The Austrian Supreme Court holds that certain aspects of a co-operation agreement between Austrian savings banks violates Art 81 EC (Erste Bank)

e-Competitions Bulletin
1. Januar 2008

1. Background

The Austrian Supreme Court (acting as the highest appellate court in competition matters) upheld a first instance decision of the Austrian Cartel Court (13 June 2006, 27 Kt 83/04, 27 Kt 18, 193/04), by which the latter found that a cooperation agreement concluded between Austrian savings banks infringed, to some extent, Art 81 (EC), but was in part also exempted under Art 81 (3) EC.

Since 2002, Erste Bank, the largest Austrian savings bank, and 53 regional and local savings banks have been parties to certain cooperation agreements: the basic framework being that credit institutions conducted a common business policy (in particular, in terms of uniform commercialization, distribution and marketing activities), and established a "liability pool" in the context of which the participating savings banks agreed on mutual support in the case of economic difficulties experienced by any of the pool´s members. For the purpose of operating and administrating the liability pool, the savings banks created a specific joint venture company.

Bank Austria Creditanstalt AG, one of Austria’s largest banks (which did not participate in the cooperation between the savings banks) filed a complaint against the cooperation with the Austrian Cartel Court and was supported therein by the Austrian Federal Competition Authority. In its ruling of 13 June 2006, the Cartel Court found that the cooperation (only) partly violated Art 81 (EC), but fulfilled to a considerable extent the criteria of Art 81 (3) EC. Both Bank Austria Creditanstalt AG and Erste Bank appealed against the Cartel Court´s ruling with the Austrian Supreme Court, which, however, upheld the Cartel Court´s decision.

2. The Supreme Court´s Ruling

Since Austrian competition law expressly exempts certain cooperation agreements between credit institutions (such as the agreements in question) from the application of the Austrian antitrust rules, the Supreme Court first examined whether the cooperation was capable of affecting trade between Member States in terms of Art 81 (EC). The Court answered this question in the affirmative, thereby relying in particular on the ECJ´s recent ruling in the Manfredi case (ECJ, 13 July 2006, C-295/04, Manfredi). In this decision, the ECJ found that a system of information exchange among insurance companies in a market of national geographic scope affected trade between Member States, if it could be established that such concerted practice impeded the business activities of foreign competitors in the Member State at issue. In the context of the case at hand, the Court concluded that the savings banks´ cooperation was capable of affecting the market activities of foreign banks in Austria, since it could result in the fixing of prices at an amount which would render market entry by foreign banks commercially unreasonable.

The Supreme Court went on to the competitive assessment of certain aspects of the cooperation between the savings banks. Upholding the first instance court´s decision, the Supreme Court found that parts of the cooperation between the banks were caught by Art 81 (1) EC and would not merit an exemption under Art 81 (3) EC. This, in particular, concerned the introduction of a unified "loan calculator" on the websites of the participating savings banks (enabling the customers to calculate the cost of loans offered by the banks), which would give rise to the alignment of the loan offers of the savings banks.

Furthermore, the Supreme Court qualified Erste Bank´s control over the management of the joint venture company (established together with the other savings banks) as violating Art 81 (EC). The participating savings banks could use the joint venture as an instrument for the exchange of market-sensitive information and, consequently, for concerted business practices. The Court rebutted Erste Bank´s argument that the right to nominate the majority of the management board of the joint venture alone would not suffice to establish an indication of anti-competitive behaviour: According to the Court´s findings, the cooperation agreements were restrictive of competition by their object, so there was no need to take account of the concrete effects of the agreements on market conditions (ECJ, Consten and Grundig v. Commission, [1966] ECR 299).

With respect to the remaining elements of the cooperation between the savings banks, the Supreme Court, however, found that the respective restrictions on competition were outweighed by the benefits of the structure under Art 81 (3) EC. To the extent the cooperation provided for joint commercialization, distribution, promotion, etc, the criteria of Art 81 (3) EG would be fulfilled. In particular, the cooperation would enable also smaller savings banks to play an active role in the market and exert competitive pressure on the large incumbent Austrian banks. The Court further pointed out the efficiency gains stemming from joint IT applications and the common development of products and marketing measures. Due to the competitive structure of the market, the parties to the cooperation would also be forced to allow consumers a fair share of the resulting benefit.

The Supreme Court also denied the applicant´s claim that the establishment of the liability pool would afford the savings banks the opportunity to align their risk costs, and, consequently, their pricing policy. The Court rejected this argument, pointing out that the harmonization of costs alone was not sufficient grounds to establish an anti-competitive practice, since it was still under the discretion of the individual members of the cooperation whether and to which extent they would shift such costs on to their customers.

To sum up: the Supreme Court´s decision entails a broad and rather unspecified application of the criteria of Art 81 (3) EC. In the light of the strict requirements for applying Art 81 (3) as outlined in the respective Commission Notice on this provision, it is remarkable that in its ruling the Austrian court imposed a rather modest level of evidence to be furnished by the parties to the cooperation in order to invoke Art 81 (3).


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