ECJ ever expands its reach

· international law

Legal opinion instead of case or controversy

SIA ‘Maxima Latvija’ v Konkurences padome

The decision by the European Court of Justice deals with the question whether a lessee may negotiate a right in a lease to prevent the lessor to lease space to a competitor. The argument pivots around the question whether such a clause is a restraint on competition. Before delving into the nitty gritty it is remarkable that the ECJ hears a case that has no relation to EU law. Anyone learning the law would scoff at the notion; a court in Texas hearing a case from Indiana having no connection to the venue is virtually unheard of. EU law however does away with this daintiness.

In the case at bar, the only law involved was Latvian, no effect on the EU was discernable since the parties only did business in Latvia. EU judges however noticed that Latvian law includes a provision that is “identical” to EU law. The quotation mark is a tribute to the fact that the similarity is rather far fetched:

Under Article 11(1) of the Law on competition (Konkurences likums):

‘Agreements between economic operators that have as their object or effect the prevention, restriction or distortion of competition within Latvian territory shall be prohibited and void ab initio and agreements relating to: … (7) actions (or omissions) as a result of which another economic operator is compelled to leave a particular market or the entry of a potential operator into a particular market is made more difficult, shall be deemed to constitute such agreements.’

The judges consider this similar to

1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions;
(b) limit or control production, markets, technical development, or investment;
(c) share markets or sources of supply;
(d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
(e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Article 101 of the Treaty on the Functioning of the European Union seems rather similar to many anticompetition laws around the world. EU judges believe they should hear these cases, because ” to forestall future differences of interpretation, provisions or concepts taken from EU law should be interpreted uniformly, irrespective of the circumstances in which they are to apply.”

Despite the fact that there is no case at bar, the EU judges offer opinion to save work in the future; again an idea that looks rather quaint. Either these judges are underemployed and need to grasp any straw that provides work, or their view of their role as judges is akin to a great pacifier who will better the world, whether called upon or not.

Anticompetitive effect

Unsurprisingly, the court does not find, that the objective of the clause at bar is to restrict competition. However, the judges, after a long list of caveats, cautiously find, that an agreement with such a clause might have an anticompetitive effect. The caveats the court delicately considers are

1) “analysis of the economic and legal context”

2) ” determine access to the relevant market, for the purposes of assessing whether, in the catchment areas where the shopping centres which are covered by those agreements are located, there are real concrete possibilities for a new competitor to establish itself, including through the occupation of commercial premises in other shopping centres located in those areas or by occupying other commercial premises located outside the shopping centres. Accordingly, it is appropriate in particular to take into consideration the availability and accessibility of commercial land in the catchment areas concerned and the existence of economic, administrative or regulatory barriers to entry of new competitors in those areas”

 

No arguments are presented so that the reader is left slightly puzzled, since the consequences are far-reaching and leave many questions. Can I negotiate a right to cancellation if a competitor moves in ? Can I negotiate a right to cancellation with reimbursement of improvements in case a competitor moves in ? What about a cancellation for no reason and a right to reimbursement of improvements ? The slope seems slippery and the decision might be easy to circumvent.

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