Chillin'Competition

Last week gave us, among others, Advocate General Rantos’s Opinion in Unilever (see here for the French version). As Servizio Elettrico Nazionale, the preliminary reference comes from the Italian Consiglio di Stato and originated in abuse of dominance proceedings before the AGCM.

Unilever raises two points of law. One relates to the single economic entity doctrine. The second, on which this post will focus, to the meaning and scope of the Intel judgment of 2017.

In essence, the Consiglio di Stato asks whether the framework laid down in Intel is also relevant outside the specific context of loyalty rebates, and more precisely where a dominant firm imposes outright exclusivity obligations on its customers.

The question from Italy’s highest administrative court has two elements: one substantive and one procedural. The substantive aspect has to do with the need to assess, as a matter of law, the capacity of an exclusivity obligation to foreclose competition. The procedural side of things concerns the need for the administrative authority to engage with the economic arguments raised by the dominant firm.

AG Rantos’s view on the point of principle is clear: the framework laid down in Intel applies irrespective of the practice at stake, to the extent that the dominant firm provides evidence showing the absence of effects (para 71).[1]

Thus, whenever the ‘Intel test’ is triggered, the authority is required to assess the actual or potential impact of the practice in light of the five criteria identified by the Court.

This clarification would be relevant when assessing the legality of ‘by object’ conduct, such as exclusive dealing (at stake in the case), predatory pricing and tying, since a finding of abuse does not necessitate, in principle, an assessment of effects.

It is difficult to disagree with AG Rantos on this point. As the Opinion explains, the very letter of the Intel judgment appears to suggest that the framework applies to any dominant undertaking (paras 74-76).

In addition, a teleological interpretation of Article 102 TFEU would go to confirm this view. As the Court made explicit in Generics, a finding of abuse presupposes that the contentious practice is capable of restricting competition.

Thus, it is only logical that arguments pertaining to the absence of actual or potential effects are considered across the board, and not only in the narrow factual circumstances of Intel (paras 78-79).

The answer to the substantive aspects of the question already addresses, by and large, its procedural dimension. If the Intel framework is applicable irrespective of the practice, by necessity a competition authority is under a duty to consider the arguments of an economic nature raised by the dominant firm (para 84).

The Opinion makes several important points from a procedural perspective. First, AG Rantos reminds us not to lose sight of the fact that authorities have the legal burden of proving the infringement, even if it is for dominant firms to reverse the presumption of foreclosure/exploitation in ‘by object’ cases.

Second, competition authorities cannot reject outright the economic evidence put forward by the parties, except by showing that the methodology relied upon by the dominant firm is not capable of substantiating claims about the potential effects of a practice (para 85).[2]

This point addresses one of the gaps left by previous case law, namely the standard of proof that dominant firms would have to meet to trigger the ‘Intel test’.

AG Rantos appears to suggest that authorities would only be dispensed from the need to engage with the evidence provided by a dominant undertaking when such evidence is irrelevant for the purposes of the assessment (a very low threshold indeed). Importantly, the Opinion makes it clear that, even in this scenario, the authority would still be subject to a duty to state reasons (para 85).

All in all, the answer to the question raised by the Consiglio di Stato seems straightforward. Its significance for future Article 102 TFEU cases, on the other hand, cannot be overstated. Some of the themes addressed by AG Rantos, such as whether the evidence has been adequately considered by the authority, are likely to be relevant again soon.

[1] The French version reads as follows: ’71. Pour les raisons suivantes, et ainsi qu’il a déjà été indiqué au point 63 des présentes conclusions, j’estime que ce même principe vaut de manière générale, et indépendamment du type de restriction, lorsqu’une entreprise dominante avance des preuves visant à démontrer que le comportement en cause n’était pas susceptible de produire de tels effets‘ (emphasis in the original)’.

[2] ’85. Or, même si l’autorité de concurrence considère, comme en l’occurrence, que la méthodologie utilisée aux fins de l’étude économique n’est pas pertinente, elle ne peut pas exclure d’emblée la pertinence d’une telle étude, sauf à indiquer, dans la décision par laquelle cette autorité qualifie un comportement d’« abusif », les raisons pour lesquelles elle estime que la méthodologie sur laquelle repose cette étude ne permet pas de contribuer à la démonstration du fait que les conduites mises en cause ne sont pas aptes à exclure des concurrents aussi efficaces‘.