Chillin'Competition

The best, and quickest, Intel comment by the most preeminent academic of his generation –who also happens to be my co-blogger- already contains the keys to understand and make sense out of the very essence of today’s CJEU (Grand Chamber) Judgment in Intel (see the preceding post). In what follows I add my two cents on another set of issues raised by the Judgment.

1- A novelty or a clarification? Pablo explains perfectly why the Judgment is perfectly consistent with the case-law. Admittedly, para. 138 states that prior case law “must be further clarified” (often a euphemism for “turned upside down”) but the truth is that this Judgment makes explicit something that was already implicit in Art. 101 TFEU as well as in other categories of abusive conduct, even if was arguably neither explicit nor so implicit in exclusivity cases (as illustrated by the fact that at first sight para. 138 reads more like a contradiction than like a clarification of para. 137).

2- But what is really the practical effect? Is this the end of “by-object” or “per se” abuses? The category continues to exist, but with a different meaning (the same that it has in Art. 101 TFEU). Exclusivity-related practices were treated as “by object” in the sense that they are presumed to have anticompetitive effects. Most of the controversy preceding this Judgment had to do with whether the presumption (going back to Hoffman-La Roche) was justified or not. As also noted by Pablo, the CJEU has endorsed and retained the controversial presumption (para. 137) (btw, the Judgment also retains the HLR references to the special responsibility of dominant firms).

Whilst the presumption/category formally remains, the reason why this Judgment marks a crucial development in the law is because the mere use of that presumption/label will not automatically mean a home-run for the Commission. Until today, the application of the presumption/by object label was enough to discharge the Commission of its burden and to shift it to the undertaking under the objective justification box (which includes a yet-to-ever-be-met indispensability requirement). Today, however, we have learnt that the presumption of “capability” is only that, a presumption, and that as such it can be rebutted (and this prior to the discussion on objective justification) (para. 138). The “objective justification” avenue cannot be the place to rebut the presumption, because it deals with other considerations, already assumes that the restriction exists and has been identified when it actually may not (this is what I think para. 140 of the Judgment is alluding to).

3- Is the Commission then always bound to use the as-efficient-competitor test? The Judgment seems to be read by many as the final victory of the efficiency principle and/or of the As Efficient Competitor (AEC) test (two different albeit often conflated things). That may well be the case, but I’m not entirely sure. Whether the AEC test is the only –or indeed an appropriate- tool to assess rebates is something questioned by many, including for instance Joshua Wright (see here) or Steve Salop (see here). In my view there are two possible readings to the Judgment:

-Alternative reading 1: At times it would seem as if the CJEU considers the AEC test as the decisive benchmark to assess whether a given conduct is contrary to the competition rules. According to this reading, the “aura of generality” that Pablo identifies (paras. 133, 134, 136, 139 or 140).  would also relate to the AEC test.

-Alternative reading 2: At the same time, the reading of the Judgment also suggests that the CJEU placed great importance on the fact that in this particular case the Commission itself had chosen to rely on the AEC test (141). It makes sense to reason (as the Judgment does in paras. 141-147 with a certain “aura of specificity”) that if the Commission chose to do so, then that analysis –and Intel’s counterarguments in that regard (which may be right or wrong, that is what will now be decided by the General Court)- should have not been ignored in first instance.

-Perhaps a way to tie together the two readings may lie in a word not mentioned in the Judgment “attributability”. This idea –as also noted by Pablo- already featured in Post Danmark I (on which this Judgment heavily relies; see the crucial paras. 133 and 134). The exclusion less efficient rivals is the essence of competition and is perfectly compatible with healthy competition, so any such foreclosure cannot be automatically attributed to an alleged abusive behavior. If a less-efficient rival is excluded, then it is reasonable to presume that this is due to competition on the merits and less likely that the exclusion is attributable to the dominant firm.

In this sense, I personally would consider the AEC-test to be a relevant but not a necessary or in itself decisive factor (Pablo has also made this point before in relation to Post Danmark II). Indeed, whereas in any given case a company may challenge “capability” showing that no as-efficient-rivals are excluded, that would not necessarily be the end of the game; it would then be up to the Commission to substantiate why the company’s arguments are wrong or why practice at issue is nevertheless restrictive.

At the end of the day, practical difficulties and open questions in this regard boil down to the operation and shifting of the burden of proof and of evidential burdens. Doubts in this regard are not exclusive to this case; we will try to go deep into this at our forthcoming conference; save the date and stay tuned

4- Will the Judgment cause a radical change in the Commission’s future enforcement? In its Guidance Paper on exclusionary abuses the Commission already committed to a careful assessment of likely effects (and this regardless of whether the undertaking concerned submitted evidence challenging the capability of the conduct to restrict competition). The Commission did not consider then that such an approach would make enforcement impossible nor did it consider that it contradicted earlier case law. In my view, therefore, the Commission already self-committed to applying a standard that is even stricter than that required by the Court in today’s Judgment. The difference is that until today the analysis all relevant circumstances in cases following the Guidance Paper was self-imposed by the Commission; as of today, it is clear that this is required by the law.

5- Effects of the Judgment on other ongoing investigations? This blog is a place to reflect about the law in general and about how individual cases affect the law, so I’d rather reserve my answers to this question for other more appropriate forums…

6- What do you make of the fact that there is no mention to the Guidance Paper in the Judgment? The Guidance Paper was not applicable in this case and, to date, EU Courts have not yet had a chance to rule on the self-binding effect of this document vis-à-vis the Commission. It’s clear to me that the Guidance Paper did not change the law (which can only be set by the CJEU) but that it has the same self-binding effect as any other piece of Commission soft law.

7- Everyone is paying attention to the substantive stuff, but what about the procedural pleas? Whereas the decision to re-send the case to the General Court is based on the substantive findings in the Judgment, there are most interesting elements in the discussion of the first two (procedural) pleas:

-On jurisdiction: The Judgment contains very important clarifications on jurisdiction, noting that

(i) contrary to what Intel argued, both the implementation and the qualified effects tests are valid ones (paras. 43-46); this may seem like no news, but it is actually the first time that the CJEU endorses the qualified effects test (previously accepted by the GC in Gencor);

(ii) that, under the qualified effects test (which requires the conduct to have a foreseeable immediate and substantia effect), the assessment must be probabilistic (para. 51) and consider the conduct as a whole (paras. 52-57). This latter part, which refers to “overall conduct” and to “comprehensive anticompetitive conduct” is reminiscent of the 101 single and continuous infringement logic; it makes sense to me provided that the conduct is really one and not different practices artificially put together (the “artificial fragmentation” referred to in para. 57 would be as wrong as an artificial melange).

– On the Commission’s new obligation to record every meeting: Whilst the Judgment’s ruling on this point did not have a decisive affect in this case, it will certainly significantly affect the Commission’s working procedures. In essence, the CJEU considers that the GC committed an error of law by distinguishing between formal and informal meetings (para. 88 and 93), and clarifies in para. 91 that “the Commission is required to record, in any form of its choosing, any interview which it conducts (…) for the purpose of collecting information relating to the subject matter of an investigation)”. The CJEU further considers that a party’s rights of defence will be breached unless the Commission makes available to it a note containing ”indications on the content of the discussions that took place during that interview, in particular as regards the nature of the information (…) provided”. A note containing just a “brief summary of the subjects” is considered insufficient by the Court.

The reason why this breach of rights of defence did not have an impact in the case is because the Court considers that this violation of rights of defence did not affect the operative part of the decision (para. 94, 96 102) This is so because (i) the Commission did not make use of information obtained at that meeting to inculpate Intel and (ii) Intel had not established that any exculpatory evidence allegedly provided at that meeting could have been invoked to challenge the Commission’s substantive assessment (paras. 97 and 100).  Admittedly, that is far from an easy task but, very interestingly, the Judgment (at para. 101) refers to the possibility of having requested measures of organization of procedure before the General Court so as to summon the individual that met the Commission to appear before Court and testify in this regard [this is, oddly, still a very little used possibility, as discussed by Fernando Castillo at our most recent litigation workshop).