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20 December 2024

“Standalone” exchanges of information as restrictions of competition by object

The European Court of Justice provides in its decision Banco BPN further guidance on information exchange between competitors

In its decision Banco BPN ao. v. Autoridade da Concorrência1 the European Court of Justice (“ECJ”) held that a “standalone” exchange of information between competitors can constitute a restriction of competition by object, meaning that the competition authority examining the case does not need to investigate its potential effects on the market. This is the case when an exchange of information is by its very nature necessarily harmful to the proper functioning of competition.  

Facts of the Case

The request for a preliminary ruling of the ECJ was made by the Competition, Regulation and Supervision Court of Portugal (“referring court”) in the context of an action brought to it by certain credit institutions following a decision of the Portuguese Competition Authority (“Competition Authority”). The Competition Authority imposed on 14 credit institutions (including the six largest in Portugal) a total fine of €225 million for having infringed national and EU competition law by participating in an  exchange of sensitive information not being linked to a concerted practice restricting competition, such as a pricing or market-sharing agreement, over a period of more than ten years between 2002 and 2013. The information exchanged concerned the home loans market, the consumer credit market and the corporate lending market and was related to certain current and future commercial conditions, in particular credit spreads and risk variables, and to the individual production figures of the participants in that exchange.

The Competition Authority considered that the exchange of information in question constituted a restriction of competition by object and had therefore no obligation to investigate the possible effects of that exchange on the market. The credit institutions, however, took the view that the exchange of information is not per se harmful and that the authority should have examined the effects as well as taken into account the economic, legal and regulatory context of the exchange while it was taking place before concluding that it led to a violation of national and EU competition law.

Due to the absence of precedents concerning standalone and informal exchanges of information, the referring court considered it necessary to address to the ECJ the question whether the classification of the exchange of information at issue as a restriction of competition by object is in line with Art. 101 TFEU.

The ECJ Ruling

Conditions for the classification of a business conduct as a restriction of competition by object

In order to answer the question whether the alleged collusion constitutes indeed a restriction of competition by object, the ECJ provided first an overview of the factors that should be taken into consideration when examining whether a conduct has as its object the prevention, restriction or distortion of competition. Such a thorough examination is required since the concept of “restriction by object” must be interpreted strictly and such a characterization should be attributed only to conducts revealing a sufficient degree of harm to competition.2

In that sense, authorities should examine i) the conduct’s content – to identify characteristics of coordination very harmful for the proper functioning of competition,3 ii) the economic and legal context of which it forms part – to ascertain that there are no particular circumstances rebutting the presumption that the form of coordination is harmful to competition,4 and iii) the conduct’s intended objectives from a competition standpoint – the lack of subjective intention to distort competition is not decisive.5

Exchange of information as a restriction of competition by object  

When it comes to the classification of an exchange of information as restriction of competition by object, the ECJ refers to the statement of the Advocate General according to which even if the exchange of information is not accompanied by a cooperation agreement it may constitute a restriction of competition by object, as long as it constitutes a form of coordination which is by its nature harmful to the proper functioning of normal competition.6

Based on the above described examination method, this should be the case when the content of the information exchanged relates to confidential and strategic information and when such an exchange can make its reasonably active and economically rational participants follow the same course of business conduct. To make such an assessment it is necessary to take into account not only the nature of the information exchanged but also the economic context in which the exchange takes place and other factors such as the concentration of the relevant market and existing barriers to entry this market.

Key takeaways on information exchanges

Although it is for the referring court to interpret the ruling of the ECJ, the latter may provide it with clarification designed to give guidance. The ECJ provided indirectly companies with “guidelines” to be taken into consideration when they exchange information with competitors. Here are some of the takeaways:

  • Information relating to parameters on the basis of which competition is established in the relevant market should be considered as strategic information.
  • The exchange of information relating to future intentions organised in a confidential manner should be seen as a form of coordination between undertakings being harmful to the proper functioning of competition.
  • The exchange of non-strategic information about past activities, communicated in a disaggregated and individualised form combined with other information already known could reveal future intentions and can also constitute a form of coordination harmful to competition.
  • Exchange of information related to possible future actions, not available in the public domain when the exchange takes place, should be seen as a form of coordination between undertakings harmful to competition.
  • The same applies to the exchange of information going beyond what in some cases is allowed by regulations requiring the publication of certain information.
  • A single instance of contact is sufficient to remove uncertainty regarding the market conditions between competitors.
  • Not only concerted practices covering all parameters on whose basis competition in the market is established are harmful.
  • It is not necessary that the exchange of information leads to a change of the business behaviour to be characterized as harmful to competition.

Conclusion

May the ECJ’s preliminary ruling have not come as a surprise, companies should nevertheless see the ruling as a “friendly reminder” to consider the principles of permissible information exchange in their business activities and to train their employees accordingly.

This publication has been prepared for information purposes only. It does not claim to be complete and does not constitute legal advice. Any liability in connection with the use of the information and its accuracy is excluded.

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Sources

  1. ECJ, judgment of 29 July 2024, C-298/22Banco BPN ao. v. Autoridade da Concorrência.
  2. Ibid, para. 43.
  3. Ibid, para. 45.
  4. Ibid, Nr. 46 et seq.
  5. Ibid, para. 49.
  6. See Advocate General Rantos, opinion of 5 October 2023, C-298/22Banco BPN ao. v. Autoridade da Concorrência, para. 52.

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