On April 2, 2020, the Court of Justice of the European Union (the “CJEU”) ruled on a 2018 preliminary reference from Hungary’s Supreme Court, vacating on appeal the decision of the Hungarian competition authority. The authority found that an agreement on multilateral interchange fees (“MIFs”) constituted a by-object and by-effect infringement of Article 101 TFEU.[1] The judgment concerns two heavily discussed topics: the notion of restriction of competition by object vs effect,[2] and MIFs.[3]

The CJEU found that an anticompetitive conduct can concurrently be classified as a by-object and by-effect infringement and provided guidance for the by-object analysis in practice. The CJEU further concluded that the MIF Agreement in question unlikely represented a by-object restriction, unless it could be assumed from its content, objectives and context that it has a sufficiently serious effect on competition, which the CJEU left for the national court to decide.

Factual background

The Budapest Bank case is the latest development in a string of antitrust investigations into credit card payment schemes that led to the seminal judgments of the EU Courts in Cartes Bancaires and MasterCard, as well as the judgment of the UK High Court of Justice in the MasterCard Damages litigation.[4]

Credit card transactions take place within a multi-sided market with four stakeholders: (1) the cardholder; (2) the financial institution that issued the credit card (the “issuing bank”); (3) the merchant; and (4) the financial institution enabling the merchant to accept the card as a means of settling a transaction (the “acquiring bank”). MIFs are fees charged by the issuing bank to the acquiring bank for each credit card transaction. The issuing bank deducts the MIF from the amount it pays the acquiring bank handling the transaction for the merchant. The acquiring bank then remits to the merchant the amount of the transaction minus the MIF and minus an additional fee for the acquiring bank, called the merchant service charge (the “MSC”). Agreements on MIF may raise competitive concerns if they inflate the cost base of the MSCs, which may restrict price competition between the acquiring banks to the detriment of merchants.

The present case stemmed from a 1996 agreement concluded by several banks[5] introducing a uniform MIF for Visa and MasterCard credit card systems (the “MIF Agreement”). The MIF Agreement remained in force until 2018. Visa and MasterCard were not present at the meeting at which the MIF Agreement was concluded but subsequently received a copy.

In 2019, the Hungarian Competition Authority found that the MIF Agreement constituted both a restriction of competition by-object and by-effect, and imposed fines on seven banks and Visa and MasterCard, in the total amount of €5 million. The parties appealed up to the Hungarian Supreme Court, which asked the CJEU whether: (i) the same conduct can constitute both a restriction of competition by-object and by-effect; and (ii) under what conditions would the MIF Agreement at issue be deemed a restriction by-object.

Concurrent restriction of competition by-object and by-effect

The CJEU reiterated that an anticompetitive conduct can concurrently be classified as a by-object and a by-effect infringement. The use of the conjunction “or” in the wording of Article 101(1) TFEU indicates that it is first necessary to determine whether an agreement restricts competition by object and, if so, there is no need to examine the effects of that agreement.[6] But, if a competition authority wishes to carry out a by-object and by-effect analysis at the same time, it is free to do so.[7] The authority must however adduce the necessary evidence for both types of restrictions.[8]

Analytical framework for by-object restrictions

In line with its judgments in Cartes Bancaires, MasterCard, InnoLux[9] and most recently Paroxetine, the CJEU explicitly reiterated that the by-object restriction concept must be interpreted restrictively and applied to practices only if they reveal a sufficient degree of harm to competition to consider that it is unnecessary to investigate its effects.[10] Notably, though, the CJEU proposed a two-step analytical framework, in line with the Opinion of Advocate General Bobek:[11]

  • First, a competition authority must determine whether the agreement can be presumed anticompetitive by its very nature based on “sufficiently robust and reliable experience” following traditional economic analysis as previously confirmed by authorities and supported by case law.[12] Absent this type of experience, a by-effect assessment is The Paroxetine judgment clarifies that the by-object category is limited to agreements, for which the only plausible explanation is the restriction of competition.
  • Second, the competition authority must then undertake a “a basic reality check” to ensure that “no specific circumstances may cast doubt on the presumed harmful nature of the agreement in question.”[13] Although the relevant considerations may be similar,[14] no in-depth by-effect analysis is warranted at this

Four observations on this analytical framework are noteworthy. First, the framework underscores the CJEU’s ruling in Cartes Bancaires, that competition authorities cannot use the by-object classification as a shortcut to avoid embarking on a contextual assessment based on the peculiarities of each agreement.

Second, in line with the Paroxetine judgment,[15] if the agreement pursues multiple objectives, only the objectives that are effectively established can be taken into account (in contrast to objectives that are merely invoked).[16] Third, ambivalent or procompetitive effects are not only relevant under Article 101(3) TFEU but also in the context of a by-object assessment under Article 101(1) TFEU.

Fourth, the counterfactual underpinning a by-effect analysis is also relevant for analyzing by-object restrictions, albeit at a higher level. The difference between the two assessments is in the intensity of work required from a competition authority. For the by-object stage, the threshold of plausibility is sufficient i.e., to rule out a by-object infringement, it must be plausible that the agreement pursues objectives other than harming competition. For the by-effect infringement, the analysis of competitive harm has to meet the threshold of likelihood i.e., an agreement restricts competition by-effect if it is likely that it would produce negative effects on price, output, innovation or the variety or quality of goods and services on the relevant market.

Multilateral interchange fees

The CJEU indicated that the MIF Agreement at issue likely does not pass the first step of the by-object analytical framework, which was however left for the referring court to decide.[17] Notably, the judgment contains a concrete example of how the counterfactual may be determinative to rule out a by-object restriction at the second step of the analysis: if there would have been an upward pressure on the MIFs even absent the MIF Agreement (which has to be established by the referring court), then the MIF Agreement could not be classified as restrictive by-object, and a by-effect assessment ought to be carried out.[18]

More generally, MIFs may escape a 101 TFEU prohibition even under a more comprehensive by-effect analysis. Indeed, in the MasterCard Damages judgment, the UK High Court found that Mastercard’s MIF arrangement would not restrict competition if it could be established that its business would collapse without the MIFs.[19]


The Budapest Bank judgment puts flesh on the bones of the CJEU’s earlier MIFs judgments and attempts to close the gaps in the by-object vs by-effect debate. In practical terms, regulators should not rely on the by-object shortcut in novel cases that cannot arguably benefit from an established consensus on the anticompetitive nature of a given practice. Instead, regulators should focus on contextual assessment based on economic and legal grounds.

[1]      Gazdasági Versenyhivatal v Budapest Bank Nyrt and Others (Case C-228/18) EU:C:2020:265 (“Budapest Bank”).

[2]      The issue of restriction by-object and by-effect was recently dealt by the ECJ in Generics (UK) Ltd and Others (Case C-307/18) EU:C:2020:52 (“Paroxetine”) as discussed in our December 2019/January 2020 EU Competition Law Newsletter.

[3]      See, for example, Groupement des cartes bancaires v European Commission (Case C-67/13 P) EU:C:2014:2204 (“Cartes Bancaires”), as reported in our Q3 2014 EU Competition Law Newsletter and our Q2 2016 EU Competition Law Newsletter; MasterCard I (Case C-382/12 P) EU:C:2014:2201 (“MasterCard I”), as reported in our Q3 2014 EU Competition Law Newsletter; and MasterCard II (Case COMP/AT.4049), Commission decision of January 22, 2019 (“MasterCard II”), as reported in our January 2019 EU Competition Law Newsletter and our April 2019 EU Competition Law Newsletter.

[4]      Asda Stores Limited and Others v Mastercard Incorporated and Others, (2017) High Court Of Justice, Queen’s Bench Division, Commercial Court, EWHC 93 (Comm). The UK Mastercard saga was reported in our February 2019 UK Competition Law Newsletter. The follow-on damages actions by Dixon and Europcar against MasterCard’s cross-border MIFs are pending at the Court of Appeal of England and Wales.

[5]      The MIF Agreement was initially concluded by 7 banks, and only later on by another 15 banks. The Hungarian Competition Authority only fined the seven original signatories and Visa and MasterCard.

[6]      See, for example, Toshiba Corporation v European Commission (Case C-373/14 P) EU:C:2016:26, para. 25.

[7]      Budapest Bank, para. 40.

[8]      Budapest Bank, para. 43.

[9]      InnoLux v European Commission (Case C-231/14 P) EU:C:2015:451, para. 72.

[10]    Budapest Bank, para. 54, see also Cartes Bancaires, paras. 53, 54, 70.

[11]    Gazdasági Versenyhivatal v Budapest Bank Nyrt and Others (Case C-228/18) EU:C:2019:678, paras. 41–43 (“Budapest Bank AG Opinion”).

[12]    Budapest Bank, para. 76; and Budapest Bank AG Opinion, para. 42.

[13]    Budapest Bank AG Opinion, paras. 48–49.

[14]    Including the nature of the goods or services affected, conditions of the functioning and structure of the markets in question, and, if necessary, the intentions of the parties.

[15]    Paroxetine, paras. 103–109.

[16]    Budapest Bank, para. 69.

[17]    The CJEU ruled that the evidence on the MIF Agreement does not allow for conclusion that it is by its very nature harmful to competition. On the contrary, the decision-making practice of the competition authorities and the CJEU indicates that, for MIF agreements, a detailed examination of the effects is necessary to determine whether it actually had the effect of introducing a floor for MSCs, restricting the price competition between acquiring banks.

[18]    Budapest Bank, para. 82.

[19]    Accordingly, the UK High Court found that Mastercard’s MIF arrangements did not restrict competition by-effect as Mastercard’s schemes would otherwise not have survived in the UK. On appeal, the UK Court of Appeal upheld the UK High Court’s test, but disagreed with the outcome as it found that Mastercard’s schemes were able to survive in other countries outside of the UK without MIFs. Mastercard’s appeal is currently pending before the UK Supreme Court.