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Case C-525/16, Meo – Serviços de Comunicações e Multimédia: a major contribution to Article 102 TFEU case law

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Love them or hate them, the EU competition law community should be grateful to collecting societies. Their activities have ensured a steady supply of preliminary references since the very early days. It looks like things are unlikely to change soon.

Yesterday’s judgment in Meo is the latest – but will certainly not be the last – of these preliminary rulings. The case concerned a relatively narrow issue: the interpretation of Article 102(c) TFEU in the context of exploitative discrimination.

You certainly remember that Article 102(c) TFEU concerns the application of ‘dissimilar conditions to equivalent transactions’ by dominant firms. According to the letter of the Treaty, the prohibition applies only insofar as it places some firms ‘at a competitive disadvantage’.

Reasonably – and as expected – the Court has held in Meo that the ‘competitive disadvantage’ cannot simply be assumed, or taken as a self-evident consequence of the behaviour of the dominant firm. Effects in this sense will have to be established on a case-by-case basis.

In any event, the contribution of Meo to the case law goes well beyond the legal status of exploitative discrimination. The Court has clarified some fundamental questions about which we lack meaningful guidance.

Not every disadvantage amounts to an anticompetitive effect: In para 26 of the judgment, the Court holds that ‘the mere presence of an immediate disadvantage affecting operators who were charged more, compared with the tariffs applied to their competitors for an equivalent service, does not, however, mean that competition is distorted or is capable of being distorted’.

Simply put: the Court clarifies that not every disadvantage resulting from the behaviour of a dominant firm amounts to an anticompetitive effect within the meaning of Article 102 TFEU. This clarification is no less than crucial, both in the context of exclusionary and exploitative practices.

The Court has put to rest, for good, the idea that practices (any practice) by a dominant firm cannot fail to have anticompetitive effects. According to this interpretation, anything that makes rivals’ or customers’ life more difficult would be abusive. Post Danmark I already dismissed this interpretation of Article 102 TFEU; Meo is the last nail in the coffin.

This is a point that Alfonso and I already emphasised in our piece on the notion of restriction of competition. A restrictive effect cannot be everything, it only exists when a practice harms firms’ ability and incentive to compete.

There is no de minimis threshold under Article 102 TFEU, true. However, not every practice has an effect: In Post Danmark II, the Court held that there is no such thing as a de minimis threshold below which anticompetitive effects can be excluded under Article 102 TFEU.

Some people interpreted this point as meaning that, since there is no de minimis in Article 102 TFEU, any practice has an anticompetitive effect. The Court dismisses this view. What Post Danmark II means, Meo explains, is that, because we are dealing with a dominant firm, exclusionary effects cannot be ruled out ex ante. However, these effects will still need to be established in concreto.

As the Court puts it in para 29 of the judgment: ‘[…] in order for it to be capable of creating a competitive disadvantage, the price discrimination referred to in subparagraph (c) of the second paragraph of Article 102 TFEU must affect the interests of the operator which was charged higher tariffs compared with its competitors’.

Final thoughts: The case law makes more sense after Meo. The analysis of effects is a meaningful one under Article 102 TFEU, as it is under Article 101 TFEU and merger control. Crucially, some of the issues it addresses will, before too long, be addressed by the EU courts.

Written by Pablo Ibanez Colomo

20 April 2018 at 1:28 pm

Posted in Uncategorized

5 Responses

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  1. I’m fascinated by par. 30:

    “30 However, in order for it to be capable of creating a competitive disadvantage, the price discrimination referred to in subparagraph (c) of the second paragraph of Article 102 TFEU must affect the interests of the operator which was charged higher tariffs compared with its competitors.”

    I’m completely at a loss to imagine how or why being charged higher tariffs could ever not affect someone’s interests.

    martinned

    20 April 2018 at 1:52 pm

    • coz probably that company did not want to pay higher taxes and wanted to keep the production output constant. thus, the said operator’s interests have not been affected, at least from its perspective

      jesseshumhk2@gmail.com

      21 July 2018 at 11:43 pm

  2. Great post!
    Had this been an abuse, competition law could be used to level outcome in bargaining situations where two customers have equal bargaining power vis-a-vis DomCo but one customer has been more succesful in its negotiations. In my view, that would have been unfortunate and possibly so even where the outcome leads to an economic disadvantage. But perhaps eradicating exploitative discrimination altogether is too much to ask.
    Also, one thing I cannot wrap my head around is the court’s discussion on intent, which in my world makes sense for exclusionary abuses but is more difficult to place in exploitative abuses.

    Pamela

    20 April 2018 at 3:43 pm

  3. Par. 31 is equally fascinating:
    “When it carries out the specific examination referred to in paragraph 28 above, the competition authority or the competent national court is required to take into account all the circumstances of the case submitted to it. It is open to such an authority or court to assess, in that context, the undertaking’s dominant position, the negotiating power as regards the tariffs, the conditions and arrangements for charging those tariffs, their duration and their amount, and the possible existence of a strategy aiming to exclude from the downstream market one of its trade partners which is at least as efficient as its competitors (see, by analogy, judgment of 6 September 2017, Intel v Commission, C‑413/14 P, EU:C:2017:632, paragraph 139 and the case-law cited)”.
    If the dominant firm is not present in the downstream market why the need/the intent for a strategy to exclude one of the trading partners?
    With reference to the AEC test – does this mean that the test has to be performed for each of the trading partners?
    What is the meaning of the “interests of the operator”?

    gonzalo

    23 April 2018 at 6:18 am

    • I agree this is ‘interesting’.

      Perhaps:
      – in para 31 the ECJ is trying to articulate some sort of general test – for first and second degree price discrimination (thus adapting its Intel formula to ??try to cover first degree price discrimination with the aim of excluding competitors);
      – it therefore drops the strategy/intent part in para 35, as MEO concerns pure second degree discrimination.

      But this still leaves us deciding what to make of the AEC part of para 31:

      – in first degree cases, is the ECJ somehow implying that it is OK to poach customer X of a competitor, as long as X is more efficient than X’s own competitors? In other words, if you disfavour (exclude) inefficient customers, is this OK? Presumably this is not the ECJ’s intention (yes, there is protecting competition vs protecting competitors, but this nevertheless seems to go too far);
      – or does the Court more have in mind the scenario where the dominant undertaking is also active on the downstream market and favours its own vertically-integrated company with its pricing? Here the AEC test makes more sense – the dominant firm has a view on its own downstream costs etc, and can therefore use this to assess to what extent the price discrimination is capable of translating into a real competitive advantage/disadvantage by reference to as-efficient (but unfavoured) downstream competitors.

      – in pure second-degree discrimination cases, the AEC test doesn’t seem very apt (I think para 35 is probably intended to rule it out). In such cases the dominant firm may have little clue about the cost structure of its clients. An AEC test is therefore of little use to it in judging whether its price discrimination might translate into an abusive competitive disadvantage. Here a more general assessment of the impact seems appropriate, which I think the Court is getting at with its reference to “all the relevant circumstances”.

      Claire Simpson

      3 May 2018 at 3:44 pm


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