Chillin'Competition

There is so much going in the discipline that we often lose sight of the pending cases before the EU courts. For over a month I have been meaning to say a word about AG Pitruzzella’s remarkable Opinion in Canal+.

The case would be of interest if only because it is about the status of commitment decisions in EU competition law. These decisions have been a major instrument in policy-making. However, they rarely ever reach the Court.

What this case shows is that, over 15 years since Regulation 1/2003 entered into force, and almost exactly 10 years since the Court ruling in Alrosa, there are some misunderstandings about the nature of the instrument.

AG Pitruzzela’s Opinion adds clarity about the status of commitment decisions in the EU legal order and introduces a refinement which, in my view, addresses the one issue that is common to Alrosa and Canal+: the impact of these decisions on third parties.

Pay-TV, Generics and ‘insurmountable barriers to entry’: the case that never was

Canal+ is a spin-off of the Pay-TV investigations against Sky UK and the Hollywood major studios. The single most interesting aspect of the case had to do with the clauses prohibiting Sky from making available, via the Internet, licensed content to customers located outside the UK.

The key point of law was whether such clauses could be deemed to restrict competition by object under Article 101(1) TFEU.

After Generics, we have the vocabulary to ask the legal question properly: is the copyright regime an ‘insurmountable barrier’ preventing licensees from (lawfully) offering content outside the area covered by the agreement? If it is, there would be no restriction (by object or effect); if it is not, the said agreement would be a blatant infringement.

Alas, the case never took off. The firms involved in the Pay-TV case offered commitments to the Commission, which brought the investigation to an end.

The challenge by Canal+

Canal+ challenged the commitment decision involving Paramount before the General Court. The most interesting aspect of this action for annulment is that the firm appeared to question the interpretation of Article 101(1) TFEU given by the Commission.

Article 9 of Regulation 1/2003, as interpreted in Alrosa, suggests this is not a straightforward legal route: a commitment decision is a vehicle through which the Commission exercises its discretion to prioritise cases; not one through which competition law provisions are interpreted.

The nature of commitment decisions has two consequences: judicial review is limited and confined to manifest errors of assessment (as it should be when policy choices by an administrative authority are at stake).

Second, a commitment decision is not a statement of the law and does not rule on whether Articles 101 and/or 102 TFEU have been infringed. The Commission must simply identify its concerns following a preliminary assessment.

Against this background, it is unsurprising that the General Court dismissed Canal+’s action. At the same time, the case was a valuable reminder that the nature of commitment decisions, even after Alrosa, may not always be well understood.

AG Pitruzzella’s Opinion

Commitment decisions and Article 101(3) TFEU

A central question addressed by AG Pitruzzella is whether the preliminary assessment must include an overview of the conditions set out in Article 101(3) TFEU.

In other words: must the concerns be limited to a finding of a prima facie infringement (Article 101(1) TFEU), or must the Commission also evaluate in its preliminary assessment whether a potential restriction might in fact be justified under Article 101(3) TFEU?

The Advocate General repeatedly emphasises the nature of commitment decisions and the fact that, as a result, at no point is the existence of an infringement addressed as such (see in particular para 66).[1] For the same reason, the theory underpinning action by the Commission need not be as solid as it would in the context of an infringement decision (para 67).

The Advocate General concluded, in light of the above, that the analysis of the economic and legal context by the Commission was in line with what is expected from it in a commitment decision (where, as pointed out in the Opinion, the authority must simply find a ‘potential infringement’).

Concerning the question of whether the preliminary assessment must comprise an evaluation of the conditions set out in Article 101(3) TFEU, on the other hand, the AG Pitruzzella departs from the Commission’s position (which was, in turn, accepted by the General Court).

Thus, the preliminary assessment must consider the two stages of Article 101 TFEU, and not simply the first paragraph. While I was persuaded by the Commission’s reasoning, the outcome suggested in the Opinion comes across as reasonable. Arguably, raising concerns about a practice implicitly assumes that the conditions set out in Article 101(3) TFEU are not fulfilled.

The protection of third parties’ interests

The Opinion addresses, next, an issue that has become apparent in proceedings before the Court. A firm, whether it is De Beers or Paramount, can accept commitments with major consequences for third parties, and this through the use of an instrument that seeks to achieve procedural economy and is subject to limited judicial review.

In this regard, the Advocate General concludes that the Commission breached the principle of proportionality by not duly taking into consideration third parties’ rights affected by the decision (and, by the same token, that the General Court had erred in law).

There are two aspects of the reasoning that deserve to be highlighted. On the one hand, AG Pitruzzella notes that the Commission’s interpretation of Alrosa (and more precisely of the principle of proportionality) was particularly restrictive (para 120).

On the other, he emphasises the implications that commitments could have on firms affected by them. AG Pitruzzella rejects the idea that third parties could effectively protect their rights by bringing an action against the firms accepting the commitments.

The Opinion focuses not so much on what third parties could theoretically achieve at the national level, but on what one can realistically expect to happen in light of the principles applying to the relationship between EU and national institutions.

In this regard, AG Pitruzzella notes that a national judge, following Gasorba, will be constrained in her assessment of the compatibility of the agreement with Article 101 TFEU (para 127). For this reason, the third party could be subject to a ‘double sword of Damocles’.

This aspect of the Opinion, by taking a ‘law in action’ approach to the operation of commitment decisions in its institutional framework, invites the Court to interpret Article 9 of Regulation 1/2003 in a way that minimises some of its potential unintended consequences.

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[1] ‘En premier lieu, il convient de préciser ce que recouvre la notion de “préoccupations en matière de concurrence” et quel est, en conséquence, la portée du contrôle juridictionnel que doit exercer la Cour. À cet égard, il faut garder à l’esprit que, puisque la décision d’accepter les engagements ne requiert pas qu’une infraction soit constatée, le niveau d’approfondissement de l’enquête et de la motivation auquel la Commission est tenue est moins élevé que celui qui lui est imposé dans le cas ordinaire d’une procédure de constatation d’une pratique anticoncurrentielle illicite […]’.