Chillin'Competition

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.

To say that the mardis du droit de la concurrence are a classic of the conference arena in Brussels is an understatement. They have become nothing short of an institution thanks to their unique format, which allows for in-depth presentations by leading experts and meaningful exchanges afterwards.

The expert hands of Denis Waelbroeck and Jean-François Bellis have kept the sessions invariably topical and fascinating over the years. The 2024/25 vintage is not an exception, as you can see from the superb programme below:

15th October | Opening Speech, by Advocate General Athanasios Rantos (Court of Justice).

21st November | The Foreign Subsidies Regulation, by Andreas Reindl (Van Bael & Bellis).

10th December | Recent Developments on Abuse of Dominance, by Massimiliano Kadar (European Commission).

28th January | Recent developments in EU merger control, by Guillaume Loriot (European Commission).

20th February | La jurisprudence récente en matière de cartels, by Fernando Castillo de la Torre (European Commission).

12th March | Recent developments in State aid policy, by Jose Luis Buendía Sierra (European Commission).

16th April | Private regulation and competition policy, by Donald Slater (Ashurst).

20th May | Competition policy and growth in Europe: an economist’s perspective, by Adina Claici (BRG and College of Europe).

I understand there might be an additional seminar to top it all off in style. We will make sure to inform about it on the blog!

For more information on the mardis, and on how to register, see here.

Last week, the Court of Justice delivered its much-awaited judgment in Google Shopping. The ruling comes across as carefully crafted. The case raised a number of novel and complex points of law, for which the Court finds clean, elegant solutions.

This outcome was not a given. Google Shopping is undoubtedly a landmark in EU competition law, and it is well known what received wisdom has to say about so-called great cases.

What stands out, above all, is the balance that the Court strikes between coherence and effective enforcement.

Ensuring that there is a coherent approach to the interpretation and application of Articles 101 and 102 TFEU is a must when private enforcement is very much on the rise (reshaping the legal and institutional landscape in the process). Effective enforcement by competition authorities, on the other hand, is as important as ever.

The Court achieves this balance mainly by placing workable demands on the Commission, all while offering the opportunity to the dominant firm to provide additional evidence in the course of the proceedings. The technique to achieve this balance is, in essence, the one relied upon in Intel.

This post will focus on the four most salient aspects of the judgment, namely (i) indispensability; (ii) competition on the merits; (iii) causality and the counterfactual; (iv) the ‘as-efficient competitor’ test.

Indispensability

The discussion around indispensability was probably one of the most awaited aspects of the judgment (even more so, one could argue, after the General Court’s ruling, which had introduced a number of innovations, none of which have made the cut).

The Court’s reasoning does not depart from the orthodoxy encapsulated in Slovak Telekom and ensures the survival of the Bronner doctrine. Thus, evidence of indispensability is required where intervention would interfere with a firm’s right to property and freedom of contract (para 91).

This approach acknowledges something that has always been apparent from the case law: the outcome of intervention (that is, a remedy mandating the dominant undertaking to deal with third parties) is inextricably linked to the question of whether there is an infringement in the first place.

The Court applies the case law to the facts of the case and concludes that the discriminatory conduct at stake was not one that involved a duty to deal with third parties, and was therefore not subject to the indispensability condition (para 99).

It also notes that the remedies imposed by the Commission did not require Google to deal with rivals (that is, give access to the ‘shopping boxes’). Instead, the authority required the dominant undertaking to apply the same processes and methods to third parties (para 98).

There is more to write on the future of indispensability (and the Court’s choices in the judgment), which requires a longer entry (or set of entries), along with an analysis of Android Auto (which is potentially more consequential in this sense).

Competition on the merits

The victory of the broad understanding of the concept of abuse

The notion of competition on the merits is, as explained elsewhere, an irritant in the case law. It is the bridge that connects the original and the current understandings of the concept of abuse. As such, it is bound to create frictions and give rise to misunderstandings.

Google Shopping illustrates well why competition on the merits has made an unlikely comeback after more than a decade confined to irrelevance. As the case shows, the notion may be used strategically as a shield by dominant undertakings. By claiming that only ‘improper’ or ‘abnormal’ conduct falls within the scope of Article 102 TFEU, it was hoped that proving an abuse would be made more difficult.

This narrow understanding of the concept of abuse has been unambiguously rejected in Google Shopping. On this point, the Court held that the categorisation of a practice as not falling within the scope of competition on the merits can rely on a number of extrinsic factors, including the market(s) covered by it and the dynamics of competition (para 166).

Whether or not a practice falls within the scope of competition on the merits, in other words, is a context-specific exercise that can rest on considerations other than the conduct itself. The concept of abuse, by the same token, encompasses practices that are not inherently ‘improper’ or ‘abnormal’.

For instance, the Court is careful to clarify that discriminatory conduct is not inherently at odds with competition on the merits (para 186). There is no such thing as a principle of ‘equality of opportunity’ applying across the board to private undertakings.

Accordingly, discrimination (which may be manifested in a number of ways) may or may not amount to an abuse depending on the circumstances of the case.

Competition on the merits in practice

Google Shopping provided an opportunity for the Court to address an additional, related question: is it necessary to show that a practice departs from competition on the merits in every instance? The Court answers in the negative in para 165:

‘In order to find, in a given case, that conduct must be categorised as “abuse of a dominant position” within the meaning of Article 102 TFEU, it is necessary, as a rule [en règle générale], to demonstrate, through the use of methods other than those which are part of competition on the merits between undertakings, that that conduct has the actual or potential effect of restricting that competition by excluding equally efficient competing undertakings from the market or markets concerned, or by hindering their growth on those markets, although the latter may be either the dominated markets or related or neighbouring markets, where that conduct is liable to produce its actual or potential effects‘ (emphasis and translation added).

Accordingly, there may be instances in which it is not necessary to show that the practice departs from competition on the merits and, similarly, instances where it is not necessary to demonstrate the actual or potential effects on competition (that is, ‘by object’ infringements).

The judgment goes on to explain why one need not demonstrate, always and everywhere, that the practice is not an expression of competition on the merits. As the Court points out in para 166, the issue of competition on the merits is sometimes subsumed into the legal test (or ‘analytical template’).

By showing, for instance, that the Bronner conditions are met, an authority or claimant will have shown (implicitly) that the practice departs from competition on the merits, without the need to clear any additional hurdle.

Causality and counterfactual

Questions around the need to establish a causal link between the practice and any actual or potential effects are particularly likely to give rise to tensions between coherence and effective enforcement.

On the one hand, establishing a causal link between the practice and its alleged impact makes it necessary to identify, by definition, the ‘but for’ world that would have unfolded in its absence (this is a point expressly acknowledged by the Court in the Servier saga).

On the other hand, requiring an authority to define the relevant counterfactual may occasionally represent a significant burden.

The Court solves this tension by ruling, first, that the ‘causal link [between the practice and any actual or potential effects] is one of the essential constituent elements of an infringement of competition law‘ (para 224); and, second, that the dominant undertaking may rely on the counterfactual to dispute the findings of the authority (para 227).

In so doing, the Court distinguishes between the legal burden of establishing the causal link, which lies with the authority or claimant, and the evidential burden of putting forward a counterfactual showing the absence of such a link, which lies with the dominant undertaking.

This solution follows the logic of Intel (and, one assumes, operates in the same way in practice, thereby triggering an obligation on the authority when the dominant undertaking provides ‘supporting evidence’ to the requisite legal standard).

The ‘as-efficient competitor’ test

Finally, the Court makes it clear that it is not necessary to evaluate whether the rivals of a dominant firm are as efficient as the dominant firm when demonstrating the exclusionary effects of a practice (para 264).

The Court’s conclusion on this point is difficult to dispute. The idea that the analysis of the exclusionary effects involves (or requires) assessing the relative efficiency of rivals does not capture what the ‘as-efficient competitor’ test is really about (and, similarly, the purpose it serves).

The rationale behind that test is to ascertain whether the dominant firm would be able to withstand its own practice if it were subject to it (for instance, whether it would be forced to sell at a loss if it were subject to its own wholesale prices or to its own conditional rebate schemes), not whether third parties are as efficient it is.

Crucially, nothing in this section of the judgment (and, indeed, the rest thereof) appears to question the relevance of the ‘as-efficient competitor’ principle. It is expressly upheld in para 263 (which refers, in turn, to paras 163-167) and, above all, implicitly endorsed in the passages that expressly acknowledge the need to establish a causal link between the practice and any actual or potential effects.

The Journal of European Competition Law & Practice is proud to announce that it plans to publish a Special Issue on “Competition Law and Gender Perspectives”.

The interplay between Competition Law and Gender Perspectives is a growing focus across various domains – legal (procedural, substantive), economic and policy – such as in the OECD Gender Inclusive Competition Toolkit.

We would be delighted to consider proposals on aspects relating, but not limited, to the following:

• The influence of gender on market definition
• The role of gender in facilitating and investigating cartels
• Gender lens and anti-competitive effects, e.g. market power’s gendered effects such as gender-based price-discrimination, gender-based effects of mergers
• Exploring gender (equality) and public interest justification
• The influence of gender on competition procedures, e.g. gendered data in market studies, gender conscious surveys, gender conscious remedies, gender lens in ex-post evaluations, gender inclusive stakeholder engagement
• Gender considerations and industrial policies
• Institutional gender diversity at competition authorities
• Methodological interaction of competition policy with gender research
• Historical perspectives of gender’s impact on competition policy and enforcement

If you have an idea for a paper, please email JECLAP editor Lena Hornkohl (lena.hornkohl@univie.ac.at) by 15 September 2024 23:59 CET with your proposal.

Lena Hornkohl will work together with members of the DG COMP Equality Network.

Your proposal should take the form of an abstract of max. 250 words in which you outline:

• the substantive issue you would like to address;
• the contribution your piece is expected to make for the future;
• the point of view you intend to take. As usual, please clarify in your proposal
  whether you have any conflicts of interests.

If your abstract is selected for publication, we expect the final article (of around 7,000-10,000 words) to be submitted by end November 2024.

We will select abstracts to maximise diversity and balance in the Special Issue. We would be particularly keen to publish new voices and perspectives.

We will contact all authors whose abstract has been selected in due course (if there was any doubt, do not hesitate to contact Lena with any questions, as some of you have already done).

The fourth edition of the Short Course on Advanced EU Competition was organised, as always, last spring. There was so much interest in the programme this time around (thanks so much!) that we are organising a second iteration this coming November.

As it happens, the timing could not be better, given recent and expected major developments with which you are all familiar (including Illumina, Google Shopping, Booking, Intel, and, to be sure, the Draft Guidelines on Article 102 TFEU). I look forward to discussing these with participants (as usual, limited to around 25 to maximise interaction).

Just like the preceding ones, this iteration is designed with full-time professionals in mind. The course (16 hours in total) takes place online on Friday afternoon over four weeks (2pm-6pm London time; 3pm-7pm continental time).

The dates for this edition are the following:

• 8 November (agreements)
• 15 November 2024 (abusive practices)
• 22 November 2024 (digital issues)
• 29 November 2024 (merger control)

More information on how to sign up for the course can be found here.

If you were wondering, an LSE Certificate will be available upon completion, along with CPD points for practitioners.

If you have any questions about the organisational aspects of the two courses, do not hesitate to contact my colleague Amanda Tinnams: A.Tinnams@lse.ac.uk.

The forthcoming issue of the Journal of European Competition Law & Practice will be dedicated to the memory of Professor Heike Schweitzer.

We will publish, posthumously, her very last paper, co-authored with Simon de Ridder and already available, in Open Access, here. Those among you who are familiar with Heike’s work will immediately recognise her characteristic style.

The article is an impressive tour d’horizon that cuts across all issues pertaining to the application of Article 102 TFEU, ranging from the procedural and institutional to the substantive. It reflects her usual concern with the effectiveness and administrability of EU competition law and policy.

I have no doubt it will be widely cited as a reference masterfully capturing the growing discontent with some aspects of the ‘effects-based approach’ to the enforcement of Article 102 TFEU and proposing a meaningful way forward.

Alongside her article, we publish an editorial (available for free here) celebrating her achievements as a uniquely versatile scholar. While a deeply original and innovative thinker, she would always be proud of her Ordoliberal lineage.

Global Competition Review will be hosting the 2024 edition of its Law Leaders Europe conference in Brussels on Tuesday 9 and Wednesday 10 July. Pablo and Director General Olivier Guersent will be the keynote speakers, and I will be co-chairing the conference together with Ethel Fonseca (RBB), Andrea Gomes da Silva (Fingleton) and Thomas Janssens (Freshfields).

Over two days, the conference will cover pretty much all significant recent (and expected) developments in the competition law field. The full, and pretty impressive, list of speakers is available here.

The program and all other relevant info are also available here.

Yesterday’s post addressed the way in which the Servier saga (see in particular Case C‑176/19 P and Case C‑151/19 P) refined and clarified the interpretation of what amounts to a ‘by object’ infringement.

The saga also sheds light on the analytical framework that applies to the assessment of anticompetitive effects under Article 101(1) TFEU (the ‘by effect’ stage, if one prefers).

First, the judgments (in particular the one in Case C‑151/19 P) confirm that the divide between actual and potential effects refers to the temporal dimension of the analysis. In other words, the notion of actual has to do with with the observable impact of a practice (what actually occurred). Contrary to what is sometimes suggested, this term does not imply a higher threshold (relative to ‘potential effects’).

The threshold of effects remains the same, whether we consider actual or potential effects. What changes (and paras 313-335 in Case C‑151/19 P are a good illustration) is that in the latter case the analysis is prospective (potential) and in the former it is retrospective (actual).

Second, actual effects may be taken into consideration in the overall assessment even when the analysis is prospective. As the Court put in in para 321 in Case C‑151/19 P: ‘events subsequent to the conclusion of that agreement may be taken into account in order to assess that situation‘.

When the actual operation of the market can be observed, this evidence may shed light on the potential of the practice to harm competition (even if it is not conclusive). The Court’s position is also in line with that expressed in Servizio Elettrico Nazionale (para 54 of Case C-377/20).

Third, the purpose of the counterfactual is to determine whether there is a causal link between the practice and any actual or potential effects (para 317 in Case C‑151/19 P: ‘The purpose of that “counterfactual” method is to identify, in the context of the application of Article 101(1) TFEU, the existence of a causal link between, on the one hand, an agreement between undertakings and, on the other, the structure or functioning of competition on the market within which that agreement produces its effects […]’).

In other words, it is only possible to conclude that effects are attributable to a given behaviour by measuring them against the relevant countefactual (that is, the ‘but for’ scenario revealing how the market would have evolved in the absence of the practice).

As the Court puts it, the counterfactual ‘[…] makes it possible to ensure that characterisation as a restriction of competition by effect is reserved for agreements displaying not a mere correlation to a deterioration in the competitive situation of that market, but for those agreements that are the cause of that deterioration‘ (ibid; emphasis added).

The points above are not strictly new, but are valuable, to begin with, because of the structure the Court provides and the careful drafting. It is a clear and effective articulation of the role of the counterfactual in the analysis of effects and in establishing causality.

It is also valuable in that it is line with Advocate General Kokott’s Opinion in Google Shopping. As explained here, she pointed out (para 172 of the Opinion) that the issue of the counterfactual must not be conflated with the temporal dimension of the analysis.

The Servier saga proves Advocate General Kokott’s point. It illustrates, in concrete terms, that the counterfactual is also relevant when evaluating whether the alleged potential effects of a practice are indeed attributable to it.

Last Thursday, the Court of Justice delivered its judgments in the Servier saga (see in particular Case C‑176/19 P and Case C‑151/19 P). These rulings will become an inescapable reference when discussing the notion of restriction of competition. They confirm some trends in the case law, refine some aspects thereof and provide a clear analytical framework.

First, the core test to evaluate whether an agreement restricts competition by object remains unchanged relative to Generics. Accordingly, it is necessary for an authority or claimant to identify the explanation for, or rationale behind, the practice (that is, its object).

In the specific context of the Servier saga, the analysis revolved around ‘whether [the] transfers of value can have no explanation other than the commercial interest of those manufacturers of medicinal products not to engage in competition on the merits‘ (see for instance para 104 of Case C-176/19 P; emphasis added).

Second, an infringement within the meaning of Article 101(1) TFEU, whether by object or effect, can only be established if there is competition to restrict in the first place. Thus, there would be no collusive market sharing where the regulatory context makes competition between the undertakings impossible (where, in other words, they are not actual or potential competitors).

The analytical framework in Servier is important in two respects. In the first place, the question of whether there is competition to restrict in the first place is presented by the Court an integral aspect of the evaluation of the object of a practice (it is identified as the first stage of the analysis; see paras 99-100 of Case C-176/19 P).

In the second place, it is now clear that, where there is no (inter-brand or intra-brand) competition to restrict, the agreement cannot be inherently anticompetitive.

My only comment in this regard is that the careful analytical framework laid down by the Court suggests that there is an additional stage. Before going into whether there is actual or potential competition, the ruling identifies, as a preliminary stage, the ‘candidate object‘ of the practice (that is, the reason why the agreement may have, as its object, the restriction of competition).

In the Servier saga, the ‘candidate object’ was collusive market sharing. The analysis that followed aimed at establishing whether the suspicion of a ‘by object’ infringement via collusion was borne out by the evidence.

Third, a restriction by object cannot be identified in the abstract. It has long been clear that a practice can only be shown to be inherenly anticompetitive by paying attention to the economic and legal context. The Servier saga is useful in that it shows that this principle works both ways: it applies both to the authority (or claimant) and the parties to the agreeement.

Just like authorities cannot categorise a practice as restrictive by object on the basis of abstract considerations, undertakings cannot escape the prohibition simply because, generally speaking, their agreement is not a suspicious one. For instance, it is irrelevant that, as a rule, settlement agreements do not have a restrictive object and are not inherently sinister (para 395 of Case C‑151/19 P).

In the same vein, the formal features of an agreement are insufficient to escape the prohibition (again, just like they are insufficient to establish one; see also para 395 of Case C‑151/19 P). In line with its consistent approach over decades, the Court placed substance above form in the saga.

Fourt, the pro-competitive and anticompetitive effects of a practice are neither necessary nor relevant to prove that it has a restrictive object. This is a point where the Court refines its case law, and confirms what was announced in Superleague.

Thus, the doctrine introduced in Generics, whereby the pro-competitive effects of an agreement may be taken into consideration when evaluating the relevant economic and legal context, is abandoned.

This refinement of the case law is not difficult to rationalise. When confronted with the reality of the doctrine, the Court may have realised that it is impossible to manage and that it might empty the ‘by object’ category of its substance.

In the early days, the Court feared an overly expansive understanding of the notion of ‘by object’ infringement. The abandonment of the Generics doctrine appears to reflect the opposite concern, insofar as taking into account the pro-competitive impact of a practice may inevitably blur the line between object and effect (this concern has been expressed by Advocates General in their Opinions).

One should point out, in any event, that this refinement is a relatively minor one. The real question, at the ‘by object’ stage, has always been whether the explanation for the agreement is a restrictive one (or a non-restrictive one instead), not whether it has positive effects on competition.

Crucially, the Court is equally emphatic about the fact that the anticompetitive effects of the agreement are not relevant at the by object stage. This point is particularly important in the wake of Advocate General Szpunar’s Opinion in FIFA v BZ (which relied exclusively on the impact of a set of rules to conclude that their object was anticompetitive).

Our friend and colleague Rubén Perea Molleda passed away five years ago just when he was about to start a promising career in competition law following his graduation from the College of Europe. Rubén remains very present in the memory of everyone who had the chance to cross paths with him. In his memory, we created a competition law writing award. Today we are launching its 5th edition.

As in previous editions, the winning paper will be published in a special issue of the Journal of European Competition Law & Practice, together with a selection of the best submissions received (the JECLAP special issue featuring the winner and finalists of the 4th edition will be out very soon; the articles are already available as a pre-publication).

Who can participate?

You may participate if you remain below the age of 30 by the submission date (i.e., if you were born after 15 October 1994). Undergraduate and postgraduate students, as well as scholars, public officials and practitioners are all invited to participate.

What papers can be submitted?

You may submit a single-author unpublished paper which is not under consideration elsewhere. The paper may be specifically prepared for the award or originally drafted as an undergraduate or postgraduate dissertation or paper.

The paper must not exceed 15,000 words (footnotes included; no bibliography needed).

Prior to submission, please make sure your paper follows the JECLAP House Style rules, which can be found here.

How to submit?

Please submit the paper via this link: https://mc.manuscriptcentral.com/jeclap.

IMPORTANT: As you go through the submission process, make sure that in Step 5, you answer YES to the question “Is this for a special issue?”, and indicate that your submission relates to the Rubén Perea Award.

What is the DEADLINE?

Papers have to be submitted by 23.59 (Brussels time) on 15 October 2024.