Building on existing case law, the Court of Justice of the European Union (CJEU) recently considered the test for when a standalone anti-competitive information exchange will constitute a “by object” infringement of EU competition law, in a case concerning Portuguese banks. 

Background

In 2019, the Portuguese competition authority (the Autoridade da Concorrência or AdC) imposed a fine of €225m on 14 banks for participating in a decade long anti-competitive information exchange in relation to home loans, consumer credit and corporate lending. The banks had exchanged information on a monthly basis via phone calls and emails, in particular regarding (i) current and future credit spreads (i.e. the difference between the banks’ own cost of funding and the interest rate applied to relevant products) and risk variables (i.e. factors which influence the spreads applied); and (ii) past volumes of the various types of loans that had been granted in the preceding month.  The context for these exchanges was a sector with high concentration and barriers to entry, set against a background of legal requirements for credit institutions to publicise certain information. 

The banks appealed the AdC’s decision on the grounds that the exchange of information at issue could not in itself be regarded as sufficiently harmful to competition to constitute a “by object” restriction. In 2022, the Portuguese court made a request for a preliminary ruling to the CJEU. Essentially, it asked whether the information exchange as described to the CJEU could, on a standalone basis (i.e. without any sort of price fixing or other collusion), amount to a restriction of competition “by object” – citing an “absence of precedents” concerning such conduct.

CJEU judgment

The CJEU confirmed that information exchange on a standalone basis can amount to a restriction of competition “by object’” The judgment¹ provides a thorough walkthrough of the analysis needed to determine whether information exchange is restrictive “by object”, and consolidates the CJEU’s views on the key considerations in this context to be applied by the Portuguese court. 

What is a “by object” infringement?

The judgment starts by providing a reminder that “by object” infringements are those that reveal a sufficient degree of harm to competition such that it is not necessary to assess their effects – i.e. infringements that are by their very nature harmful to competition. When categorising an infringement as “by object”, it is necessary to consider (i) the content of the agreement, decision or practice, (ii) its economic and legal context, and (iii) its objectives. The judgment reiterates the position set out in previous cases that the concept of a restriction “by object” is to be interpreted strictly.

When is information exchange a “by object” infringement?

The CJEU explained that to be a “by object” infringement “it is necessary that the exchange constitute a form of coordination which must be regarded, by its very nature, as harmful to the proper functioning of normal competition in the context of that exchange”, and that the exchange “creates conditions of competition that do not correspond to the normal conditions of the market in question”. 

According to the CJEU, it is sufficient to fulfil such conditions if the information exchanged is confidential and strategic. 

• Confidential information is described as “information not already known to any economic operator active on the market concerned”. 
• Strategic information is “information that may reveal, in some circumstances, once combined with other information already known to the participants in an information exchange, the strategy which some of those participants intend to implement with regard to what constitutes one or more parameters in the light of which competition on the market in question is established”.

The CJEU considered that an exchange of information on the future intentions of the participants regarding one of the parameters on the basis of which competition is established (such as credit spreads) “cannot pursue any objective aim other than that of distorting competition on that market”. The banks put forward various arguments, including that the exchanges related only to a component of price or were indicative rates. However, the CJEU held that it is not necessary for an information exchange to cover every parameter of competition to amount to a restriction of competition “by object”.

Is there a difference between past, current and future information?

Yes. The CJEU held that these types of information needed to be considered separately. 

• Forward-looking information: The banks exchanged certain information regarding future spreads and the risk variables affecting the rates offered to customers. The CJEU noted that “any exchange of information relating to future prices, or some of the factors determining those prices, is inherently anti-competitive”. The CJEU further explained that the concept of strategic information was broader than just price related information, and included any information which was likely to reduce uncertainty on the relevant market in relation to one or more of the parameters of competition. As disclosing future intentions to alter spreads would reveal the rates that credit institutions planned to offer their clients (prior to any individual negotiation with those clients), and those rates were one of the parameters of competition, such disclosure must be regarded as an exchange of confidential and strategic information, and therefore a restriction of competition “by object”. The same applied to forward-looking information about risk variables when combined with future spread intentions , as it provides an insight into future pricing strategies.
• Past and current information: The banks also exchanged information regarding the volume of loans granted in the last month. This information was disaggregated and broken down into detailed subcategories. The CJEU said that historic and current information was strategic if it allowed a participant to “infer with sufficient precision the future conduct of the other participants in that exchange or their reactions to a possible strategic move on the market.” In this regard, the CJEU was of the view that historic volume information, when considered in isolation, was “unlikely” to reveal future intentions. However, the position might differ if the information could be combined with other types of data and together they reduced uncertainty as to future conduct, or if the exchange of information were ancillary to some other form of concerted practice or coordination.

Does it make any difference if the information exchange related to consumer or other regulatory law obligations to publish such information? 

The banks argued that certain transparency obligations required them to share some of the information disclosed and therefore this prevented the conduct from being classified as a restriction of competition “by object”. The CJEU was again not persuaded by this argument, noting that parties cannot be protected by regulations requiring the publication of certain information if the exchanges went beyond what is required by that legislation and took place before the information was required to be published.  

Can limited exchanges or only one exchange (as opposed to repeated contact) be enough?

Yes. The banks argued that sporadic exchanges of information could not constitute a restriction of competition “by object”. The CJEU disagreed. It noted that a lack of frequency does not preclude the anti-competitive object of the conduct, and a single exchange may be sufficient to remove uncertainty between competitors. 

Were there any other relevant factors in this case?

The CJEU noted that the exchanges took place in markets where concentration is high and there are barriers to entry. When determining whether an exchange is a “by object” infringement, it is necessary not only to take into account the nature of the information exchanged but also the economic context in which the exchange takes place.

Commentary

This preliminary ruling is a timely reminder for businesses of the need for considerable caution when disclosing potentially confidential and strategic information to competitors, even on a standalone basis. It is important to ensure that information exchange does not go beyond what is necessary for legitimate purposes, bearing in mind the relevant legal and economic context of the sector in question, and regardless of the likely or actual market impact of any such disclosure. The case was sent back to the Portuguese court, for it to determine whether to uphold the AdC’s fines in light of the CJEU’s guidance.
 

¹ Case C‑298/22 Banco BPN/BIC Português SA and Others v Autoridade da Concorrência