What I talk about when I talk about the ‘form-based’ approach to Article 102 TFEU
The revived interest in exclusive dealing and rebates forces us to come back to some of the concepts around which debates revolved in the mid-2000s. I had not anticipated that there would still be some confusion about the meaning of some of these concepts. In particular, I thought it was clear what lawyers and economists meant when they referred to the ‘form-based’ approach to Article 102 TFEU. I now realise that a post on the matter is not only appropriate but even necessary to help the ongoing discussions (which I hope will remain as lively as they have been in the past few months).
The prohibitions set out in Articles 101 and 102 TFEU may be triggered (i) by the practice itself; or (ii) by the effects of the said practice. Under the first approach, the practice, if established by an authority or a private claimant, will be prohibited unless the dominant firm is able to put forward an objective justification or unless the parties to the agreement are able to show that the conditions set out in Article 101(3) TFEU are fulfilled. Under the second approach, it would be necessary to show that the practice under consideration has, or is likely to have, anticompetitive effects. To be sure, it would still be possible to justify the conduct even under this second approach.
The expression ‘form-based’ is used (and, as far as I understand, has always been used) to refer to the first of these two approaches. A ‘form-based’ approach to some practices seems wholly uncontroversial. Cartels, for instance, are prima facie prohibited regardless of their effects (and irrespective of whether they have actually been implemented). Thus, any claims that the cartel is on the whole pro-competitive (as in BIDS) would have to be considered under Article 101(3) TFEU. The same is true of agreements aimed at restricting parallel trade, as confirmed by the ECJ in Glaxo Spain (more about parallel trade restrictions soon).
Some practices, including exclusive dealing and loyalty rebates, are treated like cartels under Article 102 TFEU (but not under Article 101 TFEU). In other words, their legality is established in accordance with a ‘form-based’ approach. If some aspects of the case law have been criticised, this is because exclusive dealing and loyalty rebates differ significantly in their purpose and effects from cartels. As I explain in my paper, experience and economic analysis show that it is appropriate to presume an anticompetitive intent in the case of a cartel, but not in relation to exclusive dealing and loyalty rebates. Similarly, one can safely assume that, if implemented, a cartel will have anticompetitive effects. As cases like Michelin II and British Airways show, the same cannot be said of exclusive dealing and rebates.
As can be seen, references to the ‘form-based’ approach sometimes followed by EU courts in Article 102 TFEU cases have nothing to do with the fact that legal analysis involves by definition the use of categories and bright-lines, nor are they a plea for the unstructured balancing, on a case-by-case basis, of the pro- and anticompetitive effects of a practice. These references are simply used to convey the idea, enshrined in the Commission Guidance, that a ‘form-based’ approach to enforcement is not appropriate for the most common categories of potentially abusive conduct.
[I took the above picture this morning on my way to the LSE. Londoners should be able to guess where!]
Chillin'Competition 
Very enlightening indeed, but I wonder if what you describe, insofar as it concerns art 101, is not simply the same as the distinction between object and effect, known since the 1950’s. If that is so, why inventing new terms? By the way, you mention “intent” as relevant for art 102 (“experience and economic analysis show that it is appropriate to presume an anticompetitive intent in the case of a cartel, but not in relation to exclusive dealing and loyalty rebates”) but I always thought that abuse was an objective concept, or is “intent” relevant for “form-based” analysis, as you appear to suggest?
Mrs Effects
17 December 2014 at 5:16 pm
Thanks for your comments, Mrs Effects
I am also all in favour of using the same terms across the board. The fact remains that ‘form-based’ is a widely used term. The purpose of my post was not to replace existing terms (or to invent new ones). I am simply trying to clarify what lawyers and economists mean when they point to the form-based nature of some aspects of Article 102 TFEU case law. In this context, it makes sense to refer by analogy to restrictions by object within the meaning of Article 101(1) TFEU (the law is uncontroversially ‘form-based’ in relation to cartels).
On intent and Article 102 TFEU. It seems clear to me that intent plays a determinant role when the ECJ seeks to establish whether a practice should be subject to a form-based or an effects-based approach instead. Some practices are prima facie prohibited because the ECJ presumes that they are driven by an anticompetitive intent. Para 71 of AKZO and para 90 of Hoffmann-La Roche are quite clear in this regard. The ECJ considers in these two rulings that pricing below average variable costs and exclusive dealing serve no purpose other than the exclusion of rivals.
I develop these points in my paper. Do not hesitate to send more detailed comments via email!
Pablo Ibanez Colomo
17 December 2014 at 6:18 pm