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Is the Guidance Paper on Article 102 binding on the European Commission?

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A few posts ago (here) Pablo challenged me to explain my view on the binding force of the Guidance paper on Art. 102. The answer is crystal clear in my mind (and Pablo already anticipated the answer years ago labelling it as a “pre-commitment device”), but I have never seen the debate spelt out in full, nor have I seen what I think is the killer argument.

This is actually an issue that I have discussed with many people over the past few years, but never on this blog as it was pretty much a moot question. Until now every Commission decision challenged before EU Courts had been adopted prior to the release of the Guidance Paper. But the debate will now get serious, as the issue may come up in the Qualcomm (AEC test or no AEC test?) and Google Shopping cases (the first 102 standard infringement decisions adopted after the Guidance paper that does not mention it at all). All others mention it on substantive points unrelated to prioritization. [For the meticulous, ARA was a “settlement” and Romanian Power Exchanges was about an exploitative, not exclusionary abuse].

For various reasons I won’t discuss anything specific about those cases but rather the general theoretical point. I of course only work for non-dominant companies 😉 but since that view may be disputed (on the basis of a flawed dominance assessment…), please consider what I am about to say on its merits and with a critical mind. I am confident you will agree.

First, we can all agree that the Guidance Paper is not the law and that it is not binding on EU Courts, national courts or NCAs in spite of its persuasive value as a “useful point of reference”. EU Courts are the sole and ultimate interpreters of the law. Recital 3 of the Guidance acknowledges this otherwise evident reality.

Second, we surely all agree that EU case law has consistently established the principle that “in adopting [soft law instruments] and announcing by publishing them that they will henceforth apply to the cases to which they relate, the institution in question imposes a limit on the exercise of its discretion and cannot depart from those rules under pain of being found, where appropriate, in breach of the general principles of law, such as equal treatment or the protection of legitimate expectations. It cannot therefore be precluded that, on certain conditions and depending on their content, such rules of conduct, which are of general application, may produce legal effects”. (See, among many others, paras. 209-211 here).

This means that even if the Guidance Paper is not the law and cannot bind courts, it certainly might bind the institution which adopted it and committed to apply it to future cases.

The Guidance Paper seems to meet all conditions. It was formally adopted, publicly announced and presented, published in the Official Journal of the European Union and it is currently listed in DG Comp’s website under “Legislation in force” (here). The Guidance itself stated (para. 2) that its purpose is to “provide greater clarity and predictability” and “to help undertakings better assess whether certain behavior is likely to result in intervention by the Commission”. The Commission also made sure to clarify that it would “fully apply the approach set out [in the Guidance Paper] to future cases”.

I actually had a hearing in Luxembourg some weeks ago where we discussed the legitimate expectations generated by a statement from a Commissioner in response to a parliamentary question. There is, in fact, an established line of case law making clear that legitimate expectations may arise not only from administrative or legislative acts, but also from settled practice and even from oral or written representations (State aid lawyers know this all too well). If a random oral representation can have such effects, does the same reasoning really not apply to a document like the Guidance Paper?

Third, we surely all agree that deviations are certainly possible provided a special statement of reasons is given. The EU Courts have recently clarified in ICAP that the duty to state reasons “must be complied with all the more rigorously” when the Commission departs from guidelines (para. 289).

The interesting debate comes now.

Fourth (the Commission’s counterargument)

Some of the Commission’s top legal minds (whom for understandable reasons wouldn’t have agreed with the Guidance Paper in the first place) argue that the Guidance Paper is in reality a different animal because it is a “Guidance paper” (as opposed to Guidelines)? that refers only to “enforcement priorities”. This was also the view eventually advocated by the Commission in the Intel hearing as transcribed here.

At the litigation workshop we held back in June, some of the Commission representatives added that the Guidance Paper is also different from other soft law in the competition field because it relates to an element (the notion of abuse) on which the Commission lacks any discretion. The idea is that the Commission cannot limit the discretion it does not have regarding the substantive assessment of cases.

[Note that these two views appear to contradict each other, because the Commission does have prioritization discretion and could therefore limit it and commit to pursue only some types of pre-defined cases. Let us in any event consider both lines of reasoning for the sake of argument]

Fifth (my rebuttal)

I have told my friends holding this view that:

  • The case law makes it clear that the title of the document is irrelevant. Under EU law the denomination of an act is not decisive as regards its legal effects. This also applies to soft law instruments (se e.g. C-322/88). Rules of conduct of general application adopted by the EC may produce legal effects “depending on their content”. The Guidance Paper is drafted as substantive guidelines and refers to elements of the assessment that are only undertaken at every step of the investigation of a given case, not just in deciding what to prioritize.
  • There is no reason to treat the Guidance Paper differently to all other EC Communications to which the EU Courts have applied the said reasoning. If anything, there are reasons to conclude that the protection of the principle of legitimate expectations is even of greater importance here. Indeed, the EU Courts have considered that a deviation from the fining guidelines will, absent a statement of reasons, be considered contrary to the principle of legal certainty even if fining policy is an area where predictability and foreseeability may not be desirable.
  • The killer argument: The argument that the Commission could not limit its discretion with regard to its substantive assessment of Art. 102 cases because the notion of abuse is an objective one (and therefore the Commission would lack any such discretion) has already been disproven by EU Courts. The CJEU ruled in Expedia(para. 28) that the Commission is bound by its De Minimis Notice in the sense that a failure to state reasons for a deviation would imply a breach of the principle of legitimate expectations. Very importantly, the De Minimis Notice, like the Guidance Paper, refers to an objective notion in relation to which the EC enjoys no discretion (as confirmed in Case T-7/93, Schöller,  para.75). And very importantly, all versions of De Minimis notice, like the Guidance Paper, have also been clearly drafted in terms of prioritization and in order for “undertakings to be able to judge for themselves whether their agreements do not fall within the prohibition” (pretty much what para. 2 of the Guidance Paper says). In my view, paragraph 28 of the Expedia Judgment pretty much closes any possible debate.    

 I rest my case. Look forward to reading your views!

Written by Alfonso Lamadrid

15 March 2018 at 7:05 pm

Posted in Uncategorized

4 Responses

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  1. I think the starting point must be what the guidance paper says it is, i.e. guidance on enforcement priorities and thus not binding authority on which substantive legal test that the Commission will apply. This ‘clue is in the title’-argument is pretty strong, I think.

    I completely agree that title is not necessarily decisive. But for the Guidance Paper to be binding, I think one would have to demonstrate that the Commission has expressly or tacitly given the impression to stakeholders that they can unequivocally rely on the document beyond what the title suggests – thus triggering legitimate expectations to be respected. Beyond para. 2, I question whether the Commission has ever signalled anything to the effect that the Guidance Paper could be relied upon as binding. The expectations that the Guidance Paper was (or would become) an authoritative interpretation of the law binding (at least) on the Commission came from hopeful practitioners and not the Commission.

    Happy to be persuaded otherwise 🙂

    Sam

    15 March 2018 at 7:56 pm

    • Thank for the comment! I go back to the points made at the end:

      Let’s assume that the Commission saying that it “will fully apply the approach set out [in the Guidance Paper] to future cases” or keeping it under “legislation in force”
      is not sufficient to have led people to believe that the paper would have been applied to future cases .

      What were in your view the signals to the effect that the de Minimis notice could be relied upon as binding? That is the question I am really interested in.

      And assuming it really were only about enforcement priorities, shouldn’t the Commission then provide reasons to deviate from those priorities if it ever does?

      For the avoidance of doubt, I certainly don’t think the Guidance Paper ever was an authoritative interpretation of the law and did not have any hopes in that regard. Had it been a reflection of the case law, this debate would now be irrelevant. All the problems come for having made the move of committing to apply a policy that was not solely based on the case law.

      Alfonso Lamadrid

      15 March 2018 at 8:29 pm

      • On the binding nature of the de minimis notice: I think because the Commission presents its position on the law by way of what is not an ‘appreciable restriction’. In other words, the Commission expresses what it considers to fall outside Article 101 on substance which undoubtedly creates legitimate expectations and right of reliance towards the Commission at least.

        On whether the Commission should provide reasons from deviating from the priorities: To do so would certainly constitute good public administration with support perhaps in Article 41 of the Charter. A bit unsure of the remedy though. What remedy do you think could be sought if the Commission fails to state such reasons? Annulment of the decision? Reduced fine based on mitigating circumstances? Principle of legitimate expectations would make this possible in theory at least and supported by the l’effet utile doctrine there should be some consequence.

        Best
        Sam

        Sam

        16 March 2018 at 11:47 am

  2. I recall there is a paper exactly on the topic of your post: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2695732

    It dates back to 2015.

    True that in our world, this is like a century :).

    Nicolas Petit

    7 April 2018 at 6:26 am


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