Will Article 106 TFEU Case Law Transform EU Competition Law?
Issue 6 of this year’s volume of the Journal of European Competition Law & Practice came out a few days ago. Among others, it features an editorial of mine (available for free here), where I discuss one of the most interesting and potentially consequential trends of the past few years in the case law of the General Court.
In some recent judgments, Article 106 TFEU case law has occasionally found its way into some competition law rulings. Even though this trend has not caught the attention of many commentators, it has the potential to transform EU competition law in fundamental ways.
It cannot be emphasised enough that Article 106 TFEU does not apply to undertakings, but to Member States. One consequence that follows from this fact is that this case law cannot be transposed, as such, to cases dealing with the application of Articles 101 and 102 TFEU.
A second consequence is that Article 106 TFEU case law is by necessity stricter than its Article 101 and 102 TFEU counterpart. In particular, it makes sense to impose non-discrimination obligations, applicable across the board, on Member States, but not on private undertakings.
When the conduct of the latter is at stake, such non-discrimination obligations are only relevant, if at all, under very narrow circumstances. From selective distribution to exclusive dealing and refusal to deal, discriminatory conduct by private firms is pervasive and, most of the time, wholly unproblematic.
Cases like International Skating Union and Google Shopping are interesting in that they challenge this received wisdom (and well-established case law).
International Skating Union, for instance, relies primarily on MOTOE, even though the latter was never about the behaviour of private undertakings, but about legislation conferring an advantage to one firm over its rivals (and thus at odds with the principle of equality of opportunity).
In Google Shopping, the General Court draws from cases dealing with the principle of equal treatment as it applies to the EU legislature, and refers to it as if it could be directly transposed to the behaviour of dominant firms, which, as the law stands, are only subject to the principle under the very qualified scenarios identified by the Court of Justice in Deutsche Telekom.
It remains to be seen whether these ideas will be embraced by the Court of Justice. What matters is that, if the legal revolution ever comes to be, the transformation and its implications are openly acknowledged and discussed.
Chillin'Competition 
I could not agree with you more. It’s the theory of the butterfly effect. A referendaire uncritically decides to put “equality of opportunity” from Art 106 case law (Connect Austria) into an Art 102 judgment (General Court – Deutsche Telekom). His/her judge says fine. The chamber says fine. The Court of Justice on appeal says fine. Since then you have it in all decisions and many new judgments. So a concept which makes sense in Art 106 (remember the principle of neutrality between the public and the private sector) gets transplanted into Art 102…
akomninos@whitecase.com
12 October 2022 at 4:45 pm
Thanks so much, Makis!
I would say that equality of opportunity makes perfect sense in the context of Deutsche Telekom. The Court carefully confined its relevance to the circumstances of the case – an input that is indispensable. In such circumstances, it seems sensible to me.
Pablo Ibanez Colomo
12 October 2022 at 7:27 pm
Dear Pablo,
I would nuance this (potentially) revolutionary character just a bit.
First, there is no ‘Article 106-case law’. As Article 106 is an empty norm that relies on another provision to gain content, it must always be applied in connection with another provision (See the GC judgment in Greek Lignite, T-169/08, para. 79 explicitly). The most abundant case law in this regard concerns Article 106 in connection with 102 TFEU. Deutsche Post, MOTOE and Austria Telekom are 106/102-cases, therefore.
Second, the result of this combination is that 106/102-case law must deal with the issue of identifying the responsible party for the abusive actions that result from a public/private hybrid. To be honest, even when this responsibility can be identified in a legal sense, for example when the state defines an exclusive right in a way that provides the undertaking with the ability to control access to the market on which it is active itself as well (like in MOTOE), I’m always wondering why the state did this in the first place. It could just have been laziness, stupidity or perhaps they were
asked by the undertaking, ELPA, to do this. A dawn raid of ELPA’s premises and the competent Ministry may reveal the reasons underlying this decision on the part of the Greek state, just like the documents obtained from Intel and Google reveal (part?) of their reasons for doing what they did.
Third, the Court, for example in MOTOE, construes this case law from the idea that ‘the system of undistorted competition’ requires ‘equality of opportunity […] between the various economic operators’. I find it difficult to argue with this point of departure. The follow-up question is whether we should differentiate between inequalities of opportunity that can be attributed to the state and those for which an undertaking is responsible? To my mind, there is no difference. If we want equality of opportunity, the source of the inequality is irrelevant, provided that there is a legal basis for the actions against that source (we wouldn’t want to act illegally, now would we?). That legal basis is found in Article 106 as regards the state and in Article 102 as regards dominant (so by no means any and all) undertakings.
So, why should undertakings be afforded more leeway than the state if we seek to establish a system of undistorted competition? Mind you, the state has Article 106(2) at its disposal and a dominant undertaking can objectively justify its actions, so both have the capability of proving that their actions, even when they result in inequality, serve an overarching objective. I see nothing wrong with a law that will force entities to think twice about the impact of their actions to see whether and to what extent these are not just in their own interests.
Hans
13 October 2022 at 1:47 pm
Thanks for the thoughtful comment, Hans!
Provocative points, no doubt! Claiming that there is no such thing as Article 106 TFEU case law may be seen by some as a bit of a stretch. I immediately thought of Jose Luis Buendia’s monumental ‘Exclusive Rights and State Monopolies under EC Law’, which covers this case law brilliantly.
The second point is interesting, but ultimately not particularly relevant. Article 106 TFEU applies to Member States, irrespective of whether the measure has been instigated by a private undertaking. The same is true of State aid law: the Court has consistently emphasised that Member States are the addressees of decisions and that the procedure is a dialogue between the State awarding the measure and the Commission.
Finally, we may all have particular preferences about how the law should be shaped. What is undeniable, as the law stands, is that Member States are subject to stricter non-discrimination duties than private undertakings (including dominant firms).
Pablo Ibanez Colomo
13 October 2022 at 5:27 pm
Hi Pablo,
Thanks for the kind words! To me it is not a stretch, but I may have missed the cases where the Court (or Commission) relied on Article 106 as such (i.e. without 102 or another provision in the TFEU). I’ll have to reread Buendia’s Sierra’s excellent work to see whether there are standalone 106-cases.
I agree that the subpoint of the second point. about the actual reasons for such lame state actions, is not particularly relevant, especially from the perspective of understanding competition law as a set of rules seeking to create – to put it simply – ‘undistorted competition through equality of opportunity’ (paraphrasing MOTOE, Deutsche Telekom and a couple of other cases). Equality of opportunity requires non-discrimination, as much on the part of undertaking as on the part of the state. In that regard, I’m not sure I fully understand what you mean with ‘stricter non-discrimination duties’. I find it difficult to envisage different degrees of non-discrimination.To my mind, you either discriminate or don’t and whether that’s the case depends on whether you’re able to objectively justify the differentiated treatment. If a stricter duty not to discriminate boils down to having less room for objective justifications, I’d be interested to see the evidence to support that claim (this would involve some methodologically challenging issues, such as comparing MS actions and their grounds with those used by undertakings). Scientifically very interesting!
Finally, I’m also unsure as to whether and how this is about ‘preferences about how the law should develop’. I’d say that there is a (perhaps even sound?) basis in the Court’s case law for understanding competition law as undistorted competition through equality of opportunity (a quick trawl of curia revealed 49 documents), so this may also be about the way law was already shaped by the Court
Hans Vedder
18 October 2022 at 2:07 pm
Thanks for the exciting exchange of views, Hans! Really interesting.
One should be careful not to conflate two separate matters, (i) the status of Article 106 TFEU as a ‘disposition de renvoi’, which you rightly point out and (ii) whether there is such thing as Article 106 TFEU case law.
Contrary to what one might infer from your comment, the former (which is undeniable) does not imply that latter does not exist. Article 106 TFEU case law is indeed a thing, and deals with the question of whether measures adopted by Member States in relation to the award of exclusive and special rights are contrary to other Treaty measures. This is a distinct legal issue from the ones evaluated under Articles 101 and 102 TFEU.
The latter point pertaining to the case law as it exists, if very interesting too. There should be little doubt that non-discrimination duties as applied to Member States in the context of Article 106 TFEU are strict, in the sense that they are unqualified and apply across the board.
In the context of Articles 101 and 102 TFEU, on the other hand, discriminatory conduct is not necessarily an infringement. These are the lessons to draw from, inter alia, MEO, Post Danmark I and, indeed, Google Shopping.
Thanks so much again!
Pablo Ibanez Colomo
21 October 2022 at 7:01 pm
Many thanks for the great post and the comments.
In that respect, reading the comments made by Hans, I was startled by the idea that a Member State deserves the same treatment as an undertaking. Article 106 TFEU comes into play because of non-natural monopolies -the fruit of Western History – that enjoy an entrenched position (a kind of lex specialis). In my humble opinion, Article 102 per se is not the same beast. It comes (alone) into play to regulate competition in a more normal context and is as such the central antitrust playbook. To put it simply, economically speaking, the situation greatly differs. One is the result of competition on the merits, the other is not. The non-discrimination duty of the Member State makes utter sense in that very context, but may well stifle competition on the merits in another context. For example, the non-discrimination duty makes sense in the telecom sector because of the fact that there is Bronner alike undertakings with well-known bottlenecks.
Again, this makes sense because in open/free markets, the State should not tip the balance in favour of one player. Moreover, technically, equality of opportunity does not equate to non-discrimination. As to the objective justification, in a Union of law, there is the presumption of innocence.
It is the duty of the authorities to show that a conduct is unlawful and not the undertaking to prove it’s not. Happy to discuss!
BE
4 November 2022 at 10:54 am
Thanks, BE! The case law, as I understand it, seems to be very much aligned with your views. There are compelling grounds to differentiate State regulation and firm behaviour.
Thanks again!
Pablo Ibanez Colomo
4 November 2022 at 11:11 am