Chillin'Competition

My new paper, on AG Wahl’s Opinion in Intel, is available for download on SSRN here. It is not new in the sense that it is the write-up and polishing of some of the ideas discussed in an event organised by Concurrences back in October. Info and materials on the event, in which I presented together with Luc Gyselen and Damien Neven, can be found here.

I understand that Concurrences will be publishing several short papers on the Opinion together with mine and Nicolas Petit’s (see here). I chose to focus on what is, in my view, the single most important aspect of the Opinion: the emphasis placed on the virtues of realism and consistency in law-making.

Realism in law-making

A legal rule that is divorced from business realities makes bad law. When a rule ignores reality, it may be difficult to understand and anticipate. This is one key message conveyed by AG Wahl in his Opinion.

The summa divisio between loyalty rebates, on the one hand, and quantity-based schemes, on the other, has been with us since Hoffmann-La Roche. It does not capture, however, the reality of business transactions, which, as the case law shows, defies such a ready and stark categorisation.

What is more, the divide between loyalty and quantity rebates is premised on the idea that the two practices are fundamentally different in their nature, objective purpose and potential effects. Again, decades of case law provide empirical evidence showing that the reality is far more nuanced.

What happens when a rule is at odds with business realities? As AG Wahl explains, a gap opens between what courts say and what they do. Formally, courts may prefer to stick to the divide between loyalty and quantity rebates. In practice, however, they may do something very different. The analysis of ‘all the circumstances’ in cases like Michelin I and British Airways is simply an attempt to bridge the gap between rhetoric and reality.

A gap between what courts say and do is only good for academic lawyers like myself, who make a living trying to develop a systematic understanding of the field. It is bad for everybody else. Obscuring the reasoning of a ruling, or failing to make explicit the aspects that determine the outcome of a case is not conducive to legal certainty. In my view, Michelin II and British Airways exemplify the legal uncertainty created by this case law particularly well (I wrote about it here).

Consistency in law-making

AG Wahl’s Opinion also emphasises the value of consistency. Legal certainty cannot be meaningfully achieved if like practices are not treated alike. The Opinion proposes to achieve consistency both in the context of rebates and Article 102 TFEU as a whole.

In line with the Opinion, I have already pointed out that, if the case law has taught us something over the past thirty years, it is that the difference between the various types of rebate schemes is one of degree, not of principle. As a result, there should be no reason why they should be treated differently. All rebate schemes should be prohibited by object and/or by effect in accordance with the same criteria.

The Opinion distils a unifying legal framework that can apply across all potentially abusive practices. This framework revolves around a two-step test. According to AG Wahl, only the most serious infringements should be prohibited by object under the first step. The legality of all other practices should be subject to the second step. The two-step test must be performed in light of the economic and legal context of which the practice is part.

This aspect of the Opinion finds support in the case law. As I explained back in October, there are clear traces of a two-step test in past rulings. Post Danmark I is a good example in this sense. Selective price cuts can be abusive either when they are predatory within the meaning of AKZO (first step) or when they have exclusionary effects (second step). In Deutsche Telekom and TeliaSonera, the Court suggested that the first step is not sufficient to establish the abusive nature of a ‘margin squeeze’. Such a practice is only prohibited when it has exclusionary effects (that is, under the second step). Finally, a careful reading of Post Danmark II also suggests that a two-step approach was followed.