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Highest EC Court limits the scope of Competition Law

The European Court of Justice (ECJ) (which has the task if interpreting the meaning of the EC Treaty provisions) has recently given a landmark ruling limiting the scope of European competition law.

The ECJ, in a surprise decision, ruled that not every agreement which restricts the freedom of action of the parties or of one of them necessarily falls foul of the prohibition on anti-competitive agreements.

The Court’s ruling, it seems, may make life easier for Trade Associations and other public bodies who regulate economic activity in a way which benefits the public interest by making it more difficult to challenge such decisions on competition law grounds.

The case involved the Dutch Bar Association. It had a rule prohibiting the establishment of multi-disciplinary practices between lawyers and accountants. The case referred to is Wouters and others v Algemene Raad van de Nederlandse Orde van Advocaten (The Dutch Bar Association).

The Court ruled that even when faced with a decision of a trade association (such as the Dutch Bar Association) which restricts competition, account must be taken of the overall context in which the decision was taken or produced its effects. More particularly, account must be taken of the objective of the decision and then it should be considered whether the resulting effects which restrict competition are part and parcel of the objective.

The Court’s decision was made in plenary session of all 13 judges and is not limited to the circumstances of this particular case.

Even before this Decision the Court had ruled that EC rules on competition do not apply to public activities outside the normal sphere of market activity (e.g. the management of the public social security system) or the exercise of the powers of a public authority (e.g. air-space control or maritime pollution surveillance). The Court here in effect said that where a body is performing a regulatory function which serves the public interest and the restrictions it imposes are proportionate then the restrictions will fall outside the scope of the prohibition on anticompetitive agreements under the EC Treaty.

The impact of this landmark ruling has already been felt when the European Commission closed the file on a complaint against UEFA (The European Football Association) by an investment group that challenged the ban on the same owner owning more than one football club. The Commission in its announcement of its decision specifically relied on the ruling in this case.

key expertise

Geraldine Tickle
Partner
geraldine.tickle@martjohn.com

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