Chillin'Competition

The latest contributions to this series (see here) dealt with the analysis of effects. The main point it made is that we need clarity about the meaning of the notion of effect: the litmus test of the whole exercise depends on whether there is clarity about what an effect is and what it is not.

There are more aspects pertaining to the analysis of effects that could benefit from greater clarity. Over and over, we see the some issues that keep coming back, Sisyphean in their persistence, even though they should have long been behind us.

The Guidelines on which the Commission is working provide an ideal chance to address some of these common misconceptions around the issue of effects. I cannot think of a better forum to convey clarity, certainty and, above all, a clean, discernible analytical framework on which national courts and authorities can rely.

As far as the fundamental issues that could be addressed, I can think of the following:

Actual and potential effects are about the time dimension of the analysis

The distinction between actual and potential effects refers to the temporal dimension of the analysis. There should be little doubt, after the Court’s careful analysis in the Servier saga (see here), that references to potential effects relate to instances in which the assessment is prospective (that is, about an effect that may materialise in the future).

Contrary to what is sometimes (read: often) suggested, ‘actual’ and ‘potential’ do not refer to different substantive thresholds (the former being more demanding than the latter). In fact, they are not really, or not exactly, about the substantive threshold (keep reading till the end for more on this).

Clarifying this point is key for a number of reasons. The most salient of these, I would say, is that it makes sense to use the vocabulary consistently across issues and provisions. Using the same words to mean different things is a recipe for opacity and confusion.

When we talk about actual or potential competitors, we refer unquestionably to the time dimension: a potential competitor is one that has not yet entered the market but may do so in the future. This is, by the way, the manner in which the concept is used in the Draft Guidelines.

It would make little sense to refer to ‘actual’ or ‘potential’ in a different way when talking about the analysis of effects.

Appreciability, de minimis and significant effects

The Court of Justice has held unambiguously that, in the context of Article 102 TFEU, it is not necessary to show that the effects on competition are significant or appreciable. In other words, there is no such thing as a de minimis doctrine when the concept of abuse is at stake.

I do not believe there is anything controversial in this position. Because the application of Article 102 TFEU presupposes a finding of dominance, there is by definition no scope for de minimis doctrine.

This is a point on which the final version of the Guidelines could be even more explicit (ideally with a reference to Völk, where the Court explained that the doctrine applies on account of the ‘weak position’ of the parties in the relevant market, and which is not mentioned in the Draft).

The fact that the de minimis doctrine has no role to play in the context of Article 102 TFEU does not mean (this is another major source of confusion and misunderstandings) that every practice implemented by a dominant firm and/or every competitive disadvantage it inflicts upon rivals necessarily has an anticompetitive effect.

The rejection of the de minimis doctrine simply means that effects, when established, will necessarily be appreciable. But this fact does not dispense the authority or claimant from the need to establish these effects to the requisite legal standard in light of factors such as the coverage of the practice.

The substantive threshold of effects

An additional aspect on which the Draft Guidelines is silent, and about which a conversation is as necessary as it is indispensable, relates to the substantive threshold of effects. The issue is bound to be discussed sooner or later and it would be best if it were openly addressed by the Commission.

It has already been mentioned that effects may be potential. The Court of Justice has clarified, moreover, that the practice must be ‘capable’ of having such effects. These points do not say anything, however, about the requisite threshold of probability.

When the analysis is prospective, is it enough to show that the practice is a plausible source of anticompetitive effects? Is it necessary to show that it is likely to do so (that is, a probability of >50%)?

The case law is not unequivocal on this point and there is room for interpretation. One thing is clear: it is not necessary to show that the practice is certain to affect competition. I have always been of the Opinion that AG Kokott is on the money here and that the substantive threshold is one of likelihood (probability >50%).

As I say, the Draft Guidelines would be the right forum to address this matter once and for all. It would also be a great opportunity to make it clear (if only in a footnote) that the substantive threshold of effects is different from the standard of proof (even if both are expressed in probabilistic terms and even though they are, all too often, conflated).

I very much look forward to your comments, on this post and the rest of the series (see here, here and here).