Agreements dealing with pricing practices, even when concluded between undertakings operating at different levels of the market, are illegal, if they have an anti-competitive object. Vertical agreements having as their object the restriction of competition are illegal as much as horizontal agreements are, the Court of Justice of the European Union has recently affirmed.

Agreements which have the restriction of competition in a particular market as their object are illegal

The facts which came before the Court were briefly as follows. Two Hungarian insurance companies entered into an annual agreement with car dealers or with the dealers’ national association; the agreement stipulated the conditions and rates applicable to repair services for insured vehicles in the eventuality of accidents. The dealers’ would carry out repairs immediately according to those conditions and rates should the need arises. The dealers performed a dual role – that of repairers and of intermediaries on behalf of the insurance companies by offering car insurance to their customers on the occasion of the sale or repair of vehicles.

The agreements concluded between the insurers and the dealers provided that the dealers’ remuneration for car repairs would increase depending on the number and percentage of insurance policies sold for a particular insurer. The national appeals court seized of the case made a preliminary reference to the CJEU requesting guidance as to whether the agreements at issue could be said to have as their object the prevention, restriction or distortion of competition and were illegal in terms of competition law.

The CJEU began by pointing out that agreements which have an anti-competitive object are illegal, without the need of examining the effects of such agreements on competition in a particular market. The Court noted that the agreements under examination linked two activities which are, in principle, independent, namely car repair services and car insurance brokerage. Such a link does not make the agreements in question automatically illegal but it constitutes an important factor in determining whether the agreements in question have an anti-competitive object.

The Court emphasised that not only horizontal agreements, that is, agreements between undertakings operating at the same level of the market such as an insurer and an insurer, but even vertical agreements, agreements concluded between undertakings which are not in competition with each other as in the case under examination, can be found to restrict competition.

The object of the agreements at issue, the Court maintained, had to be determined in the light of the two markets concerned, that is, the insurance and the car repair market. It was, however, for the national court to determine whether the vertical agreements in question have an anti-competitive object.

Insofar as the car insurance market is concerned, the CJEU noted that the national court had to take into account several factors, such as whether domestic law stipulated that dealers acting as intermediaries or insurance brokers had to act independently from insurance companies. Similarly, an agreement can be said to have an anti-competitive object where it is likely that, following the conclusion of such an agreement, competition on the car insurance market is eliminated or seriously weakened.

Insofar as the car repair market is concerned, the Hungarian court should take account of the fact that the agreements under examination seem to have been concluded on the basis of ‘recommended prices’, established in decisions taken by the national association of the car dealers.

Such decisions could be found to be restrictive of competition since they harmonised hourly charges for car repairs and indirectly fixed prices, while the agreements between the insurers and the dealers or the dealers’ association condoned such anti-competitive decisions taken by the dealers’ association.

The CJEU has once again clearly highlighted the importance of maintaining a healthy competitive environment in the different markets.

Agreements which have as their object the restriction of competition in a particular market are illegal irrespective of whether the parties to the agreement in question are competitors on the same market or not.

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.