Two Wrongs Still Do Not Make a Right

February 11, 2013

Last week the European Court of Justice (ECJ) issued a preliminary ruling in response to questions put to it by the Supreme Court of the Slovak Republic, which reminds us that anti-competitive conduct targeting a competitor may not be excused on the ground that the targeted competitor has not conducted its business in accordance with the law (see Case C-68/12).

The facts: Akcenta, a company established in the Czech Republic, was providing cashless foreign exchange transaction services to customers in the Slovak Republic.  In order to perform these services, it needed to have accounts with financial institutions in the country.  Three banks in the Slovak Republic had contracts with Akcenta.  However, because Akcenta was providing its service to the banks’ customers and their profits were suffering as a result, the three banks colluded to terminate their respective contracts with Akcenta and to refrain from entering into new contracts with it.

One of the banks, when challenging the Slovak competition authority’s decision, raised as a defence the fact that Akcenta may have been operating illegally on the relevant market at the time that the agreement among the three banks was concluded.  Akcenta had run into a licensing problem with the Banking Council of the Slovak National Bank, although the Slovak financial authorities ultimately closed the case without resolving the matter.

The Slovak Republic’s Supreme Court sought clarification from the ECJ on whether the fact that Akcenta may have been operating illegally was relevant for the purpose of applying Article 101 TFEU, which prohibits, among other things, collusive conduct aimed at eliminating a competitor.

The ECJ responded: 

(i) The banks meant to restrict competition.  Before the investigation by the Slovak competition authority, none of them had alerted the competent authorities about the fact that Akcenta may have been operating in the Slovak Republic without a proper license.

(ii) It is for public authorities to ensure compliance with statutory requirements—not private companies or trade associations.  In that regard, the private sector has neither the authority nor the capacity to engage in complex assessments to determine whether a service supplier is operating in compliance with the law.

So, what does this mean?  If companies or trade associations engage in or promote boycotts against a market participant, the fact that the target of the boycott may have been operating in the relevant market in violation of the applicable laws is no defence to an antitrust violation.  When confronted with illegal and harmful activity—such as counterfeiting or non-compliance with safety and environmental requirements—private operators and their trade associations may not assume the role of public enforcer in order to police the market.  Rather, as noted by the Court in its judgment, when faced with market irregularities, operators should alert the appropriate authorities either individually or through their trade association.