Vigilantes on the market: Can undertakings restrict competition to ‘help out’ public authorities?

In an interesting case decided today the CJEU held that a number of Slovak banks could not exclude a competitor even if that competitor was allegedly operating illegally on the Slovak market. It’s a notable case, as it tells us something about how the CJEU assesses a situation where competitors are not playing by the rules of the game.

The case concerned the three main banks in Slovakia that agreed to no longer do business with Akcenta as long as the other banks to the agreement did the same. Akcenta is a non-bank financial institution which provides financial services, in particular cashless foreign exchange transactions, and is a competitor of the three banks on the Slovak market for cashless foreign exchange operations. Akcenta needed a current account at one of the Slovak banks in order to carry out its activities. According to one of the Slovak banks involved Akcenta lacked the necessary licenses to operate on the market, and therefore could not be considered a competitor. Consequently, according to this bank, there was no restriction of competition.

The main issue was thus whether the banks could agree to exclude Akcenta from the market because it did not comply with Slovak law, and, in the eyes of the banks, was not competing fairly by playing by the rules of the game.

The CJEU reminds us first that the purpose of article 101 TFEU is not only to protect the interests of competitors or consumers (sorry Chicago!) ‘but also the structure of the market and thus competition as such’. The CJEU then noted that not only did the agreement between the banks have ‘as its object the restriction of competition’,

none of the banks had challenged the legality of Akcenta’s business before they were investigated in the case giving rise to the main proceedings. The alleged illegality of Akcenta’s situation is therefore irrelevant for the purpose of determining whether the conditions for an infringement of the competition rules are met.

Moreover, it is for public authorities and not private undertakings or associations of undertakings to ensure compliance with statutory requirements. The Czech Government’s description of Akcenta’s situation is evidence enough of the fact that the application of statutory provisions may call for complex assessments which are not within the area of responsibility of those private undertakings or associations of undertakings.

The CJEU concluded that the alleged illegality of Akcenta’s operations were of no consequence for the determination of an infringement of article 101 TFEU. Moreover, the CJEU considered it unlikely that the agreement could be justified under article 101 (3) TFEU. It held that even if the restriction of competition ‘protects the conditions for healthy competition and, in the broader sense, thus seeks to promote economic progress as referred to in that provision

the agreement at issue in the main proceedings does not appear to meet the other three conditions – more particularly, the third condition, whereby an agreement must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of the objectives referred to in the first condition laid down in Article 101(3) TFEU. Even if, as stated by the parties to that agreement, the purpose was to force Akcenta to comply with Slovak law, it was for those parties – as has been observed in paragraph 20 of this judgment – to lodge a complaint with the competent authorities in that respect and not to take it upon themselves to eliminate the competing undertaking from the market.

The CJEU clearly is opposed to vigilante behavior. If a competitor is breaking the law, it is for public authorities to take action. Competitors cannot justify restrictions of competition by claiming that competitors are not playing by the rules of the game set by the government. This is very understandable, but it does make competitors dependent on public authorities enforcing the rules. Since EU competition law applies extraterritorially as well, one might wonder if this will not lead to uneasy situations in which competitors gain an unfair advantage due to unsound administration of (environmental/corruption) laws. On the other hand, the CJEU does leave the door open for the disapplication of EU competition law if the undertakings have tried to address the situation with the authorities and/or there is no restriction by object.