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Court of Justice ruled on restrictions by object in relation to vertical agreements

Court of Justice ruled on restrictions by object in relation to vertical agreements

Court of Justice ruled on restrictions by object in relation to vertical agreements

01.12.2015 NL law

On 26 November 2015, the Court of Justice ruled in case C-345/14 Maxima Latvija on a request for a preliminary ruling from the Supreme Court of Latvia.

 The case concerned clauses in property leasing contracts that allow the tenant to prevent the lessor from leasing to competing parties. In line with the reasoning in the recent Cartes Bancaires judgment, the Court found that the contested clauses did not have the object to restrict competition. The Court clarified further the conditions under which contractual limitations may be considered to have the effect of restricting competition within the meaning of Article 101 (1) TFEU.

Maxima Latvija ("Maxima") is a large retailer, predominantly active in the food sector. Some of its commercial leasing agreements with shopping centers included a clause allowing Maxima to prevent the lessor from leasing to other retailers in the same shopping center. In 2012, the Latvian competition authority found that such clauses had the "object" to restrict competition and imposed a fine on Maxima. Maxima appealed the fining decision, up to the Latvian Supreme Court, which in turn sought a preliminary ruling from the Court of Justice.

The Court of Justice started by reiterating the essential criteria for establishing whether there is a restriction of competition "by object". It recalled that this concept should be interpreted restrictively and can be applied only to an agreement which reveals "in itself a sufficient degree of harm to competition for it to be considered that it is not appropriate to assess the actual effects" on the market.

The Court recalled that the fact that the parties to the agreements did not compete does not preclude the possibility of finding a restriction by object (C-32/11 Allianz Hungária). The Court then held that the "agreements at issue in the main proceedings are not among the agreements [of] which it is accepted [that they] may be considered, by their very nature, to be harmful to the proper functioning of competition."

Following this, the Court clarified under which conditions a commercial lease agreement including the contested clause would be considered to restrict competition by effect. The Court started by recalling that "the effects of an agreement on competition must be assessed in the economic and legal context in which it occurs and where it might combine with other [agreements] to have a cumulative effect on competition".

The Court explained that it must first be established whether there are concrete possibilities for a new competitor to establish itself in the catchment areas of the relevant shopping centres. Here, account should be taken of all the relevant factors which determine access to the relevant market and in particular, availability and accessibility of commercial land in the catchment areas concerned and the existence of economic, administrative and regulatory barriers should be considered. In addition, the conditions under which competitive forces operate on the relevant market should be assessed. This includes the number and the size of operators present, the degree of concentration and customer fidelity to existing brands and consumers' habits. This might depend on access to commercial property in the local market and the existence of economic, administrative and regulatory barriers to entry.

If, after carrying out this analysis, it is established that market access is made difficult by all the similar agreements found on the market, then the extent to which Maxima's agreements contribute to that "cumulative closing-off effect" has to be determined. Here, the position of the contracting parties on that market and the duration of that agreement must be taken into consideration. In the end, only agreements which contribute appreciably to the foreclosure-effect are prohibited.

This article was published in the Competition Law Newsletter of December 2015. Other articles in this newsletter:

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