“It is common ground that four-party systems such as the [Visa] Scheme and the MasterCard system give rise to what is described as a “two-sided market”
“…there is simply no difference in the competitive process in the two scenarios under consideration in the absence of bilateral agreements. In either case, the market will not deviate from the default settlement rule set by the Scheme notwithstanding that the market participants are free to so … … there is no a priori reason why settlement … should be at par rather than at a discount (or at a premium) and Interchange Fees are no more or less than another way of expressing such a discount (or a premium if they have a negative value) … … the effect of the argument is that any level of MIF, on the infinite scale from infinitely positive to infinitely negative … is deemed to be a restriction of competition, all in comparison with an infinitesimally small point on that scale equating to there being no MIF (a figure of zero). But there is, in this context, no magic in the number zero and no reason why it represents an inherently more competitive situation than any other level.”
“… the situation is exactly the same at any lower level of MIF, including a zero MIF or its equivalent, a no-MIF/default SAP counterfactual. At that lower level, the default settlement rule still provides a default level of Interchange Fee, and therefore (because of the lack of competitive pressure to depart from that default) both a floor and a ceiling for that fee. The only difference is the level. Popplewell J rejected that argument in the Asda Judgment, stating at §160 that “… in a no MIF counterfactual the alleged vice is not the same as the actual: there is no floor.”
“91… Contrary to what the appellants claim, the fact that the operation is simply more difficult to implement or even less profitable without the restriction concerned cannot be deemed to give that restriction the 'objective necessity' required in order for it to be classified as ancillary … 93 … The objective necessity test… concerns the question of whether, in the absence of a given restriction of commercial autonomy, a main operation or activity which is not caught by the prohibition laid down in [article 101(1)] and to which that restriction is secondary, is likely not to be implemented or not to proceed.”
“107 As regards the objective necessity of a restriction, it must be observed that inasmuch as, as has been shown in paragraph 72 et seq. above, the existence of a rule of reason in Community competition law cannot be upheld, it would be wrong, when classifying ancillary restrictions, to interpret the requirement for objective necessity as implying a need to weigh the pro and anti-competitive effects of an agreement. Such an analysis can take place only in the specific framework of [article 101(3)] of the Treaty. 108 That approach is justified not merely so as to preserve the effectiveness of [article 101(3)] of the Treaty, but also on grounds of consistency. As [article 101(1)] of the Treaty does not require an analysis of the positive and negative effects on competition of a principal restriction, the same finding is necessary with regard to the analysis of accompanying restrictions. 109 Consequently, as the Commission has correctly asserted, examination of the objective necessity of a restriction in relation to the main operation cannot but be relatively abstract. It is not a question of analysing whether, in the light of the competitive situation on the relevant market, the restriction is indispensable to the commercial success of the main operation but of determining whether, in the specific context of the main operation, the restriction is necessary to implement that operation. If, without the restriction, the main operation is difficult or even impossible to implement, the restriction may be regarded as objectively necessary for its implementation.”
“89 As the case-law cited in paragraph 77 above [i.e. Metropole] shows, examination of the objective necessity of a restriction is a relatively abstract exercise. Only those restrictions which are necessary in order for the main operation to be able to function in any event may be regarded as falling within the scope of the theory of ancillary restrictions. Thus, considerations relating to the indispensable nature of the restriction in the light of the competitive situation on the relevant market are not part of an analysis of the ancillary nature of the restriction (see, to that effect, M6 and Others v Commission, cited in paragraph 77 above, paragraph 121). 90 Accordingly, the fact that the absence of the MIF may have adverse consequences for the functioning of the MasterCard system does not, in itself, mean that the MIF must be regarded as being objectively necessary, if it is apparent from an examination of the MasterCard system in its economic and legal context that it is still capable of functioning without it.”
“19. If that were the case, and should the vendor and the purchaser remain competitors after the transfer, it is clear that the agreement for the transfer of the undertaking could not be given effect. The vendor, with his particularly detailed knowledge of the transferred undertaking, would still be in a position to win back his former customers immediately after the transfer and thereby drive the undertaking out of business. Against that background, non-competition clauses incorporated in an agreement for the transfer of an undertaking in principle have the merit of ensuring that the transfer has the effect intended. By virtue of that very fact they contribute to the promotion of competition because they lead to an increase in the number of undertakings in the market in question”
“An agreement which restricts competition cannot escape the prohibition in [article 101(1)] merely because it enables an undertaking to survive.”
“Nevertheless, a provision in the statutes of a co-operative purchasing association, restricting the opportunity for members to join other types of competing co-operatives and thus discouraging them from obtaining supplies elsewhere, may have adverse effects on competition. So, in order to escape the prohibition laid down in [article 101(1)], the restrictions imposed on members by the statutes of co-operative purchasing associations must be limited to what is necessary to ensure that the cooperative functions properly and maintains its contractual power in relation to producers.”
“whether that operation would be impossible to carry out in the absence of the restriction in question”
“93. In that regard, suffice it to note that those two provisions have different objectives and that the latter criterion relates to the issue whether coordination between undertakings that is liable to have an appreciable adverse impact on the parameters of competition, such as the price, the quantity and quality of the goods or services, which is therefore covered by the prohibition rule laid down in [article 101(1)], can nonetheless, in the context of [article 101(3)], be considered indispensable to the improvement of production or distribution or to the promotion of technical or economic progress, while allowing consumers a fair share of the resulting benefits. By contrast, as is apparent from paragraphs 89 and 90 of the present judgment, the objective necessity test referred to in those paragraphs concerns the question whether, in the absence of a given restriction of commercial autonomy, a main operation or activity which is not caught by the prohibition laid down in [article 101(1)] and to which that restriction is secondary, is likely not to be implemented or not to proceed. 94. In ruling, in paragraph 89 of the judgment under appeal, that ‘[o]nly those restrictions which are necessary in order for the main operation to be able to function in any event may be regarded as falling within the scope of the theory of ancillary restrictions’, and in concluding, in paragraph 90 of the judgment under appeal, that ‘the fact that the absence of the MIF may have adverse consequences for the functioning of the MasterCard system does not, in itself, mean that the MIF must be regarded as being objectively necessary, if it is apparent from an examination of the MasterCard system in its economic and legal context that it is still capable of functioning without it’. The General Court did not, therefore, err in law.”
“126. The question of knowing whether the restrictive effects of the measures on the issuing market would be counterbalanced by the alleged restrictive effects on competition on the payment systems market that would occur in their absence stems from the analysis under [article 101(3)]. In this regard, in recital 368 of the contested decision, the Commission deemed that the Group’s argument relating to the indispensability of the measures for the survival of the CB system would be examined within the context of [article 101(3)]. 127 Furthermore, it should be noted that, in its previous decision-making practice, i.e. in recital 59 of the Visa 2002 decision, the Commission had considered that Visa’s argument that in the absence of the MIF, the extent of Visa’s activities, and therefore, their competitive impact, would be greatly reduced, would be examined with regard to [article 101(3)] and not to [article 101(1)] for which the question that arose was to determine whether a clause was technically necessary for the functioning of the Visa payment system.”
“In my judgment the distinction being drawn is between (a) real links to real efficiencies, capable of being observed and demonstrated on the facts by evidence (in other words, requiring empirical data), and (b) theoretical or logically assumed links and efficiencies based on broad economic or logical analysis, opinion or anecdotal evidence, perhaps sound in theory but possibly failing to take into account one or more of the many factors which arise in highly complex interactions in the real economy. I see no difficulty in this court determining whether the former has been proved on the balance of probabilities. That test is capable of accommodating varying requirements as to what is expected to meet the standard: contract terms must be “certain”, allegations of fraud must be “distinctly proved” and it is often said that “cogent” evidence is required to rebut certain presumptions. In the case of Article 101(3), it is recognised that robust analysis and cogent evidence will be required to establish, on the balance of probabilities, that a restrictive agreement in fact and in the real world (as opposed to in theory) gives rise to pro-competitive effects.”
“689 … it cannot just be assumed, as MasterCard does, without detailed economic and empirical analysis, that a MIF maximises the overall benefits of a system to merchants and cardholders “by reducing costs, increasing services levels and contributing to overall economic welfare”
“…it must be observed that that argument [the need for a direct link], which was raised most recently at the hearing, cannot be accepted. That distinction is not to be found at recitals 155 to 161 to the Decision, to which recital 169 refers, since those recitals unreservedly conclude that there is no link between the General Sales Conditions and the contribution to the promotion of technical progress. Nor is that distinction provided for in [article 101(3)], which allows the exemption of agreements producing a gain in efficiency without distinction as to whether that effect is direct or indirect, and a distinction cannot in principle be drawn where the Treaty draws no distinction (Consten and Grundig v Commission, paragraph 110 above, p. 339). In accordance with the case-law cited at paragraphs 247 and 248 above [which included Consten and Grundig], any advantage in the form of a gain in efficiency must therefore be taken into account, provided that it is objective and appreciable and that its existence is proved convincingly.”
“However, as is recalled in paragraph 234 of the present judgment, examination of the first condition laid down in [article 101(3)] raises the question whether the advantages derived from the measure at issue are of such a character as to compensate for the disadvantages resulting therefrom. Thus, where, as in the present case, restrictive effects have been found on only one market of a two-sided system, the advantages flowing from the restrictive measure on a separate but connected market also associated with that system cannot, in themselves, be of such a character as to compensate for the disadvantages resulting from that measure in the absence of any proof of the existence of appreciable objective advantages attributable to that measure in the relevant market, in particular, as is apparent from paragraphs 21 and 168 to 180 of the judgment under appeal, where the consumers on those markets are not substantially the same.”
“226 It must be concluded therefore that, in the absence of proof of a sufficiently close link between the MIF and the objective advantages enjoyed by merchants, the fact that the MIF may contribute to the increase in MasterCard system output is not, in itself, capable of establishing that the first condition laid down under [article 101(3)] is satisfied. 227 The applicants also criticise the Commission for failing to take into account the advantages to cardholders that arise from the MIF and, moreover, for acting as a ‘price regulator’ in respect of the MIF. 228 With regard to the first criticism, it is indeed settled case-law that the appreciable objective advantages to which the first condition of [article 101(3)] relates may arise not only for the relevant market but also for every other market on which the agreement in question might have beneficial effects, and even, in a more general sense, for any service the quality or efficiency of which might be improved by the existence of that agreement (Case T-86/95 Compagnie générale maritime and Others v Commission[2002] ECR II-1011 , paragraph 343, and GlaxoSmithKline Services v Commission, cited in paragraph 196 above, paragraph 248). However, as merchants constitute one of the two groups of users affected by payment cards, the very existence of the second condition of [article 101(3)] necessarily means that the existence of appreciable objective advantages attributable to the MIF must also be established in regard to them. 229 Therefore, in the absence of such proof, the applicants’ criticism that insufficient account was taken of the advantages of the MIF for cardholders is, in all events, ineffective.”
“As regards the appellants’ argument that the General Court did not explain why the first two conditions in [article 101(3)] could not be satisfied on the basis only of the advantages the MIF produce for cardholders, it is sufficient to refer to paragraphs 240 to 245 of the present judgment.”
“Moreover, the condition that consumers must receive a fair share of the benefits implies in general that efficiencies generated by the restrictive agreement within a relevant market must be sufficient to outweigh the anticompetitive effects produced by the agreement within that same relevant market.”
“The test is market specific, see to that effect Case T-1 31/99, Shaw,[2002] ECR II-2023 , paragraph 163, where the Court of First Instance held that the assessment under [article 101(3)] had to be made within the same analytical framework as that used for assessing the restrictive effects, and Case C360/92 P, Publishers Association,[1995] ECR I-23 , paragraph 29, where in a case where the relevant market was wider than national the Court of Justice held that in the application of [article 101(3)] it was not correct only to consider the effects on the national territory.”
“The application of this Regulation should be without prejudice to the application of Union and national competition rules. It should not prevent Member States from maintaining or introducing lower caps or measures of equivalent object or effect through national legislation.”
“… the analysis of the competitive situation in the absence of the measures in question aims to determine whether the measures restrict the competition that would have existed in their absence. This concerns, in particular, determining whether, in the absence of the measures in question, the competitive situation would have been different on the relevant market, that is to say whether the restrictions on competition would or would not have occurred on this market.”
“[EU] law prohibits the making by national courts of decisions which contradict decisions of [EU] institutions on the same subject matter between the same parties, and strongly discourages the making by national courts of decisions which may be inconsistent with decisions which may yet be made by [EU] institutions on the same subject matter between the same parties. But it does not, as the analysis of the relevant authorities by … Lord Hoffmann, shows, go to the length of requiring national courts to accept the factual basis of a decision reached by [an EU] institution when considering an issue arising between different parties in respect of a different subject matter.”
“MasterCard’s MIF constitutes a restriction of price competition in the acquiring markets. In the absence of a bilateral agreement, the multilateral “default” rule fixes the level of the interchange fee rate for all acquiring banks alike, thereby inflating the base on which acquiring banks set charges to merchants. Prices set by acquiring banks would be lower in the absence of this rule and in the presence of a rule that prohibits ex post pricing. The MasterCard MIF therefore creates an artificial cost base that is common for all acquirers and the merchant fee will typically reflect the costs of the MIF. This leads to a restriction of price competition between acquiring banks to the detriment of merchants (and subsequent purchasers).”
“[t]he decisive question is whether in the absence of the MIF the prices acquirers charge to merchants at large would be lower. This is the case, because the price each individual bank could charge to merchants would be fully determined by competition rather than to a large extent by a collective decision among (or on behalf of) the banks.”
“the Commission took the view that four-party bank card systems operated in three separate markets: an inter-systems market, an issuing market and an acquiring market, and relied on the restrictive effects of the MIF on the acquiring market” and “[i]t must be held that such a definition is not manifestly erroneous”
“If competition would kill off the main operation without the restriction being in place, the restriction is necessary for the main operation”
“... MasterCard’s argument that charging positive MIFs led to an increase in the use of cards and therefore an increase in the amount of the benefits enjoyed by merchants as a result of the use of cards is made good on the evidence before me. So too is its case that because cardholders received benefits from issuers which were funded by the MIF, the benefits to merchants of card use are to some extent directly caused by the MIF. That does not mean that all the benefits enjoyed by merchants are directly attributable to the level of MIFs charged by MasterCard. It does, however, mean that a MIF at some positive level is directly causative of some benefits to merchants. That is the starting point for the Article 101(3) process. There then remains to be addressed the difficult quantification exercise involved in valuing those merchant benefits which are directly attributable to the MIF. This raises difficult questions, which I address below, but none of them were issues which MasterCard sought to address before the Commission, or which the Commission, General Court or CJEU needed to address.”
“The theory, in a nutshell, is that payment card systems can exploit merchants’ fears of losing business, so as to cause them to be willing to pay higher interchange fees than are justified by the benefits received by taking a card payment in place of cash payment. This was characterised as the “must take cards” phenomenon. The view that this creates system “inefficiencies” assumes (a) that business stealing is an irrelevant merchant benefit, and (b) that merchant benefits are to be measured by reference only to the difference between cash and card transactions, neither of which are correct assumptions for the reasons which I explain below.”
“(2) An analysis of debit interchange fees in the US by Evans Chang and Joyce applied an indirect method of measuring how announcements of proposed caps on debit interchange fees in the US affected the price of issuers’ shares. The authors inferred that 80% of debit card interchange fee was passed through to buyers. (3) PwC analysed research conducted in 2001 by Research International which asked 648 respondents about their likely response to price change in credit cards, including the introduction of a transaction charge of 0.25% on all credit cards. The conclusion was that the introduction of such a charge would decrease the total transaction volume on credit cards by 26%. This suggests that in the UK the MIF subsidisation of costs which would otherwise have to be recouped in card fees has a very significant impact, implying a high level of pass through.”
“Dr Niels based his opinion that pass through was very high on economic theory and the competitive nature of the issuing market: as a matter of economic theory, in a perfectly competitive market suppliers set prices equal to marginal costs; and a single cost change to an industry which is highly competitive results in all or almost all of the cost change being passed on to the consumer; there are a large number of issuers in the UK and in general the UK market is regarded as highly competitive, particularly for credit cards…”
“…in my view these examples provided no firm empirical basis to support or undermine his estimate. They are not a representative sample and do not reflect the end point in any reduction of benefits. His estimate of 80%-100% was not based on any identified data or calculations.”
“…because a MIF which does not translate into card use cannot have a direct causative effect on merchant benefits arising out of card use. Mr Dryden and Dr Niels accepted that pass through for credit cards, which were stand-alone products, met this hurdle but Mr Dryden opined that for debit cards it "may not".”
“I have not had substantial evidence of issuer profits or issuer finances which might assist on this question. Neither side called any witness with substantial contemporaneous experience as an issuer. The documentary evidence was exiguous.”
“Doing the best I can, my conclusions are that the degree of issuer pass through is likely to be at least 75% for credit cards and at least 40% for debit cards. These percentages are intended to reflect the causative effect of the MIF in incentivising card use. The level of profit for issuers is not such as to violate the fair share or indispensability requirements. A profit at levels which varied across the market between 10% and 40% is not indicative of an unreasonable return on capital for a bank and would not of itself represent such a degree of profit as to cause the fair share or indispensability requirement to be breached if the threshold test of merchant benefit neutrality were fulfilled.”
“Again, it should be noted that an increase in system output does not constitute an objective efficiency if the benefits of increased card usage only accrue to banks, while customers and merchants are worse off due to higher retail prices and increased merchant fees. Hence, evoking the maximisation of system output also requires a convincing analysis that consumers benefit from this.”
“This suggests that in the UK the MIF subsidisation of costs which would otherwise have to be recouped in card fees has a very significant impact, implying a high level of pass through”
“Merchants will accept cards, in part, to attract customers from each other and this will increase the amount they will be prepared to pay to accept cards above a level determined solely from transactional benefits they obtain from accepting cards. Since some or most of the additional sales won by one will be taken from its competitors, the acceptance of cards may have little or no effect on total sales from the perspective of merchants as a whole.”
“As regards merchants, while an increase in the number of cards in circulation may increase the utility of the MasterCard system as far as they are concerned, it also has the effect of reducing their ability to constrain the level of the MIF and, therefore, of increasing the applicants' market power. It is reasonable to conclude that the risk of adverse effects on merchants' custom of a refusal to accept this method of payment, or of discrimination in that respect, is higher the greater the number of cards in circulation.”
“the fact that accepting a payment card enables Merchants to win business from competitors who do not accept that card (referred to as "Business Stealing") is a benefit for the accepting Merchants but not, in itself, for the economy as a whole: their competitors suffer an equal and opposite loss, achieving no more than transferring business from one to the other with no net gain.”
“Visa contends that MIFs incentivise Issuers to strike the “right” balance between online security and the need for online purchases to be as “frictionless” as possible. However, Visa’s case in this regard is entirely theoretical: there was no concrete evidence whatsoever as to what steps Issuers would or would not have taken in the absence of the MIF or what the effect of those steps would be.”
“In summary, there is in my judgment a complete absence of evidence of a real, observable and measurable link between MIFs and actions taken by Issuers to stimulate card usage. The best material that has been adduced may support some relationship between decreases in credit card MIFs and decreased levels of rewards, but its existence is a matter of supposition, there being no attempt to rule out the possibility of other causes. Even if some link was sufficiently clear, its nature and extent is not.”
“Despite the volume of that evidence and the eminence of the experts, they have all ultimately engaged in (and invited me to undertake) an exercise which involves making sweeping assumptions and the broadest of estimates, many of them requiring, in the end little more than putting a finger in the air.”
“… We consider that a substantial amount of the UK MIF - 50% - would have been passed-on (albeit not in a manner which would have amounted to a ‘defence’ of pass-on, for the reasons given at paragraphs 484 to 485).”
“15 The 1998 Act recognised that competition law was an area which justified a specialist court to deal, not just with appeals in cases concerning public enforcement of the competition rules, but also with some private law claims for damages. One obvious feature of competition litigation is the almost ubiquitous presence of expert economic evidence, often of a complex and technical nature. Another common feature, related to the last one, is evidence as to the characteristics and dynamics of specific industries and markets. Mindful of these features, Parliament provided for the specialist competition tribunal to have a multi-disciplinary constitution. In this way panels have the potential to include not just lawyers but also, for example, distinguished economists, accountants or industry experts, selected for each case from the members appointed to the CAT by reason of their knowledge and experience in these areas. Expertise of this kind is of considerable assistance in understanding and resolving the difficult issues which are a common feature of competition litigation. This has long been recognised in the UK, the former Restrictive Practices Court having had a similar constitution. Although it is not impossible for a judge sitting on a case in the High Court to enlist the assistance of a court expert, this is relatively uncommon, and there are resource and other obstacles to the adoption of that course on more than very exceptional occasions. 16 Furthermore, CAT panels benefit from outstanding logistical and legal support provided by the CAT staff and legal assistants (“referendaires”). This is of particular value in lengthy and complex actions … 17 … the CAT has the best of both worlds, in that it is also able to tap into the expertise of the High Court in this field. For many years High Court judges of the Chancery Division have been appointed as CAT Chairmen, and have regularly sat in the CAT. In this way the CAT is in a position to draw on the assistance of experienced judges who have heard competition law cases in both the High Court and the CAT ….”
“Reimbursement for Interchange Transactions Each Issuer must pay the Acquirer the amount due for Transactions occurring with the use of a valid Card.”
“9.9 Interchange Reimbursement Fees This Section 9.9 specifies the fees reimbursed by one Member to a Customer or vice versa to cover Interchange for International Transactions. These fees shall also apply to Visa Europe Transactions and Domestic Transactions where a Member's domestic operating regulations do not provide for an equivalent fee. For the avoidance of doubt, no Interchange Reimbursement Fees applicable to International Transactions shall be applied, by default, to Visa Europe Transactions. 9.9A Merchant Transactions For Transactions originating at a Merchant, an Acquirer reimburses the Issuer, or, where applicable, the issuer that is a Customer, an Interchange Reimbursement Fee for each Interchange Transaction. This fee is calculated as a percentage of net sales (Transaction Receipt totals less Credit Transaction Receipts). 9.9B Default Domestic Interchange Reimbursement Fee For Visa Europe Transactions, the Interchange Reimbursement Fees as specified in this Section 9.9, serve as the default Interchange Reimbursement Fees for Domestic Transactions in Visa Europe countries where Multilateral Agreements and/or Private Agreements are not in place. 9.9C Domestic Interchange Reimbursement Fee Variances The Visa Europe Board may, on request, establish country-specific default Interchange Reimbursement Fees for Domestic Transactions if the Members in that country are unable to reach agreement on appropriate default Interchange Reimbursement Fees for Domestic Transactions, or in other exceptional circumstances.”
“This Chapter 9 details Member-to-Member fees applicable to Domestic Transactions in the United Kingdom and Gibraltar … where these fees differ from the [Scheme Regulations] and in the absence of Private Agreements.”
“8.2 Net Settlement A Customer that uses the Interchange System for the authorization and clearing of Transactions is required to net settle in accordance with the Corporation’s settlement Standards. However, an Acquirer and an Issuer may, with respect to a particular Transaction, agree to settle directly between themselves pursuant to a bilateral agreement. Standards describing net settlement and bilateral agreement rights and obligations are set forth in the Settlement Manual ….”
“1.7.3.7 Interchange Fee Requirements If a central Acquirer acquires an lntracountry Transaction, the following principles apply to the interchange fee: 1. The central Acquirer may agree upon bilateral interchange fees with the Issuer; and 2. Unless a bilateral agreement applicable to an lntracountry Transaction has been established between two Customers, then the interchange fees applicable to an lntracountry Transaction as set forth in Rule 8.4, will apply. If a central Acquirer acquires a Non-lntracountry Transaction, the following principles apply to the interchange fee: 1. The central Acquirer may agree upon bilateral interchange fees with the Issuer; and 2. Unless a bilateral agreement applicable to a Non-lntracountry Transaction has been established between two Customers, the interchange fees applicable to a Non lntracountry Transaction as set forth in Rule 8.3 will apply.”
“8.3 Interchange and Service Fees A Transaction settled between Customers gives rise to the payment of the appropriate interchange fee or service fee, as applicable. The Corporation has the right to establish default interchange fees and default service fees (hereafter referred to as “interchange fees,” “service fees,” or collectively, “fees”), it being understood that all such fees set by the Corporation apply only if there is no applicable bilateral interchange fee or service fee agreement between two Customers in place. The Corporation establishes all fees for Interregional Transactions and Intraregional Transactions, and may establish fees for Intracountry Transactions. The Corporation will inform Customers, as applicable, of all fees it establishes and may periodically publish fee tables. Unless an applicable bilateral interchange fee or service fee agreement between two Customers is in place, any intraregional or interregional fees established by the Corporation are binding on all Customers. 8.4 Establishment of lntracountry Interchange and Service Fees This rule is applicable only to lntracountry Transactions. If intracountry interchange and service fees are not established by the Corporation, such fees may be established in one of two ways: by agreement of Customers in the country as set forth in Rule 8.4. 1, or by application of intraregional interchange and service fees to lntracountry Transactions as set forth in Rule 8.4.2. Such fees may also be established by bilateral agreement between two Customers as set forth in Rule 8.4.3. For any Transaction that is subject to a bilateral agreement between two Customers, the interchange and service fees set forth in the bilateral agreement prevail. For any Transaction that is not subject to a bilateral agreement between two Customers, the default intracountry fees established by the Corporation apply, or if none, the default intracountry fees established by Customers pursuant to these Rules apply, or if none, the intraregional fees apply, or if none, the interregional fees apply. Any multilateral Customer fee agreement must comply with all requirements set forth in Rule 8.4. 1. The Corporation reserves the right to determine if multiple bilateral agreements are deemed to be a multilateral agreement.”
“3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensible to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.” - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, (a) impose on the undertakings concerned restrictions which are not indispensible to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.”
“26. If a horizontal co-operation agreement does not restrict competition by object, it must be examined whether it has appreciable restrictive effects on competition. Account must be taken of both actual and potential effects. In other words, the agreement must at least be likely to have anti-competitive effects. 27. For an agreement to have restrictive effects on competition within the meaning of Article 101(1) it must have, or be likely to have, an appreciable adverse impact on at least one of the parameters of competition on the market, such as price, output, product quality, product variety or innovation. Agreements can have such effects by appreciably reducing competition between the parties to the agreement or between any one of them and third parties. This means that the agreement must reduce the parties’ decisionmaking independence, either due to obligations contained in the agreement which regulate the market conduct of at least one of the parties or by influencing the market conduct of at least one of the parties by causing a change in its incentives. 28. Restrictive effects on competition within the relevant market are likely to occur where it can be expected with a reasonable degree of probability that, due to the agreement, the parties would be able to profitably raise prices or reduce output, product quality, product variety or innovation. This will depend on several factors such as the nature and content of the agreement, the extent to which the parties individually or jointly have or obtain some degree of market power, and the extent to which the agreement contributes to the creation, maintenance or strengthening of that market power or allows the parties to exploit such market power. 29. The assessment of whether a horizontal co-operation agreement has restrictive effects on competition within the meaning of Article 101(1) must be made in comparison to the actual legal and economic context in which competition would occur in the absence of the agreement with all of its alleged restrictions (that is to say, in the absence of the agreement as it stands (if already implemented) or as envisaged (if not yet implemented) at the time of assessment). Hence, in order to prove actual or potential restrictive effects on competition, it is necessary to take into account competition between the parties and competition from third parties, in particular actual or potential competition that would have existed in the absence of the agreement. This comparison does not take into account any potential efficiency gains generated by the agreement as these will only be assessed under Article 101(3).”
“4. The present guidelines set out the Commission’s interpretation of the conditions for exception contained in [article 101(3)]. It thereby provides guidance on how it will apply [article 101] in individual cases. Although not binding on them, these guidelines also intend to give guidance to the courts and authorities of the Member States in their application of [article 101 (1) and (3)] of the Treaty. 5. The guidelines establish an analytical framework for the application of [article 101(3)]. The purpose is to develop a methodology for the application of this Treaty provision. This methodology is based on the economic approach already introduced and developed in the guidelines on … horizontal co-operation agreements … The Commission will follow the present guidelines, which provide more detailed guidance on the application of the four conditions of [article 101(3)] than the guidelines on … horizontal co-operation agreements … also with regard to agreements covered by those guidelines. 6. The standards set forth in the present guidelines must be applied in light of the circumstances specific to each case. This excludes a mechanical application. Each case must be assessed on its own facts and the guidelines must be applied reasonably and flexibly.”
“The assessment under [article 101(3)] of benefits flowing from restrictive agreements is in principle made within the confines of each relevant market to which the agreement relates. The Community competition rules have as their objective the protection of competition on the market and cannot be detached from this objective. Moreover, the condition that consumers must receive a fair share of the benefits implies in general that efficiencies generated by the restrictive agreement within a relevant market must be sufficient to outweigh the anti-competitive effects produced by the agreement within that same relevant market. Negative effects on consumers in one geographic market or product market cannot normally be balanced against and compensated by positive effects for consumers in another unrelated geographic market or product market. However, where two markets are related, efficiencies achieved on separate markets can be taken into account provided that the group of consumers affected by the restriction and benefiting from the efficiency gains are substantially the same. Indeed, in some cases only consumers in a downstream market are affected by the agreement in which case the impact of the agreement on such consumers must be assessed. This is for instance so in the case of purchasing agreements.”
“49. It follows from the case law of the Court of Justice that only objective benefits can be taken into account. This means that efficiencies are not assessed from the subjective point of view of the parties. Cost savings that arise from the mere exercise of market power by the parties cannot be taken into account. For instance, when companies agree to fix prices or share markets they reduce output and thereby production costs. Reduced competition may also lead to lower sales and marketing expenditures. Such cost reductions are a direct consequence of a reduction in output and value. The cost reductions in question do not produce any pro-competitive effects on the market. In particular, they do not lead to the creation of value through an integration of assets and activities. They merely allow the undertakings concerned to increase their profits and are therefore irrelevant from the point of view of [article 101(3)]. 50. The purpose of the first condition of [article 101(3)] is to define the types of efficiency gains that can be taken into account and be subject to the further tests of the second and third conditions of [article 101(3)]. The aim of the analysis is to ascertain what are the objective benefits created by the agreement and what is the economic importance of such efficiencies. Given that for [article 101(3)] to apply the pro-competitive effects flowing from the agreement must outweigh its anti-competitive effects, it is necessary to verify what is the link between the agreement and the claimed efficiencies and what is the value of these efficiencies. 51. All efficiency claims must therefore be substantiated so that the following can be verified: (a) The nature of the claimed efficiencies; (b) The link between the agreement and the efficiencies; (c) The likelihood and magnitude of each claimed efficiency; and (d) How and when each claimed efficiency would be achieved. 52. Letter (a) allows the decision-maker to verify whether the claimed efficiencies are objective in nature, cf. paragraph 49 above. 53. Letter (b) allows the decision-maker to verify whether there is a sufficient causal link between the restrictive agreement and the claimed efficiencies. This condition normally requires that the efficiencies result from the economic activity that forms the object of the agreement. Such activities may, for example, take the form of distribution, licensing of technology, joint production or joint research and development. To the extent, however, that an agreement has wider efficiency enhancing effects within the relevant market, for example because it leads to a reduction in industry wide costs, these additional benefits are also taken into account. 54. The causal link between the agreement and the claimed efficiencies must normally also be direct. Claims based on indirect effects are as a general rule too uncertain and too remote to be taken into account. A direct causal link exists for instance where a technology transfer agreement allows the licensees to produce new or improved products or a distribution agreement allows products to be distributed at lower cost or valuable services to be produced. An example of indirect effect would be a case where it is claimed that a restrictive agreement allows the undertakings concerned to increase their profits, enabling them to invest more in research and development to the ultimate benefit of consumers. While there may be a link between profit- ability and research and development, this link is generally not sufficiently direct to be taken into account in the context of [article 101(3)]. 55. Letters (c) and (d) allow the decision-maker to verify the value of the claimed efficiencies… Given that [article 101(1)] only applies in cases where the agreement has likely negative effects on competition and consumers (in the case of hardcore restrictions such effects are presumed) efficiency claims must be substantiated so that they can be verified. Unsubstantiated claims are rejected. 56. In the case of claimed cost efficiencies the undertakings invoking the benefit of [article 101(3)] must as accurately as reasonably possible calculate or estimate the value of the efficiencies and describe in detail how the amount has been computed. They must also describe the method(s) by which the efficiencies have been or will be achieved. The data submitted must be verifiable so that there can be a sufficient degree of certainty that the efficiencies have materialised or are likely to materialise. 57. In the case of claimed efficiencies in the form of new or improved products and other non-cost based efficiencies, the undertakings claiming the benefit of [article 101(3)] must describe and explain in detail what is the nature of the efficiencies and how and why they constitute an objective economic benefit.”
“84. The concept of ‘consumers’ encompasses all direct or indirect users of the products covered by the agreement, including producers that use the products as an input, wholesalers, retailers and final consumers, i.e. natural persons who are acting for purposes which can be regarded as outside their trade or profession. In other words, consumers within the meaning of [article 101(3)] are the customers of the parties to the agreement and subsequent purchasers. These customers can be undertakings as in the case of buyers of industrial machinery or an input for further processing or final consumers as for instance in the case of buyers of impulse ice-cream or bicycles. 85. The concept of ‘fair share’ implies that the pass-on of benefits must at least compensate consumers for any actual or likely negative impact caused to them by the restriction of competition found under [article 101(1)]. In line with the overall objective of [article 101] to prevent anti-competitive agreements, the net effect of the agreement must at least be neutral from the point of view of those consumers directly or likely affected by the agreement. If such consumers are worse off following the agreement, the second condition of [article 101(3)] is not fulfilled. The positive effects of an agreement must be balanced against and compensate for its negative effects on consumers. When that is the case consumers are not harmed by the agreement. Moreover, society as a whole benefits where the efficiencies lead either to fewer resources being used to produce the output consumed or to the production of more valuable products and thus to a more efficient allocation of resources. 86. It is not required that consumers receive a share of each and every efficiency gain identified under the first condition. It suffices that sufficient benefits are passed on to compensate for the negative effects of the restrictive agreement. In that case consumers obtain a fair share of the overall benefits. If a restrictive agreement is likely to lead to higher prices, consumers must be fully compensated through increased quality or other benefits. If not, the second condition of [article 101(3)] is not fulfilled. 87. The decisive factor is the overall impact on consumers of the products within the relevant market and not the impact on individual members of this group of consumers. In some cases a certain period of time may be required before the efficiencies materialise. Until such time the agreement may have only negative effects. The fact that pass-on to the consumer occurs with a certain time lag does not in itself exclude the application of [article 101(3)]. However, the greater the time lag, the greater must be the efficiencies to compensate also for the loss to consumers during the period preceding the pass-on … 102. Consumer pass-on can … take the form of qualitative efficiencies such as new and improved products, creating sufficient value for consumers to compensate for the anti- competitive effects of the agreement, including a price increase. 103. Any such assessment necessarily requires value judgment. It is difficult to assign precise values to dynamic efficiencies of this nature. However, the fundamental objective of the assessment remains the same, namely to ascertain the overall impact of the agreement on the consumers within the relevant market. Undertakings claiming the benefit of [article 101(3)] must substantiate that consumers obtain countervailing benefits (see in this respect paragraphs 57 and 86 above).”
“73. According to the third condition of [article 101(3)] the restrictive agreement must not impose restrictions, which are not indispensable to the attainment of the efficiencies created by the agreement in question. This condition implies a two-fold test. First, the restrictive agreement as such must be reasonably necessary in order to achieve the efficiencies. Secondly, the individual restrictions of competition that flow from the agreement must also be reasonably necessary for the attainment of the efficiencies. 74. In the context of the third condition of [article 101(3)] the decisive factor is whether or not the restrictive agreement and individual restrictions make it possible to perform the activity in question more efficiently than would likely have been the case in the absence of the agreement or the restriction concerned. The question is not whether in the absence of the restriction the agreement would not have been concluded, but whether more efficiencies are produced with the agreement or restriction than in the absence of the agreement or restriction. 75. The first test contained in the third condition … requires that the efficiencies be specific to the agreement in question in the sense that there are no other economically practicable and less restrictive means of achieving the efficiencies. In making this latter assessment the market conditions and business realities facing the parties to the agreement must be taken into account. Undertakings invoking the benefit of [article 101(3)] are not required to consider hypothetical or theoretical alternatives. The Commission will not second-guess the business judgment of the parties. It will only intervene where it is reasonably clear that there are realistic and attainable alternatives. The parties must only explain and demonstrate why such seemingly realistic and significantly less restrictive alternatives to the agreement would be significantly less efficient.”
“Principles to be applied in determining questions. (1) The purposes of this section is to ensure that so far as is possible (having regard to any relevant differences between the provisions concerned), questions arising under this Part in relation to competition within the United Kingdom are dealt with in a manner which is consistent with the treatment of corresponding questions arising in [EU] law in relation to competition within the [European Union]. (2) At any time when the court determines a question arising under this Part, it must act (so far as is compatible with the provisions of this Part and whether or not it would otherwise be required to do so) with a view to securing that there is no inconsistency between— (a) the principles applied, and decision reached, by the court in determining that question; and (b) the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in [EU] law. (3) The court must, in addition, have regard to any relevant decision or statement of the Commission. … (5) In subsections (2) and (3), “court” means any court or tribunal. (6) In subsections (2)(b) and (3), “decision” includes a decision as to— (a) the interpretation of any provision of [EU] law; (b) the civil liability of an undertaking for harm caused by its infringement of [EU] law.” (a) the principles applied, and decision reached, by the court in determining that question; and (b) the principles laid down by the Treaty and the European Court, and any relevant decision of that Court, as applicable at that time in determining any corresponding question arising in [EU] law. (a) the interpretation of any provision of [EU] law; (b) the civil liability of an undertaking for harm caused by its infringement of [EU] law.”
“(1) Subject to the provisions of this section, all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State are prohibited and void, including in particular, without prejudice to the generality of this subsection, those which— (a) directly or indirectly fix purchase or selling prices or any other trading conditions, (b) limit or control production, markets, technical development or investment, (c) share markets or sources of supply, (d) apply dissimilar conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage, (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature or according to commercial usage have no connection with the subject of such contracts. (2) An agreement, decision or concerted practice shall not be prohibited under subsection (1) if it complies with the conditions referred to in subsection (5) or falls within a category of agreements, decisions, or concerted practices the subject of a declaration for the time being in force under subsection (3). … (5) The conditions mentioned in subsections (2) and (3) [subsection 3 not being relevant for present purposes] are that the agreement, decision or concerted practice or category of agreement, decision or concerted practice, having regard to all relevant market conditions, contributes to improving the production or distribution of goods or provision of services or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit and does not— (a) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives, (b) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question …”. (a) directly or indirectly fix purchase or selling prices or any other trading conditions, (b) limit or control production, markets, technical development or investment, (c) share markets or sources of supply, (d) apply dissimilar conditions to equivalent transactions with other trading parties thereby placing them at a competitive disadvantage, (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which by their nature or according to commercial usage have no connection with the subject of such contracts. (a) impose on the undertakings concerned terms which are not indispensable to the attainment of those objectives, (b) afford undertakings the possibility of eliminating competition in respect of a substantial part of the products or services in question …”