Chillin'Competition

In the past few days there have been some remarkable competition-developments coming from EU Courts, the last of which took place only minutes ago in the Greek lignite case  (if you’re only interested in that one you can go directly to the bottom of the post). This is just a quick overview of some of those recent developments:

Some were anecdotal, such as President Barroso giving testimony as a witness before the General Court.

Others are relevant mainly for cartel geeks, such as the GC’s granting reductions of fines in 3 paraffin wax cartel related cases, in which it also (a) carried out a particularly detailed review of the exercise of decisive influence between a parent and its subsidiary (Sasol, available here); (b) observed a violation of the principle of equal treatment and, most unusually, found an infringement of the principle of proportionality in the calculation of the basic amount of a fine (but only due to the peculiar circumstance that the Commission had partly taken into accout the turnover of a company that had merged, in the course of the cartel, with another company participating in the infringement; see the Judgment in Esso, available here); and (c) shed some light on the assessment of the exercise of decisive influence in JV settings (in RWE, available here).

That challenges against the proportionality of fines imposed within the 10% limit are unlikely to be successful was confirmed by last week’s Judgment from the ECJ in the Telefónica case. Telefónica had challenged the GC’s Judgment upholding the controversial decision sanctioning it for a margin squeeze abuse. The ECJ’s Judgment contains nothing of particular interest (aside from an interesting explanation of why the General Court’s review is fully compatible with the requirements stemming from the ECHR). The case will mostly be remembered because of Advocate General’s Wathelet’s Opinion both on the issue of proportionality as well as on the qualities of the appeal lodged by Telefónica, which we’re told broke a record as the lenghtiest in the history of the ECJ. (For those of you who are wondering whether limitations on the number of pages didn’t apply, you should know that there’s a way to bypass them, which I won’t explain here in the interest of the efficient use of Court’s resources…).

And, finally, most interesting news came from Luxembourg minutes ago, as the ECJ has annulled the General Court’s Judgment in the Greek lignite case concerning the joint application of Articles 106 and 102 TFEU. As you may recall, some time ago we held a most interesting ménage à trois debate on the GC’s Judgment with Marixenia Davilla (see here), José Luis Buendía (see here) and Makis Komninos (see here). The ECJ and the Advocate General have followed the approach that José Luis had forecasted (the Mr. 106 nickname has a justification).

The Judgment is much more important than many may realize at first sight. The main issues raised by the case are covered in our previous posts, so I refer you to those. Observe only that the Judgment goes pretty far -in the right direction, I would argue- in ruling (in para 46) that “[a]ll that is necessary is for the Commission to identify a potential or actual anti‑competitive consequence liable to result from the State measure at issue. Such an infringement may thus be established where the State measures at issue affect the structure of the market by creating unequal conditions of competition between companies, by allowing the public undertaking or the undertaking which was granted special or exclusive rights to maintain (for example by hindering new entrants to the market), strengthen or extend its dominant position over another market, thereby restricting competition, without it being necessary to prove the existence of actual abuse“.

The Judgment would insuflate some life to Art. 106 which, as I said last week, has a tremendous potential which still today remains largely unused. This would nonetheless largely depend on politics at the incoming Commission and on the Commission’s discretion, and, judging by history, I’m not opimistic. As the GC reminded us with another Order last month declaring an appeal inadmissible (here), “the Commission’s refusal to act under Article 106(3) TFEU following the filing of a complaint by an individual against a Member State does not constitute a challengeable act“.  This ruling is based on the max.mobil case-law, which I’ve always seen as unfortunate and in need of repeal.

Minutes ago the General Court released its Judgment in Intel v Commission (T-286/09) dismissing the appeal in its entirety and upholding the 1.06 billion euros fine.

 As I noted to Bloomberg some time ago, the ECJ’s Tomra Judgment had paved the way for the Commission’s victory in this case with regard to the substantive arguments at issue.  Indeed, the Judgment resorts to Tomra in several occassions to support the key proposition that once a loyalty mechanism is demonstrated there is no need to demonstrate effects by means of an as efficient competitor (AEC) test (see mainly para. 145; I’ve spotted a few other references to Tomra in paras: 72, 73 , 77, 78, 91, 97, 103, 117, 119, 120, 132, 153, 176, 182, 184, 193, 527 or 998, plus a few more to AG Mazak’s Opinion in that case)

The General Court has also ruled out the procedural concerns previously identified by the Ombudsman, ruling that there was no procedural irregularity, and that even if there had been one it wouldn’t have affected the outcome of the case (paras. 601-664).

The Judgment has not yet been made public   is available here. [Note: this post was initially written in the light of the Court’s Press release and was subsequently updated  following a first very quick look at the actual Judgment]. I’ve only had the chance to skim through it quickly, but a quick look is enough to reveal the Judgment’s likely impact on the law on abuse of dominace and to anticipate that this ruling will no doubt stir many debates in the coming weeks and months.

The Court has found that the rebates are issue were “exclusivity rebates” and declared that these, “when granted by an undertaking in a dominant position are, by their very nature, capable of restricting competition and foreclosing competitors“. The Judgment states that in the face of such rebates it is not necessary to show effect on a case-by-case basis, and that “the Commission was not required to make an assessment of the circumstanced of the case in order to show that rebates actually or potantially had the effect of foreclosing competitors from the market“. Against this background the Court explicitly rejects the applicability of the “as efficient competitor test“.  A similar approach is undertaken with regard to the conditional payments granted to several computer manufacturers.

Key to the Court’s reasoning is the idea that “a foreclosure effect occurs not only where access to the market is made impossible for competitors. Indeed, it is sufficient that that access be made more difficult”. (paras 88 and 149). According to para 150 the as efficient competitor test “only makes it possible to verify the hypothesis that access to the market has been made impossible and not to rule out the possibility that it has been made more difficult”.

In para 152 the Court distinguishes Intel from previous cases where the as efficient competitor test had been a key criterion (namely TeliaSonera, Deutsche Telekom and Post Danmark) by observing that “those cases concerned margin squeeze practices or low price practices)” which means that a price-cost comparison was needed. According to this para. “[a] price cannot be unlawful in itself. However, in the case of an exclusivity rebate, it is the condition of exclusive or quasi-exclusive supply to which its grant is subject rather than the amount of the rebate which makes it abusive”. In para. 153 the Court again resorts to Tomra (“which postdates” the above mentioned Judgments) to support its view that no effects assessment is needed.

The Judgment deals directly with the alleged incompatibility of this approach and the Commission’s Guidance paper. In paras. 154-161 the Court explains essentially that it is “not necessary to consider whether the contested decision is in line with the Article 82 Guidance” (157) because the latter only set priorities for cases initiated following its adoption whereas the Intel investigation was already at an advanced stage by then (paras. 155-156). According to the Court, the as efficient competitor test envisaged in the Guidance paper was only relied upon by the Commission “for the sake of completeness”.

In spite of the clear statement of principle regarding the no need to prove effects, the Court has also engaged in a detailed case by case review of both the rebates and the conditional payments and concluded that “even supposing that the Commission was required to show on a case by case basis that the exclusivity rebates and payments granted to Dell, HP, Lenovo and Media-Saturn were capable of restricting competition, the Commission demonstrated that capability to the requisite legal standard in its analysis of the facts of the case”.

This “just in case” review is what explains the  lenght of the Judgment (283 pages in English). It also places the Commission in a much better position regarding an eventual appeal, for even if the ECJ were to quash the GC’s conclusions that effects didn’t have to be established (the upcoming Post Danmark II Preliminary Ruling will tell us whether that is or not likely to happen), the factual assessment of the case -beyond the scope of review of the ECJ- would be most likely to stand.

Even if somehow expected, this is a very important victory for the Commission. The main question relates to how this Judgment will impact future post-Guidance paper enforcement.