Article 101(1) prohibits agreements that have as their object or effect the restriction of competition.
In Société Technique Minière v Maschinenbau Ulm (1966) the Court of Justice stated that the words ‘object or effect’ were to be read disjunctively; this means that where an agreement has as its object the restriction of competition it is unnecessary to prove that it will produce anticompetitive effects: only if it is not clear that the object of an agreement is to restrict competition is it necessary to consider whether it might have the effect of doing so. It is still controversial, after more than 50 years of EU competition law, what constitutes a restriction of competition by object. The Court of Justice has stated, for example in Cartes Bancaires v Commission (2014, paragraph 57), that the essential legal criterion for ascertaining whether coordination between undertakings restricts competition by object is the finding ‘that such coordination reveals in itself a sufficient degree of harm to competition’. The term ‘object’ in Article 101 means the objective meaning and purpose of the agreement considered in the economic context in which it is to be applied; it is not necessary to prove that the parties have the subjective intention of restricting competition when entering into the agreement.
However, subjective intention may be a relevant factor in assessing whether the object of an agreement is anticompetitive (Cartes Bancaires, paragraph 54). The concept of a restriction of competition by object should be interpreted restrictively (Cartes Bancaires, paragraph 58). In order to decide whether an agreement restricts competition by object, ‘regard must be had to the content of [the agreement’s] provisions, its objectives and the economic and legal context of which it forms a part. When determining that context, it is also necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question’ (Cartes Bancaires, paragraph 53).
Advocate General Kokott’s Opinion in T-Mobile (2009) includes an interesting discussion of why Article 101(1) makes a distinction between object and effect restrictions. First, the classification of certain types of agreement as restrictive by object ‘sensibly conserves resources of competition authorities and the justice system’ (T-Mobile Opinion, paragraph 43). The fact that a competition authority does not need to demonstrate, for example, that a horizontal price-fixing agreement produces adverse economic effects relieves it of some of the burden that would otherwise rest upon it. Secondly, the Advocate General pointed out that the existence of object restrictions ‘creates legal certainty and allows all market participants to adapt their conduct accordingly’ (T-Mobile Opinion, paragraph 43) adding that, although the concept of restriction by object should not be given an unduly broad interpretation, nor should it be interpreted so narrowly as to deprive it of its practical effectiveness (T-Mobile Opinion, paragraph 44). Thirdly, she pointed out that, just as a law that forbids people from driving cars when under the influence of alcohol does not require, for a conviction, that the driver has caused an accident—that is to say proof of an effect—so, in the same way, Article 101(1) prohibits certain agreements that have the object of restricting competition, irrespective of whether they produce adverse effects on the market in an individual case (T-Mobile Opinion, paragraph 47); such agreements will be permitted, therefore, only where the parties can demonstrate that they will lead to economic efficiencies of the kind set out in Article 101(3), and that a fair share of those efficiencies will be passed on to consumers. A competition authority is entitled to conclude that an agreement restricts competition both by object and by effect (Hungarian Banks, paragraphs 33 to 44).
Section 1 of the US Sherman Act 1890 characterises some agreements as per se illegal, whereas others are subject to so-called ‘rule of reason’ analysis. Where there is a per se infringement it is not open to the parties to the agreement to argue that it does not restrict competition: it belongs to a category of agreement that has, by law, been found to be restrictive of competition. There is an obvious analogy between an agreement that is per se illegal under the Sherman Act and one that is restrictive of competition by object under Article 101(1). However there is an important difference between section 1 of the Sherman Act and Article 101 TFEU in that, even if an agreement has as its object the restriction of competition, that is to say that it infringes Article 101(1) per se, the parties can still attempt to justify it under Article 101(3). This possibility does not exist in US law, since there is no equivalent of Article 101(3) in that system. In this sense a judgment such as that of the US Supreme Court in Leegin (2007), in which it determined that minimum resale price maintenance should be analysed under the rule of reason rather than being per se illegal, brings US law into alignment with that of the EU: it has always been possible to argue that resale price maintenance satisfies Article 101(3), even though it is classified as having as its object the restriction of competition for the purpose of Article 101(1).
