Some of the procedural tools used by competition authorities and courts (in particular, presumptions) present an inherent link to the burden of proof and to the rightful exercise of the rights of the defence. In principle, the use of presumptions can be an efficient response to the enforcement of competition policy both in situations where a given behaviour usually amounts to an infringement or where it is competitively innocuous. In any rule of law system, presumptions of illegality must be rebuttable. Indeed, a resort to presumptions not surrounded by proper procedural guarantees may infringe the presumption of innocence and undertakings’ rights of defence.
The Intel judgment provides a good opportunity to discuss the role of presumptions under Article 102 TFEU and their implications for the burden of proof. In addition to this, this article, available here, analyses how defendants in exclusivity rebate cases can rebut the presumption of illegality in practice, with a special focus on the efficiency defence. It does so as follows:
A first section focuses on the burden and standard of proof in EU competition law.
While apparently straightforward, the rules on the burden of proof are rather complex in practice. One reason for this is that the allocation of the burden of proof (i.e. who should bear it) closely relates to the matter of its discharge (i.e. how the person carrying the burden of proof may satisfy it). In fact, the displacement or not of the burden of proof depends on the standard of evidence required to demonstrate a certain infraction, to sustain an objective justification or to support an efficiency defence. For example, the Commission must comply with a certain standard of proof in order to prove an infringement and to be able to impose a sanction. In the event that the evidence meets the standard of proof, an undertaking is then responsible for rebutting the charges of the Commission by means of convincing arguments and sufficient evidence. In Europe, the Commission must gather ‘precise and consistent evidence to give grounds for a firm conviction that the alleged infringement took place’. This ‘firm conviction’ standard used by our European Courts is stricter than a mere balance of probabilities, although not as strict as the ‘beyond reasonable doubt’ standard applied in criminal procedures.
Interfering in this process are presumptions, i.e. inferences that facts exists based on the existence of other known facts. Presumptions can assist in establishing that an infringement occurred. While presumptions may be useful tools, they must used with care – and always in full respect of rights of the defence, by allowing for their rebuttal through proportionate means. The use of presumptions to assign liability has become pervasive in EU competition law. Examples include the presumption of parental liability, that collusion is the only plausible explanation for parallel behaviour, or that participation in a meeting amounts to participating in a cartel. The generalised use of liability presumptions in competition law, particularly as regards cartels, has shifted the discussions before the Courts from focusing mainly on how to establish an infringement to matters related to the determination of liability and the duration of infringements. In this respect, the Cartes Bancaires judgment imposed a welcome discipline on the expansive use of presumptions under Article 101 TFEU.
The following sections focus on the role of presumptions when dealing with rebates.
As already discussed above, in Hoffman-La Roche the Court established a presumption that an undertaking that enjoys a dominant position, and ties its customers by means of exclusivity supply arrangements, abuses its dominant position. The same goes true for an undertaking in a dominant position that applies a system of fidelity rebates conditional on the purchasers obtaining all or most of their needs from said undertaking.
Hoffman-La Roche also gave rise to the two typologies of rebates that usually identified under competition law: presumptively legal volume rebates, and presumptively illegal exclusivity or fidelity rebates. In the General Court’s Intel judgment, the court modified this typology by distinguishing between two types of fidelity rebates: exclusivity rebates, which are in practice irrebutably illegal; and other rebates with a fidelity-building effect that do not require a company to purchase all or most of its needs from the dominant company, which should be assessed on their effects. The CJEU, on appeal, reverted to the traditional Hoffman La Roche approach, while clarifying that the Commission must consider evidence put forward by a dominant company rebutting the presumption of anticompetitive effects.
In other words, in Intel the CJEU made clear that the presumption of anticompetitive effect of fidelity rebates is rebuttable. According to the author, the ECJ set forth three ways to defeat the presumption of illegality of fidelity rebates.
- First, the company can provide an objective justification, even if it is unclear what this amounts to (e.g. the protection of legitimate business interests, or relevant considerations given the characteristics of the product) and has rarely been successful.
- A second defence focuses on efficiencies. Following Post Danmark, it is required that the efficiency gains likely to result from the conduct under consideration counteract any likely negative effects on competition and consumer welfare in the affected markets; that those gains have been, or are likely to be, brought about as a result of that conduct; that such conduct is necessary for the achievement of those efficiency gains; and that the conduct does not eliminate effective competition, by removing all or most existing sources of actual or potential competition. In practice, however, this defence has virtually never been successful, since the Commission imposes a very high standard of verifiability of the efficiencies generated, and adopts an even tougher approach regarding the specificity and indispensability criteria.
- A third defence is to prove that the rebate does not have exclusionary effects. According to the Intel judgment, the company has to put forward this defence during the administrative procedure before the Commission. The burden of adducing evidence then shifts, and the Commission ‘must substantiate that the company conducted a strategy destined to push out at least equally efficient competitors’.
The court does not provide indications of the standard that a dominant firm must meet to demonstrate that a rebate is ‘not capable’ of causing anti-competitive foreclosure. However, since the burden of proving the infringement lies on the Commission, it must establish that a dominant company’s conduct is capable of restricting competition by showing that foreclosure is sufficiently likely. Following GlaxoSmithKline, the burden is on the dominant undertaking to provide sufficient evidence to oblige the Commission to provide an explanation or justification. Regarding efficiencies, the burden of proving them lies on the company. The author questions whether the last limb of the Post Danmark formula – i.e. that efficiencies should not lead eliminate effective competition, by removing all or most existing sources of actual or potential competition – make sense in the context of Article 102 TFEU, since this may well be a consequence of pro-competitive efficient behaviour. However, this is a question that merits more attention that what can be provided here.
I liked this piece, particularly the way it explores the implications of the Intel decision and the challenges of proving that fidelity rebates are not exclusionary. At the same time, I think that a number of refinements could improve it even further. First, the author’s focus on presumptions of illegality ignores the numerous presumptions of legality that pervade competition law. In other words, the pervasiveness of presumptions in competition law is not necessarily a bad thing for companies – it is just something which is inherent to competition enforcement. Also, the existence of factual presumptions regarding cartels reflect their secrecy, and plays a role not dissimilar to that of plus factors in the US, even if these are not treated as evidential presumptions.
This links to my main reservation about this article. I think the piece could have benefitted from an attempt to distinguish between evidential and legal presumptions – a distinction which can have important implications. For example, it helps to explain the difference between how fidelity rebates were treated prior to Intel (i.e. some argued they were per se illegal) and after (where they merely create a rebuttable presumption). More generally, this distinction is important to understand how presumptions differ from legal tests, and how this distinction affects the company’s rights of defence (e.g. an object infringement cannot be defeated by evidence of absence of anticompetitive effects outside Art. 101(3) TFEU). For the purposes of this article, drawing this distinction would go a long way to understanding why objective justifications, demonstrations of absence of exclusionary effects and efficiency defences are subject to different evidentiary and substantive requirements – differences which would not be justified if all defences merely rebutted a factual (evidentiary) presumption in all instances.