Case C‑209/07, Competition Authority v BIDS

In light of the high overcapacity in the Irish beef processing industry, processors formed the so-called Beef Industry Development Society Ltd (BIDS). BIDS purchased cattle from breeders, slaughters and de-boned them, and then sold the beef in Ireland and abroad.

The processors wished to reduce the overcapacity through agreed arrangements. The standard form of contract provided that the stayers were to compensate the goers, the amount of that compensation to be determined by the parties. BIDS was to pay the compensation to the goers. The stayers were to repay BIDS by means of a levy of EUR 2 per head of cattle up to their traditional cattle kill volume and EUR 11 above that volume.

In return, the goers undertook to decommission or put beyond use their processing plants or sell them only to persons established outside the island of Ireland, or, if necessary, to the stayers on condition that they be used as back-up equipment or spare parts; not to use the land on which those plants were situated for the purposes of beef or veal processing for a period of five years; and not to compete with the stayers in the beef and veal processing market in Ireland for two years.

By its question, the national court asked, in essence, whether agreements with features such as those of the BIDS arrangements were to be regarded, by reason of their object alone, as being anti‑competitive and prohibited by Art. 81(1) EC or whether, on the other hand, it was necessary, in order to reach such a conclusion, first to demonstrate that such agreements had anti-competitive effects.

The Competition Authority, the Belgian Government and the Commission of the European Communities all submitted that the object of the BIDS arrangements was obviously anti-competitive so that there was no need to analyse their actual effects and that those arrangements were concluded in breach of the prohibition laid down in Art. 81(1) EC.

The Court of Justice rejected the argument of BIDS that those arrangements should be analysed in the light of their actual effects on the market. The Court pointed out that to come within the prohibition laid down in Art. 81(1) EC, an agreement must have “as [its] object or effect the prevention, restriction or distortion of competition within the common market”. According to the Court, the alternative nature of that requirement, indicated by the conjunction “or”, led, first, to the need to consider the precise purpose of the agreement, in the economic context in which it was to be applied.

The Court, referring to LTM, held that where, however, an analysis of the clauses of that agreement did not reveal the effect on competition to be sufficiently deleterious, its consequences should then be considered. For it to be caught by the prohibition it was necessary to find that those factors were present which showed that competition had in fact been prevented or restricted or distorted to an appreciable extent (
Case 56/65 LTM [1966]).

The Court held that in deciding whether an agreement was prohibited by Art. 81(1) EC, there was therefore no need to take account of its actual effects once it appeared that its object was to prevent, restrict or distort competition within the common market. That examination must be made in the light of the agreement’s content and economic context. (see, inter alia,
Joined Cases 56/64 and 58/64 Consten and Grundig v Commission [1966]).

The distinction between “infringements by object” and “infringements by effect” arose from the fact that certain formed of collusion between undertakings could be regarded, by their very nature, as being injurious to the proper functioning of normal competition.

The Court held that to determine whether an agreement came within the prohibition laid down in Art. 81(1) EC, close regard must be paid to the wording of its provisions and to the objectives which it was intended to attain. In that regard, even supposing it to be established that the parties to an agreement acted without any subjective intention of restricting competition, but with the object of remedying the effects of a crisis in their sector, such considerations were irrelevant for the purposes of applying that provision.

The Court held that an agreement might be regarded as having a restrictive object even if it did not have the restriction of competition as its sole aim but also pursued other legitimate objectives.

It was only in connection with Art. 81(3) EC that matters such as those relied upon by BIDS might, if appropriate, be taken into consideration for the purposes of obtaining an exemption from the prohibition laid down in Art. 81(1) EC (see:
Case C‑551/03 P General Motors v Commission [2006]).

According to the Court, the object of the BIDS arrangements was to change, appreciably, the structure of the market through a mechanism intended to encourage the withdrawal of competitors. The BIDS arrangements were intended, essentially, to enable several undertakings to implement a common policy which had as its object the encouragement of some of them to withdraw from the market and the reduction, as a consequence, of the overcapacity which affected their profitability by preventing them from achieving economies of scale.

The Court held that that type of arrangement conflicted patently with the concept inherent in the EC Treaty provisions relating to competition, according to which each economic operator must determine independently the policy which it intended to adopt on the common market. The Court stated that Art. 81(1) EC was intended to prohibit any form of coordination which deliberately substituted practical cooperation between undertakings for the risks of competition.

According to the Court, the means put in place to attain the objective of the BIDS arrangements included restrictions whose object was also anti-competitive.

It followed an agreement with features such as those of the standard form of contract had as its object the prevention, restriction or distortion of competition within the meaning of Art. 81(1) EC.

Text of judgment