Chillin'Competition

A year ago I participated at the Global Competition Law Centre’s Annual Conference, on a panel devoted to discussing the role of the EU Courts in competition cases together with General Court President Marc van der Woude and Judge Ingeborg Simonsson.

My more developed views on this topic have just been published as a chapter of Kluwer’s new book ‘The Transformation of EU Competition Law: Next Generation Issues’, edited by our friends Adina Claici, Assimakis Komninos and Denis Waelbroeck. More information about the book is available here.

Kluwer has authorized us to post here the full text (12 pages) of my contribution. To read it, click on the link below:

Now that the XXX FIDE Congress (Sofia, 31 May to 3 June 2023) is approaching, we are delighted to feature a guest contribution by the General Rapporteurs of the topic devoted to competition and trade-related matters.

Jean-François Bellis and Isabelle van Damme (Van Bael & Bellis), who need no introduction, will be coordinating rapporteurs’ efforts to understand how the shifting economic and geopolitical landscape is influencing the shaping and understanding of two policies that have been central to the project of European integration from the outset.

Enjoy the post (and if you are fortunate enough to attend it, the FIDE Congress)!

The looming threat of climate change has rekindled the debate on considering non-competition interests in legal instruments regulating the market. Competition law enforcers have also had to address the specific challenges raised by the development of the digital sector. Moreover, the subsidies granted to domestic production in the United States under the Inflation Reduction Act have exacerbated the concern that foreign investment would leave the European Union for more profitable locations abroad and might undermine the European Union’s Green Deal objectives. Those concerns have led the European Commission to develop the Green Deal Industrial Plan, which includes relaxing the State aid rules with a view to strengthening European industries. In fact, the concept of “industrial policy” which had largely disappeared from the vocabulary of EU policymakers in the last decades is making a comeback.

The discussions on Topic II “The new geopolitical dimensions of EU competition and trade policies” at the FIDE Sofia Conference, on 31 May 2023 – 3 June 2023, will explore how competition rules can be enforced—at both the national and the European levels—in this new geopolitical environment. As general rapporteurs for this topic, we look forward to debating this question with the institutional rapporteur, Mr Ben Smulders (DG Competition, European Commission), and the participants at the FIDE Sofia Conference.

Sustainability and competition

The question of whether non-competition interests, including sustainability, can be integrated in EU competition law enforcement has gained urgency. The FIDE Conference will review the practice of national competition authorities (NCAs) with respect to sustainability agreements and compare it with the approach outlined in the Commission’s Draft Horizontal Guidelines.

This question will be addressed in the context of both the assessment of sustainability agreements under Article 101 TFEU and merger control. More generally, there will also be a debate on how to balance the benefits of sustainability agreements against the harm that they might inflict on particular categories of consumers. There is already a significant body of experience with respect to this issue at the national level which will be discussed and compared with the Commission’s position as it can be distilled from, inter alia, the Draft Horizontal Guidelines.

Digital economy and competition

Making Europe fit for the digital age is the other objective pursued by the current Commission. In shaping Europe’s digital future, the European Commission has identified “a fair and competitive economy” as one of the key pillars of its strategy. The European Commission thus aims at ensuring competitive conditions and safeguarding the level-playing field in the digital Single Market while, at the same time, seeking to contribute to the global competitiveness of the European digital economy and to achieve “digital sovereignty”.

The FIDE Sofia Conference will discuss whether these two objectives are always aligned. “Digital competition enforcers” might take decisions that, at the surface, protect a European model of the digital market, while serving the European Union’s industrial policy objectives to become globally competitive.

To further the understanding of the interaction between “digital competition” and “digital sovereignty”, the following two specific issues will be discussed, namely (i) the cases against large digital US platforms, and (ii) the Digital Markets Act’s expected impact on national authorities’ competition enforcement.

Industrial policy and competition

Another element of the new geopolitical dimension of the policies which the current Commissionis promoting relates to what should be the role of industrial policy and its interplay with competition policy. Questions are being raised as to whether, in certain cases, industrial policy considerations should prevail over technical competition policy concerns in order to allow for the creation of “European champions”, able to compete with powerful non-European companies in international markets. This debate has intensified after the United States announced its new subsidies programme to promote green transport. In particular, it has caused the European Union and its Member States to intensely reflect on whether to enter a subsidies race, grant similar preferences and possibly loosen State aid control. At the centre of this discussion is the balance between responding to external threats to the competitiveness of the European Union and its green and digital agendas and preserving, at the internal level, the integrity of the internal market.

Two aspects of this sensitive interplay will be specifically discussed, namely (i) merger control and the thorny issues of “European champions” and “killer acquisitions” and (ii) State aid, including in the broader context of guaranteeing access to secure clean energy supply chains.

Impact of trade considerations on competition

Finally, the FIDE Sofia Conference will address the impact of trade considerations on competition policy.

In this respect, it is important to bear in mind that Topic II of this year’s FIDE Conference covers both competition and trade policies. Competition lawyers will benefit from a better understanding of the new trends in trade policy especially since, as illustrated by the recently adopted Foreign Subsidies Regulation, international trade law considerations will be injected in areas which were previously assessed solely on the basis of EU State aid and merger control rules.

Looking forward to seeing you in Sofia and benefiting from your contributions and insights in what promises to be a very topical debate.

The most recent Article 102 TFEU case law has emphasised the need to consider the coverage of a practice when ascertaining whether it has actual or potential anticompetitive effects. There should be little doubt that this criterion is, and has always been, central to the assessment of the restrictive impact of potentially abusive conduct.

Coverage: a key condition from the early days of competition law

Coverage as a requirement has a long and illustrious history in competition law, dating back to the very early days of the discipline. In Brasserie de Haecht, the Court held that the analys of the cumulative impact of similar exclusivity obligations on competition is a factor pertaining to the economic and legal context of an agreement and, as such, relevant when evaluating its restrictive effects under Article 101(1) TFEU.

Coverage also features prominently in the structured test laid down in Delimitis. Under the first prong of that test, it is necessary to consider the coverage of parallel networks of exclusivity agreements. Article 101(1) TFEU may come into play where the coverage of these parallel networks leads, or can lead, to market foreclosure.

It was only a matter of time before this criterion would feature in Article 102 TFEU cases. Van den Bergh Foods is one where coverage was central to the assessment. Unsurprisingly, the General Court concluded that a set of de facto exclusivity agreements implemented by a dominant firm and covering 40% of the market constitutes an abuse of a dominant position.

Tomra is another judgment where coverage was front and centre of the evaluation of the abusive nature of the practices. The Commission explained in the proceedings that there the dominant firm’s practices covered a substantial part of the internal market, amounting to 39%. Given that level of coverage, the Court held that it would not be warranted to consider whether or not rivals would still have the chance to compete on the merits (which, again, comes across as reasonable).

This brief overview of the case law suggests that there was nothing new or revolutionary in the Court judgment in Intel: coverage had always been there. It was bound to feature, sooner or later, in any case dealing with the lawfulness of loyalty rebates under Article 102 TFEU

Why coverage is indispensable when assessing anticompetitive effects under Article 102 TFEU

The prominene of coverage in the assessment of anticompetitive effects is unsurprising. It is simply not possible to evaluate the impact of a practice on competition without considering how much of the relevant market is covered by the practice. It is a necessary, but not sufficient, condition to establish its potential to cause harm.

Where the coverage is not of sufficient entity, the practice is incapable of displaying anticompetitive effects. Put differently, such effects are only plausible where the coverage is significant.

To explain why the evaluation of the coverage of a practice is so important, let me take a classic from the US, International Salt. This case involved a tying strategy implemented by a firm that had developed a technology for adding salt for food processing purposes. The company made the lease of its machines conditional upon the supply of salt (in other words, customers were required to buy both the machine and the salt from the company).

Did this tying strategy have the potential to restrict competition on the tied market? Emphatically not. The proportion of the tied market that the practice would encompass was always bound to be minuscule. No matter how successful the company and how much in demand the machines, the coverage of the practice would always be infinitesimal. Salt has so many uses and there are so many producers that exclusion would not be a plausible prospect under any realistic definition of the tied market.

I can think of another example drawn from the Commission’s recent practice. Earlier this year, the Commission sent a Statement of Objections to Apple in which it clarified its concerns. The key clarification comes from the fact that the authority would no longer be looking into the exclusionary aspects of the case.

I was not surprised by the Commission’s announcement. As I explained a while ago (see here), the exclusionary claims in the case were not obvious to reconcile with the case law. The modest coverage of the practice is one of the reasons why arguments pertaining to the restrictive potential of the in-app purchasing requirement were difficult to square with the principles laid down by the Court over the years.

These two examples are useful in another sense. The assessment of the coverage of a practice is relevant across the board. It is not confined to rebates or to practices aimed at strengthening a dominant position. The assessment of the coverage may come into play when leveraging conduct is at stake (such as a tying case a la International Salt) or in relation to non-price conduct (as in the abovementioned investigation into Apple’s requirements).

Following Servizio Elettrico Nazionale and Unilever, it seems clear that the Court regards Intel as an arrêt de principe. Therefore, the framework introduced in it (including the five criteria to assess anticompetitive effects, of which coverage is one) appear to apply in all Article 102 TFEU cases.

How about appreciability and de minimis? That is the second prong of Delimitis, not the first

I almost hear some readers reacting (entirely reasonably) to the above by asking: did the Court not hold in Post Danmark II that there is no such thing as a de minimis doctrine in Article 102 TFEU, and that there is no need to assess the appreciability of the effects under that provision?

The above is correct, but is not in any way at odds with the need to evaluate the significance of the coverage of a practice.

Coverage is, as mentioned above, part of the first prong of the Delimitis test, which seeks to ascertain the impact of parallel networks of exclusivity agreement on competition. The second prong of the test is about appreciability: do the agreements concluded by the supplier under consideration make an appreciable contribution to foreclosure?

What the Court held in Post Danmark II is that this second prong is not relevant in the context of Article 102 TFEU. Which, if you ask me, makes perfect sense and is difficult to dispute. If the effects of a practice implemented by a dominant firm have been established to the requisite legal standard, we can assume that such effects are appreciable. Appreciability would follow logically and inevitably from the fact that the firm enjoys substantial market power.

However, effects needs to be established in the first place. And, at that earlier stage, coverage is a key component of the assessment.