that the CJEU found that the legal and economic context plays a role in the determination of an agreement’s object. The CJEU thus 33 Though subsequent chapters will show how the emphasis on different elements of the STM Test has shifted over the years, which is why the object concept is seen to be so confusing. 34 Supra n27, Consten & Grundig, p342. 35 Ibid, p342. 36 Ibid, p342. 37 Ibid, p343: “since the agreement thus aims at isolating the French market for Grundig products and maintaining, artificially, for products of a very well-known brand, separate national markets within the Community”. Emphasis added. The goal of preserving the single market was an important aspect of the case and considered as part of the agreement’s legal and economic context. 38 It is possible that the ‘no concrete effects’ rule led to the proposition that object restrictions have ‘necessary effect’, ie: certain restrictions are presumed to have a restrictive effect on competition due to their known anticompetitive effects and thus, by their nature, restrict competition. builds upon the judgment in STM by referring, not just to the economic, but also to the legal context. Again, the notion that the object concept is based on the classification of particular agreements is absent, though the precise delineation of how the object criterion is applied to agreements is admittedly somewhat vague. What the judgments in STM and Consten & Grundig attest to, is that the approach of the European Courts is far more nuanced than the Article 81(3) Guidelines suggest. A further series of cases illustrate how the CJEU expands upon and refines aspects of the STM Test. This can be seen in particular when assessing how it proceeds when confronted with agreements that, the orthodox approach would automatically depict as restrictions by object.39 However it is also evident, as aptly highlighted in STM and Consten & Xxxxxxx, that the CJEU has a somewhat haphazard approach.40 For instance, the Court does not always differentiate between object and effect despite the clear reference to this requirement in STM.41 Nonetheless, the cases demonstrate how the Court applies an economics-based approach as opposed to automatically condemning agreements as restrictive by object per se.42

TFEU. 35 The CJEU considered that just because an agreement tends to restrict competition between distributors of the same make, it does not follow that it automatically escapes the prohibition because it increases competition between producers. The CJEU decided that this type of argument is irrelevant, however, because if it “appears” the object is to restrict competition, the concrete effects do not need to be considered.36 The more analytical approach advocated by STM is supported by the Court when it says “to arrive at a true representation of the contractual position the contract must be placed in the economic and legal context in the light of which it was concluded by the parties”.37 The Court does not thereby imply that certain agreements are presumed to automatically distort competition by object.38 Nonetheless, the judgment is somewhat incongruous with the sentiments set out in STM. What is more pertinent is that the CJEU found that the legal and economic context plays a role in the determination of an agreement’s object. The CJEU thus 33 Though subsequent chapters will show how the emphasis on different elements of the STM Test has shifted over the years, which is why the object concept is seen to be so confusing. 34 Supra n27, Consten & Grundig, p342. 35 Ibid, p342. 36 Ibid, p342. 37 Ibid, p343: “since the agreement thus aims at isolating the French market for Grundig products and maintaining, artificially, for products of a very well-known brand, separate national markets within the Community”. Emphasis added. The goal of preserving the single market was an important aspect of the case and considered as part of the agreement’s legal and economic context. 38 It is possible that the ‘no concrete effects’ rule led to the proposition that object restrictions have ‘necessary effect’, ie: certain restrictions are presumed to have a restrictive effect on competition due to their known anticompetitive effects and thus, by their nature, restrict competition. builds upon the judgment in STM by referring, not just to the economic, but also to the legal context. Again, the notion that the object concept is based on the classification of particular agreements is absent, though the precise delineation of how the object criterion is applied to agreements is admittedly somewhat vague. What the judgments in STM and Consten & Grundig attest to, is that the approach of the European Courts is far more nuanced than the Article 81(3) Guidelines suggest. A further series of cases illustrate how the CJEU expands upon and refines aspects of the STM Test. This can be seen in particular when assessing how it proceeds when confronted with agreements that, the orthodox approach would automatically depict as restrictions by object.39 However it is also evident, as aptly highlighted in STM and Consten & XxxxxxxGrundig, that the CJEU has a somewhat haphazard approach.40 For instance, the Court does not always differentiate between object and effect despite the clear reference to this requirement in STM.41 Nonetheless, the cases demonstrate how the Court applies an economics-based approach as opposed to automatically condemning agreements as restrictive by object per se.42

TFEU. 35 Therefore this aspect of the opinion is questionable in its accuracy. The CJEU considered AG should have cited STM. See also Joined cases C- that just because the object of an agreement tends to restrict competition between distributors is deduced from the content of its clauses, the intention of the same makeparties “as it arises from the ‘genesis’ of the agreement or manifests itself in the circumstances in which it was implemented” and the conduct of the undertakings concerned.131 Thus, the characteristics of the measure, as well as the objectives pursued by the manufacturer inferred from its general strategy, were relevant.132 Finally, it does is notable that the AG found it irrelevant that the objective pursued was not follow that it automatically escapes attained and therefore did not produce anticompetitive effects.133 Notably the prohibition because it increases competition between producersCJEU confirmed much of the AG’s opinion. The When making an assessment of object the CJEU decided that this type held that: “...account must be taken not only of argument is irrelevantthe terms of the agreement, howeverbut also of other factors, because if it “appears” such as the object is to restrict competition, the concrete effects do not need to be considered.36 The more analytical approach advocated by STM is supported aims pursued by the Court when it says “to arrive at a true representation agreement in the light of the contractual position the contract must be placed in the economic and legal context context, in order to determine whether an agreement has a restrictive object.”134 The CJEU affirmed that such an objective can be achieved through direct and indirect means.135 The CJEU therefore held that the agreement had the object of restricting competition even though it was not explicitly obvious that the agreement had that object.136 In making its assessment, the CJEU looked at the conduct of the parties and considered what the competitive situation in the light market would have been if, as in this case, export sales had not been excluded from the bonus policy. Proof of which it intention was concluded by not seen as a necessary factor in determining the parties”.37 The Court does not thereby imply that certain agreements are presumed to automatically distort competition by object.38 Nonethelessobject of the agreement.137 Such intention, however, may be taken into account when assessing the judgment is somewhat incongruous object of the agreement. 238/99 & others P Limburgse Vinyl Maatschappij v Commission [2002] ECR I-8375 on the relevance of the economic context. 131 Supra n125, General Motors, para 78. 132 Ibid, para 81. 133 Ibid, footnote 52. See also C-235/92 P Montecatini v Commission [1999] ECR I-4539, para 125. 134 Ibid, General Motors, paras 64-66. 135 Ibid, para 68. 136 This can be contrasted with the sentiments set out case law of the General Court in STMENS (supra n4). What is more pertinent is that See section 4. 137 Supra n125, General Motors, para 77. The CJEU cited Xxxxxx (supra n88) and CRAM (supra n108) in support of this point. This finding upheld the CJEU found that opinion, paras 77-78. Intent could also be attributed to the legal conduct of the parties. The need to ascertain the true objective of an agreement and economic context plays a role in the determination significance of an agreement’s objectcontext was again reinforced by the judgment in Asnef Equifax.138 Here, the issue concerned a horizontal credit information exchange agreement. Information exchange systems raise intriguing questions under Article 101(1) TFEU as they involve a form of collusion. Therefore, the assessment of whether such an arrangement is a restriction by object is an important and revealing one. Horizontal agreements to exchange information have been held to constitute restrictions by object when they concern future pricing intentions or where the commercial independence of an undertaking is compromised.139 The CJEU focused on the positive attributes of the information exchange system when dismissing the suggestion that the object of the agreement was anticompetitive.140 Instead it found that the “essential object of credit information exchange systems is to make available to credit providers relevant information about existing or potential borrowers”.141 The CJEU considered the positive benefits of such credit information systems, such as the lender being able to foresee the likelihood of repayment, and decided that they are in principle capable of improving the functioning of the supply of credit.142 Therefore, the register did not “by its very nature” have the object of restricting competition.143 The impact that the positive benefits of the agreement had on the outcome of the judgment is significant. The CJEU thus 33 Though subsequent chapters will show how weighed, albeit briefly, the emphasis on different elements positive benefits (arguably the positive effects and aims) of the STM Test has shifted over agreement against the yearsnegative aspects. As a result of this exercise, which is why it found that the object concept is seen to be so confusing. 34 Supra n27, Consten & Grundig, p342. 35 Ibid, p342. 36 Ibid, p342. 37 Ibid, p343: “since essential object” of the agreement thus aims at isolating was not anticompetitive.144 This supports the French market for Grundig products and maintaining, artificially, for products of a very well-known brand, separate national markets within the Community”. Emphasis added. The goal of preserving the single market was an important aspect of the case and considered as part of the agreement’s legal and economic context. 38 It is possible view that the ‘no concrete effects’ rule led to the proposition that object restrictions have ‘necessary effect’, ie: certain restrictions are presumed to have a restrictive effect on competition due to their known anticompetitive effects and thus, by their nature, restrict competition. builds upon the judgment in STM by referring, not just to the economic, but also to the legal context. Again, the notion that the object concept is based on the classification of particular agreements is absent, though the precise delineation of how the object criterion is applied concerned with identifying the precise purpose of the agreement by determining what the rationale behind it is, and specifically whether the agreement 138 Supra n72 Asnef Equifax. Judgment of 23 November 2006. 139 See for example Case C-204/00 P etc Aalborg Portland v Commission [2004] ECR I-123 and more generally see (Whish, 2009), p120. 140 Supra n72 Asnef Equifax, paras 46-48. 141 Ibid, para 46. 142 Ibid, para 47. 143 Ibid, para 48. 144 Ibid, para 46. is designed to agreements is admittedly somewhat vaguerestrict competition. What More interestingly, the judgments in STM and Consten & Grundig attest to, is judgment leads to the conclusion that the approach object criterion can accommodate the consideration of the European Courts positive attributes of an agreement. Hence, if an agreement’s purpose is far more nuanced than pro- competitive then it does not have the Article 81(3) Guidelines suggestobject of restricting competition.145 This conclusion was certainly evidenced in Xxxxx Xxxxx. A further series of cases illustrate how However, this position is controversial. Having a legitimate aim or objective, indeed an objective justification as a reason for entering into a potentially restrictive agreement did not convince the CJEU expands upon and refines aspects in a number of cases.146 Therefore, where the STM Test. This can be seen in particular when assessing how it proceeds when confronted with agreements that, the orthodox approach would automatically depict as restrictions by object.39 However it is also evident, as aptly highlighted in STM and Consten & Xxxxxxx, that the CJEU has a somewhat haphazard approach.40 For instance, the Court does not always differentiate distinction lies between object and effect despite the clear reference to this requirement in STM.41 Nonetheless, the cases demonstrate how the Court applies an economics-based approach as opposed to automatically condemning agreements as restrictive by object per se.42these concepts requires further reflection.

TFEU. 35 The Here, the CJEU considered that just because was clearly balancing the pro-competitive aim of such a restriction against the negative aspects.71 This apparent tolerance of the balancing of the positive attributes of an agreement tends to restrict competition between distributors of the same make, it does not follow that it automatically escapes the prohibition because it increases competition between producersunder Article 101(1) TFEU is notable. The CJEU decided that As will be seen throughout this type of argument is irrelevantthesis, however, because if such balancing is fairly commonplace.72 Yet again, the Court’s approach highlights the individual nature of each case that comes before it “appears” and underlines the importance of assessing the 70 Ibid, para 10-11 (emphasis added). 71 Balancing the aims of an agreement can also be seen in AEG-Telefunken v Commission (supra n6) where the Court considered a selective distribution system. Here the Court looked at the object is of the agreement in a positive light, stating that the “object” of the system was to restrict “improve competition”. Moreover, it found there are “legitimate requirements which justify a reduction of price competition in favour of competition relating to factors other than price”. The Court also held that if selective distribution systems did not follow the Metro criteria, they would constitute an infringement of Article 101(1). The Court did not clarify that would constitute a restriction of competition by object or effect. However in para 96 the Court made the point that “effecting parallel imports cannot be regarded as an infringement of the rules of competition, whereas undertaking no longer to effect such imports is manifestly an infringement of community law since it would allow a manufacturer to wall off national markets...” (emphasis added). The interesting issues raised in this judgment are considered in subsequent chapters. 72 See for instance the concrete effects do not need to be considered.36 The more analytical approach advocated by STM is supported by the Court when it says “to arrive at a true representation various selective and exclusive distribution cases; also footnote 34 of the contractual position the contract must be placed opinion in the economic and legal context in the light of which it was concluded by the parties”.37 The Court does not thereby imply that certain agreements are presumed to automatically distort competition by object.38 NonethelessBIDS (supra n3), the judgment is somewhat incongruous with in Case C-238/05 Asnef Equifax v Ausbanc [2006] ECR I- 11125 and the sentiments set out Commission’s decision in STM. What is more pertinent is that the CJEU found that the legal and economic context plays a role in the determination of an agreement’s objectVisa International – Multilateral Interchange Fee [2002] OJ L318/17. The CJEU thus 33 Though subsequent chapters will show how the emphasis on different elements of the STM Test has shifted over the yearsdistinction between positive aims or attributes and a legitimate objective is moot: see XX Xxxxx’x Opinion in Case C-439/09 Xxxxxx Xxxxx Dermo-Cosmétique SAS v Président de l’Autorité de la concurrence, which is why the object concept is seen to be so confusing[2001] ECR I-9419. 34 Supra n27These issues are discussed further in chapter 4, Consten & Grundig, p342. 35 Ibid, p342. 36 Ibid, p342. 37 Ibid, p343: “since the agreement thus aims at isolating the French market for Grundig products and maintaining, artificially, for products of a very well-known brand, separate national markets within the Community”. Emphasis added. The goal of preserving the single market was an important aspect of the case and considered as part of the agreement’s legal and economic context. 38 It is possible that the ‘no concrete effects’ rule led to the proposition that object restrictions have ‘necessary effect’, ie: certain restrictions are presumed to have a restrictive effect on competition due to their known anticompetitive effects and thus, by their nature, restrict competition. builds upon the judgment in STM by referring, not just to the economic, but also to the legal context. Again, the notion that the object concept is based on the classification of particular agreements is absent, though the precise delineation of how the object criterion is applied to agreements is admittedly somewhat vague. What the judgments in STM and Consten & Grundig attest to, is that the approach of the European Courts is far more nuanced than the Article 81(3) Guidelines suggest. A further series of cases illustrate how the CJEU expands upon and refines aspects of the STM Test. This can be seen in particular when assessing how it proceeds when confronted with agreements that, the orthodox approach would automatically depict as restrictions by object.39 However it is also evident, as aptly highlighted in STM and Consten & Xxxxxxx, that the CJEU has a somewhat haphazard approach.40 For instance, the Court does not always differentiate between object and effect despite the clear reference to this requirement in STM.41 Nonetheless, the cases demonstrate how the Court applies an economics-based approach as opposed to automatically condemning agreements as restrictive by object per se.42section 2.

TFEU. 35 Therefore this aspect of the opinion is questionable in its accuracy. The CJEU considered AG should have cited STM. See also Joined cases C- that just because the object of an agreement tends to restrict competition between distributors is deduced from the content of its clauses, the intention of the same makeparties “as it arises from the ‘genesis’ of the agreement or manifests itself in the circumstances in which it was implemented” and the conduct of the undertakings concerned.131 Thus, the characteristics of the measure, as well as the objectives pursued by the manufacturer inferred from its general strategy, were relevant.132 Finally, it does is notable that the AG found it irrelevant that the objective pursued was not follow that it automatically escapes attained and therefore did not produce anticompetitive effects.133 Notably the prohibition because it increases competition between producersCJEU confirmed much of the AG’s opinion. The When making an assessment of object the CJEU decided that this type held that: “...account must be taken not only of argument is irrelevantthe terms of the agreement, howeverbut also of other factors, because if it “appears” such as the object is to restrict competition, the concrete effects do not need to be considered.36 The more analytical approach advocated by STM is supported aims pursued by the Court when it says “to arrive at a true representation agreement in the light of the contractual position the contract must be placed in the economic and legal context context, in order to determine whether an agreement has a restrictive object.”134 The CJEU affirmed that such an objective can be achieved through direct and indirect means.135 The CJEU therefore held that the agreement had the object of restricting competition even though it was not explicitly obvious that the agreement had that object.136 In making its assessment, the CJEU looked at the conduct of the parties and considered what the competitive situation in the light market would have been if, as in this case, export sales had not been excluded from the bonus policy. Proof of which it intention was concluded by not seen as a necessary factor in determining the parties”.37 The Court does not thereby imply that certain agreements are presumed to automatically distort competition by object.38 Nonethelessobject of the agreement.137 Such intention, however, may be taken into account when assessing the judgment is somewhat incongruous object of the agreement. 238/99 & others P Limburgse Vinyl Maatschappij v Commission [2002] ECR I-8375 on the relevance of the economic context. 131 Supra n125, General Motors, para 78. 132 Ibid, para 81. 133 Ibid, footnote 52. See also C-235/92 P Montecatini v Commission [1999] ECR I-4539, para 125. 134 Ibid, General Motors, paras 64-66. 135 Ibid, para 68. 136 This can be contrasted with the sentiments set out case law of the General Court in STMENS (supra n4). What is more pertinent is that See section 4. 137 Supra n125, General Motors, para 77. The CJEU cited Xxxxxx (supra n88) and CRAM (supra n108) in support of this point. This finding upheld the CJEU found that opinion, paras 77-78. Intent could also be attributed to the legal conduct of the parties. The need to ascertain the true objective of an agreement and economic context plays a role in the determination significance of an agreement’s objectcontext was again reinforced by the judgment in Asnef Equifax.138 Here, the issue concerned a horizontal credit information exchange agreement. Information exchange systems raise intriguing questions under Article 101(1) TFEU as they involve a form of collusion. Therefore, the assessment of whether such an arrangement is a restriction by object is an important and revealing one. Horizontal agreements to exchange information have been held to constitute restrictions by object when they concern future pricing intentions or where the commercial independence of an undertaking is compromised.139 The CJEU focused on the positive attributes of the information exchange system when dismissing the suggestion that the object of the agreement was anticompetitive.140 Instead it found that the “essential object of credit information exchange systems is to make available to credit providers relevant information about existing or potential borrowers”.141 The CJEU considered the positive benefits of such credit information systems, such as the lender being able to foresee the likelihood of repayment, and decided that they are in principle capable of improving the functioning of the supply of credit.142 Therefore, the register did not “by its very nature” have the object of restricting competition.143 The impact that the positive benefits of the agreement had on the outcome of the judgment is significant. The CJEU thus 33 Though subsequent chapters will show how weighed, albeit briefly, the emphasis on different elements positive benefits (arguably the positive effects and aims) of the STM Test has shifted over agreement against the yearsnegative aspects. As a result of this exercise, which is why it found that the object concept is seen to be so confusing. 34 Supra n27, Consten & Grundig, p342. 35 Ibid, p342. 36 Ibid, p342. 37 Ibid, p343: “since essential object” of the agreement thus aims at isolating was not anticompetitive.144 This supports the French market for Grundig products and maintaining, artificially, for products of a very well-known brand, separate national markets within the Community”. Emphasis added. The goal of preserving the single market was an important aspect of the case and considered as part of the agreement’s legal and economic context. 38 It is possible view that the ‘no concrete effects’ rule led to the proposition that object restrictions have ‘necessary effect’, ie: certain restrictions are presumed to have a restrictive effect on competition due to their known anticompetitive effects and thus, by their nature, restrict competition. builds upon the judgment in STM by referring, not just to the economic, but also to the legal context. Again, the notion that the object concept is based on the classification of particular agreements is absent, though the precise delineation of how the object criterion is applied concerned with identifying the precise purpose of the agreement by determining what the rationale behind it is, and specifically whether the agreement 138 Supra n72 Asnef Equifax. Judgment of 23 November 2006. 139 See for example Case C-204/00 P etc Aalborg Portland v Commission [2004] ECR I-123 and more generally see (Whish, 2009), p120. 140 Supra n72 Asnef Equifax, paras 46-48. 141 Ibid, para 46. 142 Ibid, para 47. 143 Ibid, para 48. 144 Ibid, para 46. is designed to agreements is admittedly somewhat vaguerestrict competition. What More interestingly, the judgments in STM and Consten & Grundig attest to, is judgment leads to the conclusion that the approach object criterion can accommodate the consideration of the European Courts positive attributes of an agreement. Hence, if an agreement’s purpose is far more nuanced than pro- competitive then it does not have the Article 81(3) Guidelines suggestobject of restricting competition.145 This conclusion was certainly evidenced in Louis Erauw. A further series of cases illustrate how However, this position is controversial. Having a legitimate aim or objective, indeed an objective justification as a reason for entering into a potentially restrictive agreement did not convince the CJEU expands upon and refines aspects in a number of cases.146 Therefore, where the STM Test. This can be seen in particular when assessing how it proceeds when confronted with agreements that, the orthodox approach would automatically depict as restrictions by object.39 However it is also evident, as aptly highlighted in STM and Consten & Xxxxxxx, that the CJEU has a somewhat haphazard approach.40 For instance, the Court does not always differentiate distinction lies between object and effect despite the clear reference to this requirement in STM.41 Nonetheless, the cases demonstrate how the Court applies an economics-based approach as opposed to automatically condemning agreements as restrictive by object per se.42these concepts requires further reflection.