In a ruling dated June 28, 2023, the Cour de cassation[1] upheld the Paris Court of Appeals’ judgment which had reversed the 2010 decision of the French Competition Authority fining 11 banks for an anticompetitive pricing agreement in relation to check processing. The Cour de cassation ruled that the FCA had improperly qualified the agreement as a “by object” infringement when no sufficient degree of harmfulness to competition was proven. This ruling puts an end to a 13-year old judicial saga.
Background
In 2010, the French Competition Authority (“FCA”) fined 11 banks[2] for having set unjustified interbank fees and artificially raised check processing charges between 2002 and 2017.[3] The FCA found that the banks had colluded on the creation of a computerized check processing system at the time of the switch to the Euro, which included the creation of an Exchange Check-Image Fee (“ECIF”) and eight fees for related services (the “Fees”). As the banks themselves acknowledged, the ECIF was not a remuneration that remitting banks paid to drawee banks in consideration for a service rendered, but rather a transfer of income from one bank to another to share the financial consequences of the acceleration in check exchange made possible by the system’s dematerialization. The ECIF increased the costs of the remitting banks, which the FCA assumed was likely to increase final prices and reduce the supply of check remittances. Furthermore, the FCA found that the creation of the ECIF and the Fees aimed to restrict each bank’s freedom to independently determine its pricing policy, thereby hindering price competition in the check market. The FCA therefore classified the multilateral agreement that led to the establishment of the ECIF and the Fees as an infringement “by object.”
The banks attempted to convince the FCA that the ECIF and the Fees could qualify for an exemption as they contributed to overall efficiency gains associated with the new computerized system. Although the FCA recognized that the Fees could be considered as compensation for services newly provided by banks and as a means to offset cost transfers resulting from the dematerialization of the check exchange system, it noted that the banks failed to demonstrate that the ECIF specifically contributed to the overall efficiency gains achieved through dematerialization.
The parties appealed, and a long judicial saga ensued around the notion of infringement “by object.” According to the European Court of Justice (“ECJ”) case law, infringements of competition “by object” are restrictions that reveal “a sufficient degree of harm to competition that it may be found that there is no need to examine their effects.”[4] To determine whether an agreement reveals a sufficient degree of harm, antitrust enforcers and judges must analyze the content of its provisions, its objectives, and the economic and legal context of which it forms a part.[5] This notion must be interpreted restrictively.[6] The saga in this case concerned the standard of proof to demonstrate that a restriction revealed a “sufficient degree of harm.”
In 2012, the Paris Court of Appeals annulled the FCA decision on the grounds that the FCA had not proven to the requisite standard of proof that the agreement had an anticompetitive object.[7] Three years later, the Cour de cassation quashed the Paris Court of Appeals’ ruling on procedural grounds,[8] and the case was remanded to the Paris Court of Appeals.[9]
The Paris Court of Appeals handed down a new judgment in 2017,[10] this time upholding the FCA’s decision. The Court found that the establishment of the ECIF and the Fees were infringements “by object” because they restricted each bank’s pricing autonomy and were necessarily passed on to consumers. However, the Cour de cassation quashed it once again in 2020, stating that the Paris Court of Appeals had applied the notion of “restriction of competition by object” too broadly.[11] In particular, the Cour de cassation held that in the absence of “sufficiently reliable and robust experience” showing that the contested fees are necessarily passed on to final prices, it was not appropriate to classify agreements like the one in question as inherently harmful to competition.
The case was remanded to the Paris Court of Appeals once more. In 2021, applying the legal standard defined by the Cour de cassation, the Paris Court of Appeals held that the agreement creating the ECIF and the Fees did not amount to an anticompetitive agreement. Neither “by object,” primarily because the agreement did not hinder the banks’ ability to freely determine their prices, nor “by effect,” because the FCA had failed to demonstrate that the ECIF and the Fees had any tangible impact on the prices of check remittance services or had diminished the supply in the remittance market.[12] The FCA appealed.
The Cour de cassation’s ruling
The Cour de cassation rejected the FCA’s appeal on all its grounds.
First, it dismissed the FCA’s argument that there was “reliable and robust experience” indicating that the specific fees concerned were by their very nature harmful to competition. The Cour de cassation relied on the Budapest Bank preliminary ruling in which the ECJ held that “an interbank agreement which fixes at the same amount the interchange fee payable, where a payment transaction by card takes place, to the banks issuing such cards offered by card payment services companies operating on the national market concerned” cannot be classified as a restriction “by object,” unless that agreement, “in light of its wording, its objective and its context” can be regarded as posing a sufficient degree of harm to competition to be classified as such.[13] The Cour de cassation also reiterated that the FCA’s argument according to which the ECIF and the Fees were necessarily passed onto consumers was based on a mere presumption. Therefore, the Cour de cassation held that the Paris Court of Appeals sufficiently demonstrated that the agreement was not an infringement “by object.” Second, the Cour de cassation held that, contrary to the FCA’s argument, the Paris Court of Appeals did consider the potential effects of the ECIF and the Fees in order to reject the classification of infringement “by effect.” However, the Court rightly concluded that the FCA did not successfully demonstrate that the fees had been passed on to consumers. Therefore, the FCA failed to prove that the ECIF and the Fees had had the effect of preventing, restricting, or distorting competition between banks. Thus, the agreement that led to the establishment of the ECIF and the Fees was neither an infringement “by object” nor an infringement “by effect.”
[1] Cour de cassation, judgment of June 28, 2023, No. 21-26.015.
[2] BNP Paris, Banque de France, Confédération Nationale du Crédit Mutuel, Crédit Industriel et Commercial (CIC), Crédit Agricole, Le Crédit Lyonnais (LCL), Crédit du Nord, HSBC France, Banque Postale, Société Générale, and Groupe BPCE.
[3] FCA Decision No. 10-D-28 of September 20, 2010.
[4] ECJ, judgment of September 11, 2014, C-67/13 P, Groupement des cartes bancaires, para. 58.
[5] ECJ, judgment of September 11, 2014, C-67/13 P, Groupement des cartes bancaires, para. 53.
[6] ECJ, judgment of September 11, 2014, C-67/13 P, Groupement des cartes bancaires, para. 58.
[7] Paris Court of Appeals, judgment of February 23, 2012, No. 2010/20555.
[8] The Cour de cassation held that the Paris Court of Appeals’ refusal to address the arguments raised by two consumer protection association in support of the FCA violated their right to be heard and as such their right to a fair trial, which justified the complete annulment of the Court’s judgment.
[9] Cour de cassation, judgment of April 14, 2015, No. 12-15.971.
[10] Paris Court of Appeals, judgment of December 21, 2017, No. 2015/17638.
[11] Cour de cassation, judgment of January 29, 2020, No. 18-10.967 and No. 18-11.001.
[12] Paris Court of Appeals, judgment of December 2, 2021, No. 20/4626.
[13] ECJ, judgment of April 2, 2020, C-228/78, Budapest Bank.