Chillin'Competition

The “revolution”, “counterrevolution” and most debates around Article 102 TFEU over the past couple of decades have revolved around the notion of an “effects-based approach”. Yet, there remains considerable uncertainty as to the meaning of “effects” in abuse of dominance cases. This is remarkable given the Court’s clarification that a finding of abuse presupposes that the conduct at issue “at the very least, is capable of producing exclusionary effects” (Superleague, para. 130). Indeed, establishing exclusionary effects/foreclosure is the bottom line in every case. If the notion of effects is too narrow or demanding, effective enforcement may be compromised. If, on the contrary, there are no discernible limitations to the notion of effects, then this paves the way to discretionary enforcement and legal uncertainty. We should arguably avoid either extreme.

In the Policy Brief launching the process for the future adoption of Guidelines on Article 102 TFEU (titled “A dynamic and workable effects-based approach to abuse of dominance”) the Commission acknowledged that “[t]he effects-based approach promoted by the Commission is clearly reflected in [case law developments]” (p.2), but also raised “the question of whether the heightened substantive legal standard that the Union Courts have accorded to it may inadvertently lead to undesired outcomes”, expressing concern that “the bar for intervention [could be set] at a level that would render enforcement against practices that restrict competition unduly burdensome or impossible” (p.4).

The desire to “consolidate the case law” in such a way as to make the effects-based approach more “workable” also inspired the March 2023 amendments to the Guidance Paper on exclusionary abuses. With those amendments, the Commission replaced the notion of “anticompetitive foreclosure” that the Commission had publicly committed to follow since the original 2008 version of the Guidance Paper, and which was consistent with that used under merger control (see e.g. the Commission’s non-horizontal merger guidelines, para. 18). This significant amendment, which implied not only signposting for the future, but arguably also an element of goalpost-moving, received scarce attention at the time.

The draft Guidelines now take several additional steps to alleviate the Commission’s burden of having to establish exclusionary effects:

First of all, it is noteworthy that under the approach set out the Commission would not need to establish anticompetitive effects in cases involving “naked restrictions” (Draft Guidelines, para. 60.c) or conduct otherwise “presumed to lead to exclusionary effects” (including exclusivity agreements, conditional rebates, predatory pricing, margin squeeze and certain forms of tying; Draft Guidelines, para. 60.b)). This reliance on presumptions has already been the subject of much commentary (see, e.g., here, here, here, or here).

But for the purposes of this post I will focus on the analytical framework that the Draft Guidelines propose to follow in relation to the only category of practices that the Commission itself describes as “conduct for which it is necessary to demonstrate a capability to produce anticompetitive effects” (Draft Guidelines, para. 60.a):

If one connects what the Draft Guidelines say regarding capability, causality and appreciability together with their definition of exclusionary effects, my reading is that even in the subset of cases where the Commission would be required to establish effects, the Commission would only need to show that conduct by a dominant firm is capable, considered together with other factors, of potentially increasing the likelihood that rivals (including in some cases less efficient rivals) may find it somewhat more difficult to compete against a dominant undertaking (e.g. by increasing barriers to entry), even if the added difficulty is minimal or not appreciable.

Query: Can anyone think of any conduct outside the scope of competition on the merits that would not meet this test?

I can’t. And if every conduct deviating from competition on the merits (itself a controversial and vaporous filter, as discussed here or here) would meet this test then, arguably, the requirement that conduct must be capable of having exclusionary effects to fall within the scope of Article 102 TFEU would constitute an empty filter.

There are, I suppose, three possible counterarguments to my observation, namely (a) that my reading of the Draft Guidelines is an oversimplification; (b) that the Draft Guidelines are simply and objectively based on established case law; and/or (c) that, in practice, the Commission would in any case exercise self-restraint. So let’s address those:

First, if you have the impression that the question above is an oversimplification, please check for yourselves. Under the proposed framework, to show exclusionary effects the Commission, for example, (i) would not need to consider the actions that competitors may take to limit the effects of the conduct (para. 70.c); (ii) would not need to meet any probability threshold; (iii) would not need to show that the conduct at issue is the sole cause of the effects, only that it “contributes to increasing the likelihood of exclusionary effects” (para. 65); (iv) would not necessarily have to to rely on a realistic counterfactual, but could rely on an “alternative hypothetical scenario” establishing a “plausible outcome among various possible outcomes” (para. 67); (v) would not need to conduct a counterfactual analysis in cases where it may be difficult to ascertain the objective causes of market developments (para. 67); (vi) would not need to prove that conduct is capable of foreclosing as-efficient competitors (para. 73).

These are all in addition to the more broadly accepted notions that it is not necessary for the Commission to show actual effects or direct consumer harm (paras. 61 and 72) nor to establish that exclusionary effects are appreciable (para. 75). There draft Guidelines also give no indications of factors that would exclude effects (limited coverage, perhaps?). And, in addition, the factors that the Commission would take into consideration to establish effects (such as the extent of the dominant position, the position of customers, the existence of barriers to entry, etc. would arguably always tend to favour a finding of infringement against companies that the Commission would necessarily have previously identified as “dominant”. My concern is that, in practice, the cumulative effect of all these interpretations of the law would be to render the effects filter nugatory.

Second, one could also argue that the Commission is not exercising any discretion on these points and that it is simply consolidating and codifying the case law as it existed at the time of adopting the Draft Guidance. This argument, however, would be in arguable contradiction with the Policy Brief’s concern that the case law had set a bar so high that could “inadvertently lead to undesired outcomes” or render enforcement “unduly burdensome or impossible”. The Commission’s attempt to codify the case law may not be the only way to interpret that case law; perhaps inadvertently, the document places greater emphasis on elements, findings or phrases that may be more favorable to enforcement discretion as opposed to others that may constrain enforcement. And while constraints may be uncomfortable for enforcers, they are also what makes enforcement legitimate, lawful and sound. One may criticize the case law on various grounds, but the case law does make clear that not everything amounts to an effect and that effects analysis must be rigorous, meaningful and informed by all the relevant circumstances.

Third, I do not dispute the notion that, under the framework laid down in the Draft Guidelines, the Commission would exercise self-restraint (at least in the majority of cases) and would not seek to systematically and cumulatively exploit all possibilities of every angle left open in the Guidelines. But, first, the idea that the Commission will not necessarily do what the document says it may do is problematic from the point of view of legal certainty and undertakings’ need to self-assess their conduct ex ante; second, it does not account for the fact that the future Guidelines will also guide national courts and national competition authorities; and, third, this argument would appear to accept the idea that the Guidelines seek to reclaim a perceived loss of administrative discretion while, based on the case law, the role of Guidelines should be to “limit the exercise of its discretion” (e.g. Dansk Rørindustri, paras. 209-211), not to enable it.

[A version of this post was previously published in EU Law Live’s Symposium on the Draft Article 102 Guidelines. Note that I currently represent several defendants, complainants and third parties in various Article 102 TFEU matters in proceedings before the European Commission, the CJEU, and national competition authorities. The views expressed in this contribution have not been requested, paid for, or in any way supervised by any clients]