Cartel agreements violate competition rules even if targeting illegal competition

The ECJ was asked to resolve whether a cartel agreement violates competition rules even when the competitor undertaking operates illegally on the market.

In the original case, each competitor was fined up to four million euros by the Slovak Antitrust Authority. In the subsequent appellate proceedings, the authority of second instance merely broadened the legal categorisation of the relevant conduct but did not alter the fines. One of the parties then filed an appeal with the Regional Court in Bratislava, which annulled both previous decisions as far as concerned the appealing party. In its judgement, the court stated that the administrative authorities had misinterpreted the terms “competitor” and “relevant market” and failed to determine whether the customer in question could be considered an actual competitor given that it was operating in Slovakia without the requisite license.

The Slovak Antitrust Authority then brought an appeal against the Regional Court’s decision before the Slovak Supreme Court, which stayed proceedings and requested the ECJ to issue a preliminary ruling pursuant to Article 267 of the Treaty on the Functioning of the European Union (“TFEU”). In addition to the two issues concerning the customer’s illegal conduct on the Slovak market, the ECJ was asked to address whether the alleged purpose of a cartel agreement – in this case to eliminate an illegal operator on the market – can be considered relevant for evaluating such agreement.

Arguments in vain

Simply put, the ECJ stated that the arrangement between the three competitors was still prohibited even though the competing undertaking operated unlawfully on the market.

One of the competitors argued that the employee who was responsible for the cartel negotiations had not been given authority to enter into the agreement. However, the ECJ noted that “…for Article 101 TFEU to apply, it is not necessary for there to have been action by, or even knowledge on the part of, the partners or principal managers of the undertaking concerned; action by a person who is authorised to act on behalf of the undertaking suffices.”

The ECJ was also asked to resolve whether the exemption set out in Article 101(3) of the TFEU could be applied to the case as one of the parties argued that the aim of the arrangement was to prevent the customer from operating on the market illegally (i.e. without a license).

The Court stated that the exemption did not apply as the conditions in Article 101(3) had not been fulfilled. The Court added that even if the purpose of the agreement was to force the company to comply with the law, the proper course of action was to lodge a complaint with the relevant authorities, not for the companies to take it upon themselves to eliminate the undertaking from the market.