The ban on anti-competitive agreements and concerted practices
contained in the Chapter I Prohibition is usually considered to be an
absolute one. If an agreement is shown to fall within the scope of the
prohibition, then it will automatically be unlawful unless the parties
can demonstrate that it should be exempt by reference to the consumer
benefit criteria contained in section 9 of the Competition Act. The
Competition Appeal Tribunal's ruling in the 'Attheraces' case at the
beginning of August provides a rare example of circumstances where this
basic principle does not apply and a so-called 'rule of reason' takes
its place.

In this case, the OFT had found that an agreement between a group of
UK racecourses and Attheraces (under which the courses jointly granted
Attheraces rights to exploit off-course betting and other rights via
the internet) infringed the Chapter I Prohibition and did not satisfy
the criteria for exemption. The OFT took the stance that, by selling
their rights collectively, the courses had distorted the competition
which would otherwise exist between them, thus artificially raising the
price paid for the rights. The courses appealed to the CAT against this
decision claiming, for example, that unless they acted collectively,
they would have been unable to sell their rights at all. The CAT agreed
with the courses on this point, holding that collective dealing had
been necessary in order to commercialise the rights (essentially
because it was the only realistic means of assembling the 'critical
mass' of betting turnover needed to interest punters) and, as such, the
courses' conduct could not infringe the Chapter I Prohibition as a
matter of law.

The CAT relied on the ECJ's 1994 Gottrup-Klim and 2002 'Wouters
rulings in reaching this conclusion. According to the CAT, those
rulings show that, "ostensibly restrictive arrangements which are
necessary to achieve a proper commercial objective will not, or may
not, constitute an anti-competitive infringement at all. Whether or not
they will do so requires an objective analysis of the particular
arrangement entered into by the parties, assessed by reference to their
subjective “wants” and against the evidence of the particular market in
which they made their arrangement. The task then is to consider whether
the restrictive arrangement of which complaint is made is 'necessary'
to achieve the objective" (para. 167).

On the particular facts of 'Attheraces', the CAT was satisfied that
these criteria were all satisfied. In reaching that view, it
distinguished these facts from those which led in 2003 to the European
Commission ruling against the collective selling of media rights by
UEFA. In that case, the Commission found that negotiation between
individual football clubs and media companies was a realistic
alternative to collective dealing and had in fact occurred on a number
of occasions. No such alternative route was found to exist in
'Attheraces'.

What then are the wider implications of this ruling? It is suggested
that these are fairly limited. First of all, it is clear that the
concept of 'legitimate commercial objective' is a narrow one. In
'Attheraces', for instance, the parties were able to show that the
objective of the agreement was the creation of a brand new internet
betting product, benefiting punters and horseracing generally and not
just the parties themselves. Second, in seeking to justify a
restriction of competition with reference to such an objective, the
parties carry a heavy onus of proof: unless the achievement of the
objective would be impossible without the restriction in question, they
will fail.

In fact, readers will notice the striking similarity between this
test and the exemption criteria under section 9 of the 1998 Act. Given
that, as the CAT made clear in its ruling, the parties to the agreement
(and not the OFT) bear the onus of proof in either case, it is perhaps
questionable what the practical advantage is of relying on the
'necessity' test as opposed to the 'exemption' test (particularly now
that section 9 applies without the need for an OFT decision to that
effect).

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