Chillin'Competition

This week’s post focuses on what is probably the single most complex point of law considered in the Draft Guidelines on exclusionary abuses. It is also the keystone of the whole venture, in the sense that it could mark its fate.

The case law of the past decade has very much emphasised the need to engage in a meaningful assessment of the effects of certain practices. It is now undeniable that some conduct is only caught by Article 102 TFEU where it can be shown to have an actual or potential impact on competition.

This so-called ‘effects-based approach’, now enshrined in the case law, is not a capricious hurdle aimed at making enforcement more difficult or less effective. It is rather the acknowledgement that many, if not most, practices do not necessarily pursue an exclusionary aim and, similarly, do not invariably deteriorate the competitive process (even when implemented by a dominant firm).

The (daunting) challenge, against this background, is to get the definition of anticompetitive effects right. Getting the definition right, in this context, means, first, providing the basis for a meaningful assessment (that is, one that is not merely a formality); and, second, making it possible to discern what an effect is and what it is not.

What an effect is not: lessons from the case law

Part of the difficulty that comes with fleshing out the concept is that the case law is far more illuminating about what an anticompetitive effect is not (as opposed to what it is). The issue, as the law stands, is best approached in a negative manner.

It is clear from the case law, to begin with, that an anticompetitive effect is not synonymous with harm to consumer welfare. Therefore, the former can be established without showing the latter (and, more importantly, without the latter necessarily occurring, whether actually or potentially).

Second, a mere competitive disadvantage and/or a limitation of a firm’s freedom of action do not amount, in and of themselves, to an anticompetitive effect within the meaning of Article 102 TFEU.

The latter point has long been clear. If anything, it has become even more difficult to dispute following Servizio Elettrico Nazionale and the appeal judgment in Google Shopping. As reminded in para 186 of the latter, the fact that a vertically-integrated dominant firm discriminates against its non-integrated rivals (which necessarily places them at a disadvantage) is not abusive in and of itself.

Similarly, the fact that a practice (say, a system of standardised rebates) limits the freedom of action of a dominant undertaking cannot, in and of itself, substantiate a finding of anticompetitive effects. The clarification of this point is arguably the most valuable contribution made by Post Danmark II to the body of case law.

The challenge, in theory and in practice, is to identify the point at which a competitive disadvantage and/or limitation of a firm’s freedom of action are significant enough to amount to anticompetitive effects.

Third, the fact that the rivals of a dominant undertaking lose customers as a result of the behaviour of the dominant firms does not necessarily mean that the said behaviour has actual or potential anticompetitive effects.

According to the case law, there will be no anticompetitive effects, whether actual or potential, for as long as rivals remain willing and able to compete. Post Danmark I provide an ideal case study (if only because the Court unambiguously signalled the absence of effects in light of the facts of the case and the evolution of the relevant market).

The definition of anticompetitive effects in the Guidelines (and its practical consequences)

Capturing the essence of the case law is not an easy task. Crafting a definition that is operational (in the sense that its meaning can be grasped by national courts and authorities) is even more difficult.

The Commission could not avoid, alas, trying its hand at the challenge. In para 6 of the Draft Guidelines, it proposes to define the notion of anticompetitive effects as referring to:

‘any hindrance to actual or potential competitors’ ability or incentive to exercise a competitive constraint on the dominant undertaking, such as the full-fledged exclusion or marginalisation of competitors, an increase in barriers to entry or expansion, the hampering or elimination of effective access to markets or to parts thereof or the imposition of constraints on the potential growth of competitors‘.

The fundamental point to make in relation to this definition is that it does not fully shed light on what an effect is (and, indeed, what an effect is not).

More precisely, the definition enshrined in the Draft Guidelines could be reasonably interpreted as suggesting that virtually any competitive disadvantage amounts to an anticompetitive effect. According to the current drafting, any ‘hindrance’ to the exercise of a competitive constraint would be sufficient, in and of itself, to establish an abuse.

Such an approach may not be obvious to square with the case law described above. As rulings like Servizio Elettrico Nazionale and Google Shopping show, ‘hindering‘ rivals’ ability to exercise competitive pressure does not necessarily lead to actual or potential anticompetitive effects.

The practical consequences of such an expansive understanding of the notion of anticompetitive effects are arguably more significant than the tension with some aspects of the case law.

Accepting that any ‘hindrance‘ can amount to an anticompetitive effect means accepting that pretty much any strategy implemented by a dominant firm amounts to an abuse of a dominant position. With such a broad definition, one could always make a plausible case that the requisite threshold is met.

The assessment of effects, in other words, would become a formality (actual or potential effects would always be shown to exist), rather than a meaningful one.

One can expect, in the same vein, actors in the system to exploit the expansive understanding of the notion of abuse before national courts (which, unlike competition authorities, lack the ability to prioritise cases).

If enforcement moves down this road, it may take a while before the Court of Justice is given the chance to refine the definition of effects and correct deviations from the case law. In the meantime, the legal community will have to learn to live with a significant degree of legal uncertainty around the meaning and scope of Article 102 TFEU.

A proposed definition of anticompetitive effects

One can think of a definition of anticompetitive effects that more faithfully reflects the essence of the case law and ensures, in the same vein, that the assessment remains meaningful. The notion can be construed, for instance, as follows:

‘Anticompetitive effects exist where the practice reduces rivals’ ability or incentive to compete to such an extent that the competitive pressure to which the dominant firm is subject is reduced as a result’.

Next week, I will address the ways in which this definition can be made operational (and administrable) so that it can be applied in concrete cases. In the meantime, I would very much welcome your thoughts.

‘Remedies in EU Antitrust Law‘, my latest paper, is already available on ssrn and can be downloaded here. It is based on a keynote speech delivered at the University of Mannheim upon the invitation of Heike Schweitzer. The piece is dedicated to her memory.

Remedies are now central to successful enforcement. The correct design and adequate implementation of measures ceasing the infringement are as important, if not more, as detecting and establishing a breach of Articles 101 and/or 102 TFEU.

The days of yore, where the remedy was self-executing, are long gone. With the focus of enforcement on digital markets, effective enforcement depends on specifying, in a regulatory-like way, the measures that firms need to positively (and not just negatively) implement to bring the infringement to an end.

Against this background, the paper makes one point about current administrative practice and another one about the legal landscape.

The first point is that a ‘principles-based approach’ to remedial intervention, whereby an authority refrains from specifying the ways in which the infringement is to be brought to an end, is not compelled by law and is likely to lead to suboptimal outcomes.

Such an approach to the administration of remedies can be expected to delay effective enforcement, is opaque for third parties and is inevitably a source of legal uncertainty: it may never be entirely clear whether the firm subject to the obligations is fully complying with its duties.

The second point the paper makes is that Regulation 1/2003 was probably not designed with regulatory-like intervention in mind. This reality is neither a surprise nor a criticism: as Andriani Kalintiri and I showed empirically (see here), regulatory-like remedies were a rarity under Regulation 17.

Article 7 (unlike Article 9) of Regulation 1/2003 appears to be premised on the idea that behavioural remedies are necessarily negative in nature (that is, they impose an obligation to refrain from engaging in certain conduct) and implemented on a one-off basis.

It is suggested that Article 7 could be reformed so as to introduce a structured framework giving third parties the chance to express their views on the proposed measures and to give addressees the certainty that the obligations they implement comply with the terms of the decision.

Finally, the paper also addresses some of the ongoing debates. Competition authorities are right to be cautious about the implementation of so-called ‘restorative remedies’. It is unclear that there is a legal basis for such remedies (as a matter of EU antitrust and EU law at large).

Even if there were, it is not clear that it would be desirable to embrace restorative intervention. The system already struggles with the administration of complex, regulatory-like remedies.

Adding a layer of complexity would absorb even more resources and may venture beyond what competition authorities can realistically and consistently achieve. Restorative intervention, it is submitted, is best undertaken by means of ad hoc regulation (such as the DMA).

I would very much welcome your thoughts (nothing to diclose).

Last week’s post focused on the tripartite categorisation of practices in the Draft Guidelines on exclusionary abuses. It concluded that, while the categorisation is sound and finds support in the case law, it misses a fourth family of practices (that of presumptively lawful conduct).

‘Naked restrictions’ in the Draft Guidelines

This week’s post zooms into a sui generis category, which the Commission labels ‘naked restrictions’ in the Draft Guidelines. Practices falling within this group share two distinctive features. First, they lack redeeming virtues (that is, they can only be explained as a device to exclude actual or potential rivals). This feature is the one that makes them stand out from the rest.

Second, ‘naked restraints’ are prohibited as abusive without the need to consider their effects on competition. Contrary to what is true in the default scenarios, such effects can be safely presumed. Which makes sense. It is reasonable to expect that a practice that pursues no plausible purpose other than the restriction of competition is (at least) capable of exclusion.

‘Naked restrictions’ as a reality and a necessity

The first point to make about ‘naked restrictions’ is that they are both a reality and a necessity. That they are a reality need not be explained at length. There are concrete examples in the case law showing that these practices are an integral aspect of the legal landscape.

Predatory pricing within the meaning of AKZO is one mentioned last week, but not the only one. For instance, providing objectively misleading information to regulatory authorities, which was at issue in AstraZeneca (and is topical again in the context of the Teva decision) is also abusive by its very nature.

‘Naked restrictions’ are also a necessity. According to a well-established doctrine, a practice can be subject, either alternatively or cumulatively, to both Articles 101 and 102 TFEU.

If the behaviour under consideration is restrictive by object under Article 101(1) TFEU, it stands to reason that it is also prohibited without the need to show effects under Article 102 TFEU. Reverse payment settlements, which may amount to a ‘by object’ infringement and have been scrutinised under the two provisions (including in Generics), illustrate this point particularly eloquently.

‘Naked restrictions’ or ‘by object’ abuses?

The second point relates to the labelling of practices. While a relatively minor issue in a field that places substance above form, it makes sense to say a word about it.

The question, in essence, is whether to label these practices ‘naked restrictions’ or ‘by object’ abuses. It seems to me that the latter (‘by object’) is preferable (and the one that the final version of the Guidelines would ideally adopt).

This is so, to begin with, because it is the label that the Court has consistently used since Generics (and then Superleague, and then Google Shopping). The reiteration of the formula suggests that it is now part of the acquis on Article 102 TFEU.

A second reason why the ‘by object’ label would be preferable is that its scope of application is very similar, if not identical, to the scope of ‘by object’ infringements within the meaning of Article 101(1) TFEU.

The Court has reiterated since Generics (most recently in the Servier saga and Banco BPN), that an agreement is restrictive by object under Article 101(1) TFEU when it cannot be explained other than as a means to restrict competition.

As the Court put it in para 56 of Banco BPN: ‘[…] [A]n exchange of information which, although not formally presented as pursuing an anticompetitive object, cannot, in the light of its form and the context in which it occurred, be explained other than by the pursuit of an objective contrary to one of the constituent elements of the principle of free competition must be regarded as constituting a restriction by object‘.

It is sufficient to compare and contrast the Court’s position in Banco BPN with the definition of ‘naked restriction’ given in the Draft Guidelines (in turn borrowed from para 71 in AKZO) to realise that they both concern the same range of practices. The case law would be cleaner and easier to navigate if the same phenomenon were labelled identically irrespective of the provision.

Rebutting the presumption of anticompetitive effects: ‘real and concrete possibilities’

The third, related issue concerns the rebuttal of the presumption of anticompetitive effects underpinning the qualification of a ‘naked restriction’ as an abuse of dominance. The Draft Guidelines point out that it should only be possible to rebut this presumption in rare, if not exceptional circumstances.

It seems to me that this point of principle cannot be disputed. Where the Draft Guidelines could be more specific is in relation to the (exceptional) instances where the presumption can be rebutted.

The currrent version of the document helpfully (and rightly) mentions that the bar is significantly higher than in Intel-type scenarios. However, it does not elaborate much further and leaves a great deal of scope for speculation.

The most elegant solution, and the one that is wholly aligned with the existing body of judgments, would be to draw inspiration straight from the case law on restrictions by object under Article 101(1) TFEU. One should bear in mind, in this sense, that ‘Articles 101 and 102 TFEU must be interpreted consistently‘.

The recent Servier saga has helpfully clarified (in light with the preceding cases and with AG Kokott’s own analysis in her Opinion in Generics) that there is no restriction, whether by object or effect, where there is no actual or potential competition in the relevant economic and legal context (that is, where there are no ‘real and concrete possibilities‘ of entry).

There would be no ‘real and concrete possibilities’ of entry, for instance, where the regulatory regime prevents actual or potential competition (an example at stake in E.On Ruhrgas and cited with approval by AG Kokott in the abovementioned Opinion to make this very point). The same would be true where no other firm has the ability or incentive to enter the market (for instance, because none has not taken the requisite preparatory steps to place competitive pressure on actual competitors).

As far as ‘naked restrictions’ are concerned, it is submitted that the presumption of anticompetitive effects should only be rebuttable in these same (and very narrow) scenarios. These are, incidentally, the scenarios where (as in E.On Ruhrgas) the presumption of effects underpinning a ‘by object’ infringement has been successfully rebutted by the parties in Article 101(1) TFEU disputes.

As it happens, the case law on exclusionary abuses already provides scenarios where there were no ‘real and concrete possibilities‘ of entry (and thus no abuse). One of these scenarios is found in the BEH ruling, where the General Court found that the regulatory context precluded actual or potential competition. An example of the second scenario can be found in Qualcomm (exclusivity). In that case, the customers of the dominant undertaking had no realistic alternatives.

Refining the Guidelines to make it explicit that the presumption of anticompetitive effects underpinning a ‘naked restriction’ can only be rebutted where the dominant undertaking can show that there are no ‘real and concrete possibilities‘ of entry in the market affected by the practice and therefore no actual or potential competition would greatly contribute to the clarification of the existing law of exclusionary abuses.

I have just uploaded a new paper on ssrn. It can be downloaded here and is forthcoming in the next volume of the Yearbook of European Law.

The paper is entitled ‘Restrictions by object under Article 101(1) TFEU: from dark art to administrable framework‘. It may be legitimate to wonder whether yet another paper on this topic was really needed. I found myself hard at work on it before noticing for three main reasons.

First, there have been some key developments over the past year, including Superleague, the Servier saga (see here and here), FIFA v BZ and Banco BPN. These judgments have refined the existing framework in some respects and clarified the analytical structure in others. Taking stock of this crucial year for Article 101(1) TFEU felt indispensable.

Second, the Court had consistently held that a restriction by object must consider not only the content of the practice, but also its objetive aims and the legal and economic context of which it is a part. This formula is well known, but what it involves in practice is something that has only been seldom discussed in the literature.

A significant fraction of the paper explains, in light of the relevant case law, how the economic and legal context can influence the legal qualification of agreements and what objective aims the Court has considered to be legitimate.

In the coming weeks, I will be sharing on the blog some concrete examples of how the Court’s analytical framework operates in practice, and what it means for specific categories of conduct.

One of the main conclusions that I draw in this regard that the evaluation of the object of agreements is not only predictable and administrable, but also flexible, in the sense that it adapts to the features of the agreement and the surrounding context.

As a result, establishing the object of an agreement is straightforward when it makes sense for it to be and difficult when it needs to be.

Accordingly, the annulment of some decisions, whether at the national or the EU levels, should not be interpreted as meaning that the ‘by object’ route is demanding for an authority. It simply means that the ‘by object’ route was not the most obvious path in the specific circumstances of the case.

Third, changes in the enforcement patterns of EU antitrust provisions mean that discussions around the scope and meaning of the notion will become more frequent and pronounced than they have until now. The rise of private enforcement inevitably increases the potential for legal fragmentation.

Against this background, it came across as desirable to provide some structure to the case law. From a normative perspective, moreover, there appears to be some scope for the streamlining of the existing doctrines, so their meaning and operation become clearer.

I take this opportunity to thank those who took the time to comment on the piece as well as to this year’s College of Europe students, with whom I discussed an earlier draft. And very much look forward to your comments. As you know, I have nothing to disclose.

As evidenced by the many conversations it has initiated, the Draft Guidelines on exclusionary abuses issued back in the summer provide a good basis to think systematically about Article 102 TFEU and the evolution of the case law over the past couple of decades.

This post is the first of a weekly series engaging with the points addressed by the Commission in the document and discussing whether, and how, the review exercise can contribute to making enforcement both more effective and more predictable.

The Draft Guidelines are rich and offer a number of angles to take. It seemed to me that the obvious starting point is the tripartite categorisation of conduct, if only because much of the document (and many assumptions underpinning the analysis) revolves around it.

I assume every reader knows that the Commission identifies three broad families of potentially abusive practices: (i) so-called ‘naked restrictions’; (ii) those where the anticompetitive effects are presumed and (iii) those that require a case-by-case assessment of their impact.

The tripartite distinction makes sense and faithfully captures the essence of the case law. From an enforcement standpoint, it is consistent with the ambition of favouring the administrability of Article 102 TFEU.

That some practices are abusive by their very nature (whether we call them ‘naked restrictions’ or abuses by object) cannot be seriously disputed. It is an integral feature of the case law, and a useful one at that: if it did not exist today, the Court would create it.

By definition, conduct that cannot be explained other than as a means to restrict competition falls (and should fall) within the scope of Article 102 TFEU. There is no need for an authority or claimant to show any actual or potential anticompetitive effects in such instances.

My only suggestion about this first category is that predatory pricing within the meaning of AKZO, even though not qualified as such in the Draft, is emphatically a ‘naked restriction’. Arguably, it is the single most prominent example of the category.

It is sufficient to compare and contrast para 71 of AKZO and the definition of ‘naked restriction’ given by the Commission: the former is the direct inspiration of the latter. It would be illogical not to treat it as abusive by its very nature.

It is also difficult to dispute that the anticompetitive effects of some practices are presumed and thus that the creation of a specific category necessarily in relation to these practices is warranted.

Loyalty rebates (that is, rebates conditional upon exclusivity) feature prominently in this category. The Intel judgment of 2017 made a fundamental contribution to the case law in that it clarified that the presumption of anticompetitive effects underpinning Hoffmann-La Roche can be rebutted (it may be rebuttable, but it remains a presumption).

There is also a presumption of anticompetitive effects (and this is another good example in the Guidelines) where ‘margin squeeze’ conduct leads to negative spreads (that is, where the wholesale price the dominant firm charges to its downstream rivals is higher than the retail price it charges to end-users)

I would argue that the fundamental (and, I would add, necessary) contribution that the Draft Guidelines make to the above is that they acknowledge the difference between, respectively, ‘naked restrictions’ and Intel-type scenarios. The latter cannot be treated as ‘naked restrictions’, if only because they can be rationalised on pro-competitive grounds.

It is no less valuable that the Commission clarifies that the bar would be relatively higher if a dominant undertaking were to argue that a ‘naked restriction’ should not be prohibited as abusive in a particular instance. The question of where exactly one should place the bar in relation to these practices is one that I will address in the second post of this series.

The main comment I would make about the tripartite distinction is that it is missing a fourth category, that of presumptively lawful conduct.

The case law is unequivocal about the existence of this family of practices. Acknowledging its existence in the final version of the Guidelines would not only complete the codification exercise but would also contribute to the declared goal of enhancing legal certainty.

It has been clear since Hoffmann-La Roche that the category of presumptively lawful conduct encompasses a rebate that is genuinely conditional on the volume supplied (that is, ‘a simple quantity rebate linked solely to the volume of purchases‘).

The scope of this category would be clarified in Post Danmark II, where the Court held that it comprises rebates that are granted ‘in respect of each individual order‘ and which therefore correspond ‘to the cost savings made by the supplier‘. It is admittedly a narrow range of practices, but a range nonetheless.

Following Post Danmark I, moreover, there should be little doubt that above cost unconditional prices are presumptively lawful. If anything, the Court went further in its judgment, as it suggested that unconditional prices are unlikely to have anticompetitive effects where they would allow to cover ‘the great bulk of the costs attributable to the supply of the goods or services in question‘.

By extension, a practice cannot be qualified as an abusive ‘margin squeeze’, where the margin between the wholesale and the retail prices would not force the downstream division of the dominant firm to sell at a loss (in the sense that the spread between the former and the latter prices give the downstream division a sufficient margin to sell above cost).

The four categories in the case law are summarised in the table below. Next week, I will say a more detailed word about ‘naked restrictions’ (including whether it is more appropriate to call them abuses by object). In the meantime, I very much look forward to your comments.

Category	Rationale	Examples	Case law
Presumptively lawful	Expressions of ‘on the merits’ competition	Prices x>ATC Volume rebates	Post Danmark I Post Danmark II
Case-by-case analysis of effects	Ambivalent effects on competition	Standard rebates Tying in tech	Post Danmark II Android
Anticompetitive effects presumed	Likely to have negative effects	Loyalty rebates Negative spread	Intel TeliaSonera
‘Naked restrictions‘	Only explanation is exclusionary	Predatory pricing Sham litigation	AKZO ITT Promedia

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.

There’s still a week for you (or your under-30 students/colleagues/friends) to submit a paper for the 5th Rubén Perea Writing Award. As many of you know, 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. The 5th edition is still open for submissions, but the deadline is now only one week away. 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. 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.

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.