Chillin'Competition

If there are two eternal truths about competition (and strategies to restrict competition), they must be the following. First, State regulation is always the most effective mechanism to prevent the emergence or growth of a rival. Second, the declared goal of some of the most egregious restrictions of competition is often the protection of consumers.

I am frequently reminded of these truths whenever I read about the various tactics that the meat industry displays to curtail the growth of plant-based alternatives to their products, which are increasingly popular as more environmentally-friendly (and typically healthier) options.

The most salient (and probably most effective) of these tactics involves lobbying governments and legislatures to ban, by law, the use of terms such as ‘burger’ or ‘sausage’ in vegan or vegetarian products. Given the clout that these incumbents have, it comes as no surprise that lobbying efforts have delivered the expected results in a number of Member States (see for instance here) and that measures have been contemplated in others (see here).

These measures are invariably put in place in the name of consumer protection. Because this justification is not particularly effective at concealing the underlying (and fairly transparent) motivation, it is equally unsurprising that regulatory bans have been found by the Court of Justice to run counter to secondary EU law (see here for its judgment in Protéines France, delivered last week).

One question, against this background, is whether competition law has a role to play when addressing conduct and regulation aimed at hindering the growth of emerging players in this space (including both plant-based and lab-based alternatives to meat).

Insofar as regulatory bans involve, by definition, State intervention, the application of Articles 101 and 102 TFEU is not possible. In principle, restrictions that are not attributable to the behaviour of undertakings (as Deutsche Telekom would confirm) escape antitrust scrutiny. It is the privileged realm of the State-action doctrine.

This said, one can conceive a number of scenarios in which cooperation with the object of distorting competition in this space could be tackled by Articles 101 and 102 TFEU.

There would be an infringement, for instance, where State intervention requires or favours the implementation of restrictive conduct by private undertakings. This old doctrine was discussed by the Court in, for instance, CIF.

Suppose that key players along the value chain (meat producers and grocery chains) get together to agree on some guidelines about the labelling and presentation of plant-based alternatives (as in Nederlandse Federatieve Vereniging voor de Groothandel op Elektrotechnisch Gebied) and that, subsequently, the government rubber-stamps the agreement. Such a scenario would be clearly caught by Article 101(1) TFEU (and some variations thereof are not inconceivable in the real world).

Consider a second scenario. Suppose that the associations of meat producers and wholesalers demand that grocery chains sell plant-based alternatives in different aisles as a condition for the supply of their products. Such a decision would also be caught, by its very nature, by Article 101(1) TFEU.

A variation of this second scenario would include an instance in which an association of meat producers starts a disparagement campaign against plant-based alternatives (arguing, inter alia, that they are unsafe to eat, or that they induce nutritional deficiencies). The ‘other’ Hoffmann-La Roche judgment (the one delivered in 2018) makes it clear that such strategies may amount to a restriction by object.

Another question that emerges is whether these are practices that should be prioritised by competition authorities. Given the potential benefits for society in terms of emissions and environmental footprint, and given the fact that they are innovative propositions adding competition and dynamism to the market, one could convincingly argue that the case for prioritisation, in the current (and rapidly changing) climate, is very strong.

I had the honour of presenting my work a few weeks ago at the Vienna Competition Law Days 2024, superbly run by Vicky Robertson and the rest of the crowd at the Competition Law Hub. My presentation (on the present and future of Article 102 TFEU) can be found here (and the paper on which it is based, here).

The predictability and administrability of the law were two of the central topics of the event (they were also the overarching themes of my own presentation). There was little disagreement in our panel about the need to craft substantive standards so that they can be applied with ease by authorities and that intervention can be reasonably anticipated by firms.

It is not unusual to frame this debate around the form vs effects divide. Such framing, I believe, misses the point: we know from experience that a form-based approach can be just as unpredictable and difficult to administer as the effects-based approach. The real debate, if legal certainty and effective enforcement are a concern, is the one between structured vs unstructured (or liquid) legal tests.

The central point I made, in this vein, is that structured legal tests are the best way to ensure that enforcement is both effective and predictable. A structured legal test is one that revolves around a fixed, stable set of conditions that do not fluctuate from one case to another.

Structured legal tests contribute to effective enforcement in the sense that they draw clear boundaries about what a competition authority needs to prove. If an agency shows that the conditions of the applicable test are met, it will have discharged its burden of proof. Attempts to introduce additional elements or considerations by firms will be irrelevant.

If, for instance, a competition authority shows to the requisite legal standard that the elements of the AKZO test are present in a given case (either pricing below AVC or pricing below ATC in addition to an exclusionary plan), the pricing strategy will be deemed abusive, without the need to take into account any other factor.

As the Court has had the occasion to clarify (in both Tetra Pak II and Wanadoo), the issue of recoupment is irrelevant to establish the abusive nature of a predatory pricing strategy. In the same vein, the General Court has recently held, in Qualcomm (predation), that evidence of exclusionary effects is not necessary to establish the abusive nature of this practice (see in particular para 521 of the judgment).

One could argue that the structured legal test might miss some nuances of the economic and legal context or that it might lead to overenforcement by failing to take into consideration some issues (such as the exclusionary impact in the case of predatory pricing).

These arguments are not persuasive. There will always be some degree of overenforcement (and some degree of undenforcement) in any legal system worthy of the name.

Structured legal tests also provide legal certainty to undertakings, in the sense that they allow them to evaluate their conduct against a fixed and stable set of conditions. They are a safeguard in this regard in that they prevent a competition authority from picking and choosing which conditions are relevant to evaluate the lawfulness of conduct in a given case.

For instance, an agency may seek to argue that, in the relevant context, pricing above ATC is problematic and should be prohibited as abusive. Similarly, it may try to argue, in an exclusive dealing case, that coverage should not be part of the analysis given the features of the relevant market.

Again, the competition authority may have a point. It could well be the case that sticking to the structured legal test in the specific circumstances of the case may harm the effectiveness of administrative action and may lead to underenforcement.

While the agency may indeed have a point, effectiveness of enforcement needs to be balanced against other considerations, not only legal certainty, but also the administrability of the law. When crafting substantive standards, we must bear in mind that private enforcement is very much on the rise across Europe and that national courts will be invited, more than ever, to engage with the interpretation and application of Article 102 TFEU.