The Austrian Supreme Court holds that a fee structure of a trade association infringes Art. 81 EC despite its voluntary nature and limited application in practice (Honorarordnung der Baumeister)

e-Competitions Bulletin "Effect of Competition-De Minimis", 2008
1. Januar 2008

1. Background

The Austrian Supreme Court (acting as the highest appellate court in competition matters) upheld a decision of the Austrian Cartel Court, by which the latter declared a fee structure (in the following the "Fee Structure") of the Austrian trade association of builders as infringing Art 81 EC (Austrian Supreme Court (Oberster Gerichtshof) decision dated 20 December 2005, 16 Ok 45/05).

The trade association of builders is a public corporation (based on Austrian statutory law) which has, since 1978, regularly issued non-binding tariff structures for its members (i.e., private building companies). When a further increase of such recommended tariffs was published in 2004, the Austrian NCA applied to the Cartel Court to require the trade association to withdraw the Fee Structure in its entirety.

The Cartel Court found that the Fee Structure qualified as a decision by an association of undertakings under Art 81 (1) EC, despite its nature as a non-binding recommendation. The Fee Structure aimed at coordinating the price-setting conduct of the association´s members and therefore infringed Art 81 (1) EC. Consequently, the Cartel Court granted the motion brought by the NCA.

The trade association appealed against this ruling with the Austrian Supreme Court which, however, upheld the Cartel Court´s decision.

2. The Supreme Court´s Ruling

In its appeal, the trade association relied in particular on the following arguments:

• The Fee Structure did not constitute a decision by an association of undertakings in the meaning of Art 81 (1) EC, since it was of a purely voluntary nature and was in fact hardly followed by the association´s members (who would mostly agree on prices below the recommended tariff structure with their customers).

• Since the Fee Structure was thus hardly ever applied in practice, it would not have any anti-competitive effects.

In its appeal decision, the Supreme Court referred to the broad interpretation of the term "decision" in the meaning of Art 81 (1) by the ECJ. A "decision" is encompassed by Art 81 (1) EC, even when in the form of a non-binding recommendation, if it reflects the aim of the association to coordinate the conduct of its members (ECJ, Verband der Sachversicherer v. Kommission, [1987] ECR 405). Even if a recommendation does not have any indirect binding effect, since the addressees are not subject to any legal or economic disadvantages in cases of non-compliance therewith, such recommendation may still constitute a "decision" if several members of the association comply with the respective tariff structure (ECJ, IAZ International Belgium NV v. Commission, [1983] ECR 3369). Based on this case law of the ECJ, the Supreme Court held that the Fee Structure introduced by the trade association demonstrated the association´s intention to coordinate the pricing behaviour of its members. In the meaning of the court, this was primarily evident from the content and structure of the tariff system, which was drafted in the way of a compulsory measure.

The court further dismissed the appellant´s argument, that the Fee Structure was in fact hardly applied in practice, by referring to the principle that for the application of Art 81 (1) EC, there is no need to take account of the concrete effects of an agreement once it appears that it has as its object the prevention, restriction or distortion of competition (see, e.g., ECJ, Consten and Grundig v. Commission, [1966] ECR 299). As the ECJ ruled in Verband der Sachversicherer, this concept also applies to decisions of associations. The ECJ stated that a non-binding recommendation of prices by a trade association can distort competition merely by affording its members the opportunity to predict the pricing policy of their respective competitors (ECJ, Vereniging Van Cementhandelaren v. Commission, [1972] ECR 977). Against this backdrop, the Austrian Supreme Court concluded that the extent to which the Fee Structure was applied in practice was not actually relevant for its finding of an infringement of Art 81 (1) EC.

Since the Supreme Court further found that the decision had an appreciable effect on trade between Member States and that it did not fulfil the conditions of Art 81 (3) EC, it concluded that the Fee Structure infringed Art 81 EC.

Although the Supreme Court correctly applied the well established principle in the ECJ´s case law that non-binding recommendations by trade associations fall under Art 81 (1) EC if they reflect the association´s aim to coordinate the conduct of its members, the court´s conclusion that the extent of compliance with such a recommendation in practice is virtually irrelevant for the application of Art 81 EC, is at least questionable. As the ECJ held in the IAZ Case in order to assess whether a recommendation qualifies as a decision of an association, it is necessary to examine how far the members have adhered to the recommendation in the past and what the effect of the recommendation will be on the market in the future.


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