Hybrid transaction : The Court of Justice of the European Union revisits the conditions for a "hybrid" transaction and affirms that pro-competitive effects can be analyzed at the stage of the search for the anti-competitive object of the agreement, through the examination of the context in which the agreement takes place (HSBC)

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In 2016, informed of the facts by a leniency application filed by the Barclays group, the Commission sanctioned various banks for a cartel on the market for euro-denominated interest rate derivatives (EIRDs), products indexed to the Euribor, an interest rate supposed to reflect the cost of interbank loans. HSBC was fined a frighteningly high amount: 33 million for a cartel that lasted only one month. Subsequently, the European Court of First Instance confirmed the classification of the cartel but annulled the fine, criticising the Commission for not having sufficiently motivated its calculation (EU Court of First Instance, September 24, 2019, case T-105/17, Concurrences n° 1/2020)It was therefore up to the Court of Justice to take a position. A ruling was issued on January 12, 2023. Considering itself able to settle the dispute definitively, the Court did not refer the case back to the Court of Justice and gave it its epilogue: finally, the judgment of the Court of First Instance was annulled and the appeal brought by the The Court of First Instance’s judgment is annulled and HSBC ’s appeal against the Commission’s decision is dismissed, so that the fine of EUR 33 million becomes final.

In this judgment, two elements caught our attention, one of a procedural nature and the other of a one procedural and the other substantive.

The Court of Justice raises the level of procedural safeguards in the case of a "hybrid" transaction

As a reminder, the settlement is said to be "hybrid" when not all participants to the infringement do not agree to participate in the settlement procedure. This circumstance obviously creates a delicate situation: it will be difficult for those who intend to defend themselves to do so effectively, since others have accepted the settlement and, in so doing, have at least given the impression that the infringement did indeed exist! For this reason, in France, the statement on the settlement procedure states that "the Authority therefore intends, as a general rule, to give preference to the use of the settlement procedure in cases in which all the parties waive their right to contest the objections and solicit the use of such a procedure" (§19). In a less direct manner, the Commission, in its Procedural Notice, indicates that it "will seek to ascertain the interest, if any, of all parties in reaching a settlement", before choosing to open the way to this possibility (pt 6).

In this judgment, the Court of Justice considers that it was incumbent on the General Court of the Union to ensure that the presumption of innocence was respected, by verifying that the decision terminating the settlement procedure did not contain passages "capable of being understood as a premature expression of responsibility" of the companies that did not participate in the settlement procedure (Rappr., using the same formula: Tr. EU, Feb 2, 2022, Scania, Case T-799/17). The Court of First Instance could therefore not hide behind the mere fact that, if there had been a procedural irregularity, it had not had any consequences, as the content of the decision adopted had not been modified. It was really necessary to verify that the settlement decision could not be read as a kind of "prejudgment", hindering the possibility for the companies not party to the settlement procedure to defend themselves effectively. This requirement is intended to ensure that the presumption of innocence of companies that did not participate in the settlement procedure is respected. In the present case, the Court of Justice is undertaking these verifications in order to directly remedy the shortcomings of the Court of First Instance. And it finds that the requirements of the presumption of innocence and the right to the proper administration of justice have been met. of justice have been respected.

At the substantive level, the Court of Justice provides (again and again...) new elements regarding the notion of anti-competitive object and the consideration of pro-competitive effects

The Court begins by stating that the agreement has an anti-competitive purpose if it has a sufficient degree of harmfulness. In itself, this is not very innovative. One passage in the judgment devoted to the anti-competitive object seems to us to be worth noting: "the downward fixing of the variable rate was explained solely by the commercial interest of the traders concerned not to compete on the merits. By agreeing on the level of a variable that could determine the fixed rate of the EIRDs, they thus knowingly substituted practical cooperation between them for the risk of competition, which falls within the definition of a restriction by object" (pt 124). Does the link established here between "competition on the merits", a standard generally applied in abuse of dominance cases, and "cartel with an anticompetitive object" herald a better articulation between the different qualifications of anticompetitive practices? This would be desirable.

The remainder of the decision deals with the consideration of the pro-competitive effects of the disputed information exchange. In commenting on the judgment of the Court of First Instance the Court of First Instance in 2019 in this case, we pointed out that, "as regards the pro-competitive advantages derived from those exchanges of information, the Court of First Instance quickly sweeps them under the carpet: it was for the banks penalised either to show that those exchanges were directly linked to and necessary for the functioning of the EIRD market (ancillary restraint theory) or to show that they created efficiencies meeting the conditions of Article 101(3) of the TFEU." (obs. Concurrences 1/2020. This quick "sweep" was not to the liking of the Court of Justice. According to the Court, the possible pro-competitive effects of the practice could also be taken into account when examining the context in which the practice took place, given that the context is one of the three elements, alongside the content and the objective of the agreement, that must be analyzed in order to detect a possible anti-competitive object.

According to the Court of Justice, the consideration of pro-competitive effects, at this stage of the reasoning, does not run counter to the jurisprudence of the Court, which refuses to apply the "rule of reason", well known to American competition experts. We must admit that we are not very convinced by this last statement. To seek the positive effects of an exchange of information as an element of its context, does it not, in practice, come down to a balancing of its advantages and disadvantages? In this case, the Court found that the pro-competitive effects (the possibility for the banks to offer better rates to their customers) did not call into question the finding that the agreement had an anti-competitive purpose, because the practice appeared too serious and too harmful to the market for positive effects to remedy it. After stating that the reasoning was not based on a "rule of reason", the Court of Justice seems to have applied such a "rule of reason" in order to conclude that there was an anti-competitive object. the existence of an anticompetitive agreement.