Judgment of the CJEU in the Portuguese “Banking Case”

On July 29, the Court of Justice of the European Union (the “CJEU” or “Court”) issued a judgment regarding the request for a preliminary ruling, submitted by the Competition, Regulation, and Supervision Court of Portugal (“TCRS”), in the context of the well-known “Banking Case.” The judgment is available here.

In short, in 2019 la Portuguese Competition Authority (“AdC”) fined 14 banks a total of €225 million for engaging in a concerted practice of exchanging sensitive commercial information, during a period of over 10 years between 2002 and 2013.

Most of the credit institutions appealed the decision of the AdC to the TCRS, on the ground that the exchange of information in the markets for mortgage loans, consumer credit, and business credit—in relation to credit spreads and risk variables, as well as the individual production figures of the participants in that exchange—could not be regarded as being, in itself, sufficiently detrimental as to be classed as a restriction of competition by object; and that, for this reason, the AdC should have examined the effects on the market.

In April 2022, the TCRS issued an interlocutory judgment indicating the facts given as proven, and deciding to suspend the proceedings and submit two preliminary questions to the CJEU. These concerned the interpretation of Article 101, Sections 1 and 3, of the Treaty on the Functioning of the European Union (“TFEU”), particularly whether the facts that the TCRS had established as proven could be construed, in the light of that regulation, as a restriction of competition by object.

Without prejudice to the analysis that will still have to done on the TCRS in this specific case, from now on it is important to bear in mind the Court’s most recent positioning regarding the exchange of sensitive information between competitors.

In particular, the CJEU considers that a comprehensive and reciprocal exchange of commercially sensitive information constitutes a restriction of competition by object. It is also relevant when it happens in a concentrated market with high barriers to entry, and when referring to commercial terms with which the company competes in those markets and which they intend to apply in the future.

Moreover, even information that has an impact on past or current events constitutes strategic information if it can be used to infer with sufficient precision the future behavior of participants or their reactions to a possible strategic move on the market.

Even if the exchanged information only refers to one of the parameters used for establishing market competition, it does not preclude the possibility of the practice in question being classed as a restriction of competition by object.

In addition, the standalone exchange of information (i.e., an isolated practice, and not part of any agreement, concerted practice or decision of an anticompetitive business association) can also amount to a restriction of competition by object, as described in Article 101, Section 1, of the TFUE, whenever it contains features that—taking into account the nature of the goods or services in question, the real operating conditions, and the market structure—can only mean some sort of coordination between companies that are likely to create detrimental conditions for the correct functioning of competition in that particular market.

The CJEU recalled that the legal concept of restriction of competition by object must be strictly interpreted. In fact, to class an agreement, concerted practice or decision of a business association as such, it is necessary to examine (i) the content, (ii) the financial and legal context in which it is inserted, and (iii) the intended objectives, in each specific case.

The analysis of the above elements must reveal concrete facts for which the conduct in question causes a sufficient level of harm to competition. In addition, there must be no other economically rational explication than the pursuit of an anticompetitive practice.

In any case, it is important to note that the admissibility of preliminary requests is restricted to the interpretation or validity of an EU regulatory text. It does not address the subject matter of the case in question, nor does it verify if the hypothesis described by the referring court reflects the real situation, meaning that the TCRS will be responsible for conducting the necessary factual assessment to determine if the exchange of information actually created a restriction of competition by object.