I. Introduction
The distinction between restrictions of competition “by object” and “by effect” is a fundamental element of the interpretative framework of Article 101(1) TFEU. Although a finding of a restriction by object relieves the European Commission or national competition authorities from the obligation to demonstrate specific market effects, recent case law has clarified that this classification cannot function as an automatic or mechanistic presumption of unlawfulness. Consequently, the issue arises as to whether, and to what extent, counterfactual analysis constitutes a distinct and necessary element in determining whether an agreement restricts competition by object.
This article argues that counterfactual analysis does not constitute an autonomous or distinct legal test. Rather, it is functionally integrated into the assessment of the legal and economic context in which the agreement operates. The intensity and depth of this assessment may vary according to the nature and specific characteristics of the conduct under review.
II. The Jurisprudential Foundations of the Concept of a “Restriction by Object”
A pivotal development in modern case law occurred with Case C-67/13 P, Groupement des cartes bancaires, where the Court of Justice of the European Union emphasised that the concept of a restriction of competition by object must be interpreted narrowly and limited to conduct that, in itself, demonstrates a “sufficient degree of harm” to competition. The harmful nature of specific conduct cannot be established solely through abstract classification; rather, it necessitates an examination of the agreement’s content and objectives, as well as the legal and economic context in which it operates.
Additional clarification was provided in Case C-228/18, Budapest Bank, where the Court of Justice emphasised that conduct cannot be classified as restrictive by object if serious doubts exist regarding whether the agreement is sufficiently harmful to competition. This approach precludes adopting a strictly formalistic methodology that would automatically classify certain forms of conduct as restrictions by object without consideration of their content, objectives, and legal and economic context.
Nonetheless, Budapest Bank does not impose a requirement to conduct a full effects analysis for every agreement. It does, however, clarify that a finding of a restriction by object must remain connected to the structure and operation of the relevant market. The concept serves to delineate the scope of the evidential inquiry, rather than to eliminate the need for a substantive examination of the legal and economic context.
III. The Concept of the Counterfactual under Article 101(1) TFEU
Within competition law, counterfactual analysis entails comparing the actual state of the market with the hypothetical scenario that would have existed in the absence of the conduct at issue. In cases involving restrictions of competition by effect, this comparison is explicit, systematic, and often supported by quantitative analysis, as it is necessary to demonstrate a specific adverse impact on the structure or operation of competition.
By contrast, in cases involving restrictions by object, a comprehensive and detailed counterfactual analysis, as required in effects cases, is not necessary. However, the obligation to consider the legal and economic context in which the agreement operates inherently incorporates elements of counterfactual reasoning.
Specifically, to determine whether an agreement is, by its nature, capable of restricting competition, it is necessary to identify the competitive process that characterises, or would have characterised, the relevant market in the absence of the conduct in question. Identifying this hypothetical benchmark does not constitute a separate effects analysis; rather, it forms an integral part of assessing whether an agreement demonstrates a “sufficient degree of harm.”
In this context, counterfactual reasoning operates indirectly and in a condensed form. Where conduct reduces competitive uncertainty between undertakings or undermines the independence of their commercial decision-making, it may be inferred that competition, which would have occurred under independent conduct, is restricted. The comparison with the hypothetical scenario in which the practice did not exist is not omitted; rather, it is implicitly incorporated into the determination that the conduct reveals a sufficient degree of harm.
Therefore, the counterfactual does not represent an autonomous or distinct stage of legal assessment in by-object cases. Instead, it is functionally embedded within the analysis of the relevant legal and economic context.
IV. Clear-Cut and Borderline Cases
The development of the case law demonstrates that the intensity of counterfactual analysis varies according to how clearly the agreement exhibits a restrictive object.
In cases involving explicit price fixing, market sharing, or the exchange of commercially sensitive and strategic information between direct competitors, the case law considers established experience sufficient to support a finding of sufficient harm. For example, in Case T-113/17, Crédit Agricole, the General Court confirmed that the exchange of strategic information capable of reducing competitive uncertainty may constitute a restriction of competition by object, without requiring an explicit and extensive examination of the hypothetical scenario that would have prevailed in the absence of the practice.
In such cases, the counterfactual is almost self-evident: in the absence of coordination, the undertakings concerned would be expected to determine their conduct independently. The legal and economic context remains relevant, but its assessment may be relatively concise because the nature of the conduct itself supports the inference that competition has been restricted.
The position is different, however, where the practice does not fall within the traditional core of collusive conduct or where the market exhibits particular characteristics, such as an oligopolistic structure, a high degree of transparency, extensive regulatory intervention, or features associated with two-sided or multi-sided markets. In such circumstances, specific alternative explanations—for example, that an observed convergence in prices results from structural market characteristics, or that bidding patterns are also shaped by the conduct of undertakings outside the alleged collusive arrangement—may give rise to reasonable doubt as to whether the conduct reveals the requisite degree of harm.
Such arguments form part of the assessment of the legal and economic context and expressly incorporate counterfactual reasoning. They seek to demonstrate that the observed market outcome could have arisen even without the agreement in question. In light of Case C-228/18, Budapest Bank, where those doubts are serious and substantiated, the conduct cannot properly be classified as a restriction of competition by object.
V. The Burden of Proof and the Duty to State Reasons
Counterfactual analysis in the assessment of a restriction by object does not require reversing or reallocating the burden of proof. The European Commission or the relevant national competition authority continues to bear the burden of establishing all the constituent elements of an infringement of Article 101(1) TFEU.
However, where the undertaking under investigation advances specific, coherent, and substantiated alternative explanations concerning the operation of the market, the European Commission or national competition authority cannot disregard them without explanation. The authority must examine these arguments and provide explicit reasons for their rejection.
This obligation arises, first, from the jurisprudential requirement to fully examine the relevant legal and economic context and, second, from general principles of EU law, including the principle of good administration, the right to be heard, and the right to effective judicial protection. A substantive assessment of the arguments advanced is necessary both to ensure that the administrative decision is adequately reasoned and to enable effective judicial review after its adoption.
Conversely, if the European Commission or national competition authority relies solely on the categorical assertion that the conduct constitutes a hardcore restriction, without substantively addressing specific doubts regarding the market’s structure and operation, the statement of reasons will be deficient. In such circumstances, classifying the conduct as a restriction by object risks devolving into the type of formalistic categorisation that the relevant case law precludes.
VI. Normative Assessment
The foregoing analysis indicates that the modern case law operates between two methodological approaches. The first is a categorical approach, which regards certain forms of conduct as inherently restrictive of competition by their very nature. The second is a contextual approach, which requires a substantive assessment of the legal and economic context before a practice may be classified as restrictive by object.
The more doctrinally coherent interpretation of the case law is that classifying conduct as restrictive by object operates as a rebuttable presumption of harmfulness. Where the conduct and market characteristics make its harmful character evident, that presumption is difficult to rebut. By contrast, in complex markets or markets with unusual structural characteristics, a specific and substantiated counterfactual may create reasonable doubt as to whether the conduct reveals a sufficient degree of harm, thereby making it necessary to proceed to an effects analysis.
Recognition of this dynamic prevents the assessment from descending into formalism. It preserves the doctrinal consistency of the concept of a restriction by object with the principles developed in Cases C-67/13 P, Groupement des cartes bancaires, and C-228/18, Budapest Bank.
VII. Conclusions
Counterfactual analysis does not constitute a distinct evidential stage in establishing a restriction of competition by object under Article 101(1) TFEU. It nevertheless operates as an integral element of the required assessment of the legal and economic context.
In the case of hardcore restrictions, counterfactual reasoning operates in a condensed and almost self-evident form. In borderline or complex cases, however, it becomes critical, particularly where serious and plausible alternative explanations are advanced regarding the market’s operation.
Under the principles developed in the case law, a full analysis of effects is not required in every case. What is required is the consistent incorporation of elements of counterfactual analysis into the assessment of the legal and economic context in which the conduct operates. A failure to assess material and substantiated alternative explanations would be inconsistent with the restrictive interpretation of the concept of a restriction by object and with the fundamental principle that a finding of infringement requires proof that the conduct reveals a sufficient degree of harm.
This approach ensures that the concept of a restriction by object does not degenerate into a standardised or formulaic classification of unlawful conduct. Instead, it retains its proper function as a means of streamlining the evidential inquiry in cases where established experience and market characteristics render the anticompetitive nature of the conduct sufficiently apparent.
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