An agreement intended to exclude a competitor from a particular market is in breach of competition law, even if such a competitor is operating unlawfully on the market in question, the Court of Justice of the European Union has recently concluded. Competition rules are intended to protect not only competitors but also the structure of the market and, consequently, competition as such, the court explained. The Competition Authority of the Slovak Republic found that three major Slovak banks had infringed EU competition rules.
Private enterprises can never take matters in their own hands, even in the face of illegality
These banks had agreed to terminate, in a coordinated manner, contracts concerning current accounts that a Czech company had with them and not to enter into any further contracts with this same company.
The latter company is a non-bank financial institution providing services involving cashless foreign exchange transactions. It therefore needs to have current accounts in banks in order to carry on its activities.
In the Slovak Competition Authority’s view, the three banks colluded to act in this manner because of their preoccupation with the fact that their profits had fallen as a result of the business carried on by this competing company.
One of the banks brought proceedings against the national authority’s decision to impose a fine on it. The bank submitted that it had not infringed competition law, as the company in question could not be regarded as its competitor since it did not have the necessary licence required under Slovak law to carry on its business.
This company was operating illegally on the Slovak market. The national court seized of the case made a preliminary reference to the Court of Justice of the European Union asking the latter court for guidance as to whether it is of legal relevance for the assessment of an anti-competitive agreement that a competitor adversely affected by such an agreement is operating illegally on the market in question.
The Court of Justice observed that where the object of an agreement is that of preventing, restricting or distorting competition, there is no need to take account of the concrete effects of the agreement in order to conclude that it is unlawful. EU competition rules are intended to protect not only the interests of competitors or consumers but also the structure of the market and thus competition as such, the court explained.
The court went on to conclude that in this case, the agreement in question had the specific objective of restricting competition. The fact that the competing company was allegedly operating illegally on the Slovak market was irrelevant for the purpose of coming to the conclusion that the competition rules had been breached. The Court of Justice proceeded to point out, that it is for public authorities and not private undertakings, to ensure compliance with the competition rules.
The court went on to explain that the bank could not avoid liability on the basis that its employee who took part in the meeting at which the agreement was concluded had not been given authorisation to do so. It remarked that participation in unlawful agreements is more often than not clandestine and is not governed by any formal rules. It is thus rarely the case that an undertaking’s representative attends a meeting with a mandate to commit an infringement.
Restricting competition, or even worse eliminating it, is clearly illegal. The court has made it clear that this is so, irrespective of the legality or otherwise of the operations conducted by competitors. It is for the national authorities to ascertain that the playing field for all commercial operators in a particular market is indeed level, and private enterprises can never take matters in their own hands, even in the face of illegality.
mariosa@vellacardona.com
Mariosa Vella Cardona is deputy chairwoman of the Malta Competition and Consumer Affairs Authority and a member of the National Commission for the Promotion of Equality.