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Archive for December 2021

AG Rantos’s Opinion in Case C-377/20, Servizio Elettrico Nazionale: a clean framework capturing the essence of the case law (II)

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Advocate General Rantos’s Opinion in Servizio Elettrico Nazionale is this month’s highlight. It seems fitting to say a word about it before the year comes to an end. The first post on the Opinion (see here) addressed the general approach to the notion of abuse and the way in which it codified the body of case law that has developed in recent years.

This second post focuses on two specific points addressed by Advocate General Rantos (the Opinion is particularly rich and there are other aspects that might be discussed in the future). The first is the role of actual, observable market developments when assessing potential effects. The second relates to the applicable threshold of effects.

The assessment of potential effects and actual market developments

It has long been established that EU competition law (including Article 102 TFEU) is concerned not only with actual effects but also with potential effects. One could even argue that potential effects are the primary concern, since the fundamental goal of the system is to preserve the competitive process rather than to sanction the exclusion of rivals.

When it comes to the assessment of potential effects, one question inevitably comes to mind: what is the role of actual market developments when evaluating them? If there is evidence that rivals have retained their ability and incentive to compete in spite of the practice, is this evidence relevant when the analysis is prospective in nature?

Advocate General Rantos gives an answer that is not only reasonable but also in line with the case law. Where the analysis is based on the potential effects of a practice, but the latter has been going on for a while, its actual impact is a relevant indicator of the likely consequences further down the line (para 119 of the Opinion).

In other words: the absence of actual effects can lead to the conclusion that the practice is incapable of having a potential impact on competition.

The Court of Justice had already hinted at this conclusion in Post Danmark I. It invited the national court to evaluate the anticompetitive effects of the below-cost price campaign at stake in the case.

In that judgment, the Court was careful to note (para 39), that the available evidence suggested that the rival had not lost its ability and incentive to compete (so much so, in fact, that it had gained back the two relevant customers). That evidence, along with the fact that an as efficient competitor would be able to cover the bulk of the cost attributable to the supply of the relevant goods (para 38), would be sufficient to conclude that the practice is unlikely to produce potential effects.

Advocate General Rantos’s clarification, even if eminently reasonable and straightforward, was particularly necessary. Occasionally, evidence pertaining to actual market developments is dismissed as irrelevant when the case revolves around potential effects. The fact that the analysis is prospective, in other words, is occasionally used as a pretext to ignore the reality of the economic and legal context of which the conduct is a part.

By concluding, in line with Post Danmark I, that actual market developments can be a factor when evaluating the potential impact of practices, Advocate General Rantos confirms that the assessment under Article 102 TFEU cannot be carried out in the abstract or in a hypothetical manner. The relevant economic and legal context, and thus ‘all the circumstances’, must be considered.

The threshold of effects

The Opinion also touches upon another crucial question that has not been addressed explicitly by the Court of Justice. As a matter of substantive law, what is the relevant threshold of effects? Is it sufficient for the authority or claimant to show that anticompetitive effects are a plausible outcome of the implementation of the practice? Or is it necessary to show, as suggested by Advocate General Kokott in her Opinion in Post Danmark II, that effects should be more likely than their absence?

The letter of the relevant judgments is not particularly illuminating in this regard. As noted by Advocate General Rantos (and previously, by Judge Wahl during his tenure as Advocate General), the words ‘capability’ and ‘likelihood’ have been used interchangeably in the case law.

When looking at this question, it is important to consider not only what the Court says, but also to what it does (as explained here). The meaning of the words ‘capability’ and likelihood’ is best understood when one pays attention to how the analysis is actually carried out in the judgments.

And if one pays attention to what the Court does, two conclusions can be drawn. First, there is a difference between abuses ‘by object’ (say, pricing below average variable costs) and abuses ‘by effect’ (say, a ‘margin squeeze’). The threshold is lower in the case of the former (judgments like AKZO suggest that plausibility is enough in ‘by object’ cases).

Second, as far as abuses ‘by effect’ are concerned, the threshold seems higher than that of plausibility. It is sufficient to read judgments like Deutsche Telekom, Post Danmark I and TeliaSonera to realise that the Courts demands more than the mere plausibility of an anticompetitive effect.

Advocate General Rantos appears to reach a similar conclusion in his Opinion. He suggests, in line with the above, that the threshold may vary depending on the nature of the conduct and the specific circumstances of each case (para 118). The more egregious the conduct, the lower the threshold, which, again, seems eminently reasonable (and is also compatible with the case law).

More importantly, Advocate General Rantos points out that any evaluation must be carried out by reference to specific factors, such as the length of the practice and its coverage (which, again. would go to suggest that the mere plausibility of anticompetitive effects would not be enough).

Written by Pablo Ibanez Colomo

29 December 2021 at 4:10 pm

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2021: a year in publications (on blogging and research)

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As the year comes to a close, we are all tempted, to a greater or lesser extent, to look back at what has happened (which, in 2021, is definitely a lot, both for reasons within and outside our control). As an academic, my reflex is to update my CV with the papers I have published in the past twelve months.

A thought that came to mind as I was writing down the titles is how much I owe to the blog. Many of the ideas found in them were first tried and sketched via this medium, and your reactions have often contributed to refining and improving the arguments. In some cases, I would never have come up with the idea in the first place had I not bumped into (and taken part in) some discussions.

In short: the blog has become inseparable from my research activity, and the latter has improved a great deal as a result. Thanks very much all! I very much hope 2022 will bring more lively debates on legal matters.

The papers published in 2021 are the following (and it is never too late to provide comments and suggestions, by the way):

EU Merger Control Between Law and Discretion: When Is an Impediment to Effective Competition Significant?‘ (2021) 44 World Competition 347-372 (a working paper version can be accessed here)

Anticompetitive Effects in EU Competition Law (2021) 17 Journal of Competition Law & Economics 309–363 (a working paper version can be accessed here)

The Draft Digital Markets Act: A Legal and Institutional Analysis (2021) 12 Journal of European Competition Law & Practice 561–575 (a working paper version can be accessed here)

The role and limits of competition law in digital markets: on the reports and the reforms proposed (2021) 29 Zeitschrift für Europäisches Privatrecht 8-34 (a similar paper, under the title ‘What Can Competition Law Achieve in Digital Markets? An Analysis of the Reforms Proposed’, can be accessed here

Vertical Restraints after Generics and Budapest Bank (2021) 18 Concurrences 8  (a working paper version can be accessed here)

Territorial Restrictions in EU Competition Law: From Consten-Grundig To Ping and Pay-TV in Adina Claici and Denis Waelbroeck (eds), Vertical Restraints in The Digital Economy: Vertical Block Exemption Regulation Reform and the Future of Distribution (Kluwer 2021) (a working paper version can be accessed here)

Some of the papers that I have already presented in draft form are going through the usual editorial process, and I hope I will be coming back with updates in the coming weeks. Thanks so much again!

Written by Pablo Ibanez Colomo

27 December 2021 at 7:18 pm

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CMA orders Meta to sell Giphy: an animated comment

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Two weeks ago the CMA ordered Meta to sell Giphy. Our readers (who have always been very keen on exploring the blurred boundaries between competition law and silliness) were quick to point out that we could not let the opportunity pass to gif you a primer on the CMA’s order using Giphy’s GIFs.

Since Pablo and I have become serious people, we have invited a new contributor to blog at Chillin’Competition. From now on Areeader will be in charge of our editorial line regarding anything that may be fun, amusing, or remotely interesting. Pablo and I will take care of the rest.

Here are Areeader’s comments on a case that arguably sets a high-water mark for merger enforcement in dynamic, and animated, markets.

The background. The CMA seems to be reacting to the views of some commentators that merger control has been too lax in recent years. It has become commonplace to argue that deals such as Facebook/Whatsapp (2014) and Facebook/Instagram (2012) should have been prohibited. While there may arguably be some hindsight and selection bias at play, it is probably fair to say that some enforcers regret those decisions. And as fans of behavioral economics know, regret is a powerful factor when it comes to decision-making.

A lot has changed. Along came Facebook/Giphy, which the CMA must have seen as an ideal case to flex its muscles.

Some of you may very much doubt that this case would have raised issues in the past but, as we also know….

The CMA’s competition concerns. The CMA has explained that its extraordinary order for Meta to unwind the Giphy acquisition is based on three serious competition concerns:

-The first concern is that Meta could deny or limit other platform’s access to Giphy GIFs. I repeat, this is a serious concern. The CMA identifies a risk that other tech companies would not be able to effectively compete with Facebook and Instagram absent access to those GIFs. It’s easy to see how running out GIFs would be a problem for anyone. The treatment of GIFs as an essential input, however, raises important legal questions that will attract our community’s attention for months to come, like: are GIFs substitutable with memes?

-The second serious concern relates to the risk that Meta could change the terms of access (to GIFs) by, “for example, requiring TikTok, Twitter and Snapchat to provide more user data in order to access Giphy GIFs“). This substantive concern would appear to overlap with the first one, but it arguably helps bring out the user data argument and show that, of course:

-The third concern is that the deal could affect the display advertising market by eliminating “an important source of potential competition” (yes, Giphy). The CMA’s press release explains that before the merger Giphy had launched innovative advertising services, and observes that “Giphy’s services allowed companies – such as Dunkin’ Donuts and Pepsi – to promote their brands through visual images and GIFs“.

Regardless of your opinion on this case, we can probably all agree that the CMA could not have chosen better examples to illustrate the importance of ensuring a healthy market for display advertising:

The remedies. This is the first time that the CMA reverses a completed acquisition by a large digital platform and, inevitably, the remedy has attracted lots of attention. Facebook had offered behavioural remedies consisting in (i) open access to Giphy for new and existing partners, and (ii) creating a sale and licensing arrangement for Giphy’s content and algorithm. The CMA, however, considered that its concerns could only be addressed by Facebook divesting Giphy.

The CMA’s position might again seem surprising. It appears, however, that the CMA would rather avoid engaging in post-transaction compliance monitoring. Why? Because GIF-related competition issues are not time-limited but likely to come up again, and again, and again…

What now? Meta is reportedly considering an appeal. Given the UK’s standard of review for merger cases, battling the CMA may not be easy. We’ll be watching. (Yes, I inserted this last bit and the reference to “battling” only to justify posting a GIF of Mark Zuckerberg fencing in the metaverse).

THE END

Written by Alfonso Lamadrid

14 December 2021 at 10:48 am

Posted in Uncategorized

AG Rantos’s Opinion in Case C-377/20, Servizio Elettrico Nazionale: a clean framework capturing the essence of the case law (I)

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Advocate General Rantos’s Opinion Case C-377/20, Servizio Elettrico Nazionale, was published yesterday (see here for the French version). It is notable for two reasons. First, it effectively captures the essence of the case law following the contributions made by the Court from Post Danmark I to Generics. Second, it creates a framework that brings together all the pieces in a way that completes the picture and addresses some misunderstandings.

The Opinion is also a reminder that the pace of the law is not the pace of policy. The law moves in an incremental way that has little to do with the swings (occasionally dramatic) in enforcement. As Advocate General Kokott once memorably put it, the law, as interpreted by the Court, is not driven by the zeitgeist, but by a more stable undercurrent.

The questions asked by the Consiglio di Stato provide the Court with a great opportunity to engage with some questions that had not been expressly addressed so far. The Opinion is incredibly rich and I do not feel I would do it justice in a single post.

Thus, I will start my discussion with the question of whether an abuse of a dominant position involves an element of ‘impropriety’ or ‘abnormality’. Are practices caught by Article 102 TFEU inherently against competition on the merits? Can ‘normal’, ‘widespread’ or ‘commonplace’ conduct be prohibited as abusive?

Advocate General Rantos suggests an elegant answer, and one that is consistent with the case law. Whether a practice departs from competition on the merits and is qualified as abusive depends on a number of considerations, which vary based on the circumstances of each case and its peculiarities. One size does not fit all.

At one end of the spectrum (see para 62), there are practices that are inherently against competition on the merits, in the sense that they can only be rationalised as a means to exclude rivals (pricing below average variable cost is the perfect example in this sense; Advocate General Rantos adds Lithuanian Railways, in which the anticompetitive object of the conduct is also apparent).

Most potentially abusive practices, in any event, can be rationalised on pro-competitive grounds (and thus can be explained for reasons other than exclusion). They are, in that sense, ‘normal’. In such circumstances, the analysis of the anticompetitive effects becomes the central consideration to determine the legality of the behaviour. By the same token, the question of whether the said behaviour departs from competition on the merits and that of whether it has anticompetitive effects collapse into one and the same issue.

Concerning the analysis of anticompetitive effects (which is understood to mean ‘foreclosure’, or éviction), the Opinion addresses a number of important points (some of which will be discussed in a second post).

First, Advocate General Rantos confirms the principle according to which Article 102 TFEU is about equally efficient rivals. In this sense, the Opinion explains that, absent other circumstances, a practice that can be replicated by an equally efficient competitor is not abusive (para 69). This principle applies irrespective of whether the practice is price-based (say, a set of standardised rebates) or not (say, a refusal to deal).

Thus, there is a difference between ‘foreclosure’ and ‘anticompetitive foreclosure’. This point reflects the idea, introduced in Post Danmark I, whereby ‘not every exclusionary effect is necessarily detrimental to competition‘.

In the same vein, the ‘as efficient competitor test’ is considered to be an expression of that principle (but different from it and thus not to be conflated with it). There are circumstances in which the ‘as efficient competitor test’ is wholly inappropriate (as is true of the specific circumstances of Servizio Elettrico Nazionale or of Post Danmark II).

Second, a finding of abuse presupposes that the practice is capable of having anticompetitive effects, which is a point made explicit in Generics. It has long been clear that there is no such thing as a per se infringement in the EU legal order (para 55). We know from the case law, however, that effects need not be established by the authority or claimant in relation to all practices (AG Rantos mentions loyalty rebates in para 54; pricing below average variable costs is another example).

Third, substance trumps form (para 55). This is a theme that cuts across the case law in EU competition law (and, I would add, EU law at large). From the notions of undertaking and agreement to that of abuse, formal considerations are never decisive from a legal standpoint. The underlying substantive aspects are what truly matters.

Fourth, the evaluation of the anticompetitive effects of potentially abusive conduct is not carried out in the abstract and is not purely hypothetical. It must consider the relevant economic and legal context of which the practice is a part.

In fact, it is sufficient to read the application of the principles to the facts of the case (paras 75-81) to realise how far the analysis goes. The Court invites the Consiglio di Stato to consider, in particular, the following elements:

  • (i) the importance and extent of the competitive advantage afforded by the practice (the greater the competitive advantage, the more likely the anticompetitive effects).
  • (ii) whether the advantage can be replicated by rivals, in the sense that they can still compete effectively with the dominant firm.
  • (iii) the existence of a causal link between the practice and the anticompetitive effects: thus, if the competitive advantages can be effectively replicated, any actual or potential effects would not be attributable to the practice).

The nature of the analysis is entirely consistent with that introduced in cases like Deutsche Telekom, TeliaSonera and Post Danmark I and II. It is also consistent with that conducted in the context of Article 101 TFEU (Delimitis springs to mind when reading the Opinion) and merger control.

The above said, the framework proposed by the Advocate General is invaluable, as there are still few examples in the case law in which the issue is presented in such a thorough manner.

Written by Pablo Ibanez Colomo

10 December 2021 at 2:39 pm

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Chillin’Competition DMA Symposium: Options to Strengthen Control of Acquisitions by Digital Gatekeepers in EU Law, by Jens-Uwe Franck, Giorgio Monti and Alexandre de Streel

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[We have been publishing, in the past few months, a series of entries devoted to the Digital Markets Act (see here and here for other posts). This week’s entry provides a summary of a study produced for the German government on whether Article 114 TFEU could be relied upon to introduce a system of merger control within the DMA. The three authors (Jens-Uwe Franck, Giorgio Monti and Alexandre de Streel) need no introduction. They mention that they hope to start a debate around the legal basis (something on which Alfonso has written extensively; see for instance here). We have no doubt a debate will indeed follow. Enjoy the post!]

There are good reasons for the EU legislature to act

Several recent economic papers have shown the risks for competition and innovation raised by the acquisitions of start-ups or scale-ups by digital gatekeepers. However so far, most of those acquisitions have not been reviewed by the competition agencies and the few that have been analysed have often been authorized without conditions. As some policy reports have shown, this points to a gap in merger control that may need to be closed by amending merger control rules with respect to the notification thresholds, the specification of theories of harm and the standard and burden of proof.

To close this gap, various countries in the EU and beyond (such as the US and the UK) have reformed or seem to be about to reform their merger laws. Some Member States of the EU (such as Germany and Austria) have already changed their national merger laws, while others (such as France) have plans for reforms. However, the adoption and implementation of divergent systems and/or standards by the Member States to control digital gatekeeper acquisitions may undermine the digital single market, hence a reform is necessary at the EU level.

Four legislative options

In a TILEC Working Paper which is based on a legal opinion for the German government, we review four possible options for such EU-level reform and assesses their legality under Article 114 TFEU and other key EU constitutional law requirements.

  • The first option, which has been chosen by the Commission, is to encourage more merger referrals from the Member States to the Commission under Article 22 of the EU Merger Regulation (EUMR).
  • The second option is to establish through the Digital Markets Act (DMA) a new notification threshold for digital gatekeepers that would complement the existing thresholds of the EUMR. Once the conditions for this new threshold are met, the acquisition would be reviewed by the Commission under an unchanged EUMR, i.e. according to the existing theories of harms and the current burden and standard of proof.
  • A variant of this option has just been proposed by the Internal Market Committee of the European Parliament and consists in a temporary restriction of merger for the gatekeepers which repeatedly violated the obligations in the DMA (see amendment 167).
  • The third option is to amend the EUMR to establish new notification thresholds in a manner that would require the notification of mergers involving nascent competitors but also to adapt the Significant Impediment to Effective Competition (SIEC) test used to assess concentrations as well as the rules on proof.
  • The fourth option is to establish through a new and separate regime to review acquisitions by digital gatekeepers, which would either replace or complement the existing merger control under the EUMR.

Limits to the Article 22 route

The first option does not require a change in hard law and has been carried out by the Commission adapting the Guidelines on Article 22 EUMR. However, this option does not appear to be robust enough, as recent cases (in particular Facebook/Kustomer and Illumnia/GRAIL) have shown: on the one hand, it is not clear whether such an extension of the referral possibilities complies with Article 22 EUMR and, on the other hand, it is uncertain whether the Member States would decide to refer more cases to the Commission.

Legislating – Yes, they can!

The three other options require a change to EU hard law, either with the adoption of new rules (be that via the DMA or separate secondary law) and/or changes of existing rules (in the EUMR). Our paper analyses whether those changes could be based on Article 114 TFEU and, if so, under which conditions. To do so, we review the main conditions set by the Court of Justice of the EU to use Article 114 TFEU as well as other Treaty rules and principles related to the choice and use of legal basis.

On that basis, we show that option 2 (i.e. the adoption a new notification threshold in the DMA without changing the EUMR) would be legally feasible under Article 114 TFEU because it would prevent the fragmentation of the digital single market created by the adoption of divergent control regimes for digital gatekeeper acquisitions at the national level and it would improve the functioning of the internal market. Moreover, it would be legally possible to establish a new notification threshold without amending the EUMR.

Then, we show that the third option (i.e. amending the EUMR) would also be feasible under Article 114 TFEU. In that regard, it is important to remember that the original Merger Regulation was adopted on the basis of Articles 103 and 352 TFEU (then Articles 83 and 235 EEC), for historical reasons linked to the extensive use of Article 352 TFEU and the absence of Article 114 TFEU in the 1970s, when the Merger Regulation was first conceived. Moreover, while Article 100a EEC came into force in 1987, before the EUMR was adopted, at the time there was considerable uncertainty about the scope of the newly inserted legal basis. However, the legislature is not bound to retain the original legal basis when amending EU secondary law. The Court of Justice of the EU has confirmed that prior legislative practice ‘cannot … create a precedent binding … with regard to the correct legal basis’ (at para 24). Therefore, the two legal bases originally used to adopt the EUMR do not mean that the EUMR could not be amended or replaced today under Article 114 TFEU. We show that those conditions are met as reforms to merger control clearly contribute to the establishment of the internal market. Thus, a reform of the EUMR to better take into account the risks for competition and innovation of acquisitions by digital gatekeepers could be based on Article 114 TFEU, possibly together with Article 103 TFEU.

Finally, we demonstrate that the fourth option (i.e. the establishment of a new specific merger control in the DMA without changing the EUMR) could also be based on Article 114 TFEU. As for the two previous options, the establishment of this specific regime would prevent the risks of fragmentation that would be created by the adoption of divergent national rules on digital gatekeepers’ acquisitions and contribute to the internal market with the adoption of one unique control regime for the whole EU.

Ultimately, we conclude that, of the four policy options to strengthen the control of acquisitions by digital gatekeepers, the first option – which is favoured by the Commission – is the least robust in law and in practice. The three other options are preferable as they ensure a one-stop shop and they could be based on Article 114 TFEU as interpreted by the Court of Justice. It is then a political choice to decide if an action is needed and, in this case, which option should be favoured.

When conducting the research for this project, we noticed that the academic literature often assumed without much analysis that the EU could adopt and change its merger law solely on the basis of Article 352 TFEU. We hope that our paper will contribute to launch a deeper debate on this issue. In any case, those who fear a political reform of EU merger control law should not hide themselves behind a legal basis argument which seems to us as a fig leaf.

Written by Pablo Ibanez Colomo

7 December 2021 at 9:45 am

Posted in Uncategorized

Is the counterfactual relevant under Article 102 TFEU? How could it not?

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10 Tips for Staying Relevant at Work

Is the counterfactual relevant when evaluating the effects of a potentially abusive practice? This is a post I did not anticipate I would write. Until recently, I thought it was self-evident that the evaluation of the counterfactual is required under Article 102 TFEU (as is true of Article 101 TFEU and EU merger control). I have come to understand (in part thanks to the lively and thoughtful discussions on this blog) that not everybody is of the same view.

There are several reasons why I assumed that the definition of the relevant counterfactual is a necessary step in the evaluation of potentially abusive behaviour. Some of these reasons relate to what we know about Article 102 TFEU. Other reasons have to do with what we know about EU competition law more generally.

Effects must be ‘attributable’ to the practice under Article 102 TFEU

As already explained before on the blog (see here), actual or potential effects must be ‘attributable’ to a practice for Article 102 TFEU to come into play. This is a principle that derives from Post Danmark II and that the General Court does not question in Google Shopping (in fact, in makes repeated references to attributability; see, inter alia paras 441, 456, 518, 541 and 543 of the judgment).

Establishing that any actual or potential effects are attributable to a practice means, in concrete terms, showing that there is a causal link flowing from the latter to the former (the Cambridge Dictionary defines ‘attributable’ as ’caused by’; if you are curious, the French word is imputable, which essentially gets you to the same place).

How does the EU competition law system go about establishing a causal link between practice and actual or potential effects? By evaluating the counterfactual, that is, the conditions of competition in the absence of the contentious behaviour.

It is not surprising, in fact, that the European Commission embraced this technique in its Guidance Paper on exclusionary abuses. In para 21 of the instrument, it explained that the assessment of anticompetitive effects (‘foreclosure’) ‘will usually be made by comparing the actual or likely future situation in the relevant market (with the dominant undertaking’s conduct in place) with an appropriate counterfactual, such as the simple absence of the conduct in question or with another realistic alternative scenario, having regard to established business practices’.

Do the terms ‘competition’ and ‘effects’ have different meanings depending on the provision?

A second reason that pleads in favour of considering the counterfactual under Article 102 TFEU has to do with established principles and practice under Article 101 TFEU and EU merger control. In these two contexts, this exercise has long been the standard technique to establish a causal link between the relevant practice (or transaction) and any actual or potential effects.

Take for instance the Visma case, decided by the Court a couple of weeks ago (see here). In para 74 of the ruling, the ECJ announces, uneventfully, that the analysis of the restrictive effects must consider the conditions of competition which would exist in the absence of the agreement. This is a long-standing principle that dates back to Société Technique Minière and that has determined the outcome of some landmark Article 101 TFEU rulings (see here for an exhaustive analysis).

As far as EU merger control is concerned, the ‘failing firm defence’, addressed in the Guidelines on horizontal mergers, is the most obvious example. That instruments captures the essence of the relevant case law and explains that the doctrine applies ‘where the competitive structure of the market would deteriorate to at least the same extent in the absence of the merger‘ (that is, where the evaluation of the counterfactual reveals the absence of a causal link between the concentration and any likely effects).

Arguing that the counterfactual is relevant under Article 101 TFEU and EU merger control but not under Article 102 TFEU amounts, in essence, to claiming that the notions of ‘competition’ and ‘effects’ have a different meaning under the latter provision.

I cannot think of a valid reason why the analysis of effects would be conducted differently under Article 102 TFEU. It is occasionally argued that the difference may be justified by the fact that dominant firms have a ‘special responsibility’.

It is undeniable that dominant firms have such a special responsibility. What this argument fails to acknowledge, however, is that Article 101 TFEU and EU merger control sometimes apply to dominant firms, which do not have any less of a ‘special responsibility’ when the latter two are enforced against them.

Generics, which engaged extensively with the counterfactual, is one case in which Article 102 TFEU was also at stake. Nowhere did the Court hold that the evaluation of the counterfactual under Article 101 TFEU changes depending on whether the firm is dominant.

Similarly, Kali+Salz, in which the Court accepted the ‘failing firm defence’ (and thus embraced counterfactual analysis in EU merger control), was about a transaction creating no less than a de facto monopoly in the German market (see here for the original decision). Tetra Laval and Microsoft/Skype are other examples of EU merger control applying to (super-)dominant firms.

The counterfactual in Google Shopping

In Google Shopping, the General Court dealt with the counterfactual. Paras 377-378 are perhaps the most interesting bits of this aspect of the judgment.

I am particularly intrigued by the claim that ‘identifying the events that would have occurred in the absence of the practices that are being examined and identifying the situation that would have resulted, may, in a situation such as that of the present case, be an arbitrary or even impossible exercise if that counterfactual scenario does not really exist for a market that originally had similar characteristics to the market or markets in which those practices were implemented‘.

I am not sure what to make of these passages, which (as much as large parts of the ruling) seemed confined to the specific arguments raised and the specific circumstances of the case, but which (if interpreted in some ways) could have far-reaching and paradoxical outcomes. Suffice it to say that there is scope for reasonable disagreement about this dimension of the ruling.

What matters, in any event, is that arguments relating to the counterfactual have now been raised in an explicit manner and that the Court may have the opportunity to answer crucial questions pertaining to the burden of proof (is it for the claimant or authority to establish the effects by reference to the counterfactual, as is true under Article 101 TFEU?) and the substance of Article 102 TFEU (are the notions of ‘competition’ and ‘effects’ defined in the same way across the board in EU competition law or are they defined differently depending on the applicable provision?).

PS: To those who have submitted an abstract for the Special Issue on Google Shopping – how great! We are both grateful and overwhelmed by the interest shown and the task ahead of us.

Written by Pablo Ibanez Colomo

3 December 2021 at 2:19 pm

Posted in Uncategorized