The EU’s abuse of dominance doctrines have been criticised for two reasons. The first is their focus on the form of the conduct rather than on the relevant theory of harm; the second is that the law is applied to protect rivals of the dominant firm without requiring a showing that this would improve economic welfare.
Several commentators considered that the Commission’s 2009 Guidance Paper on Exclusionary Abuses brought a paradigm shift to the analysis of Article 102, moving towards a more economics and effects’ based approach. A question that remained was how the courts would react to this. Some decisions – such as Post Danmark I – seemed to move towards the approach adopted in the Guidance Paper, while others – such as Telia Sonera or Post Danmark II – seemed to revert to a more expansive and formalistic approach to Article 102 TFEU. This paper, available here, asks whether the recent move back towards a more effects’ based approach in Intel will take root.
Section II asks whether the European courts’ case law is coherent after Intel.
The Intel judgment (reviewed here) is the most extensive reformulation of the existing legal standard possible of formally overruling that case law. After restating the general rule that loyalty-inducing rebates constitute an abuse of a dominant position, the Court suggested that a “further refinement” was necessary in cases where the dominant firm submits evidence that its conduct is not capable of having anticompetitive effects. In such cases, the ECJ continued, the Commission has a duty to look for evidence of likely foreclosure effects, and, if appropriate, to apply the as-efficient-competitor (“AEC”) test. This test is a mechanism to determine whether the real prices paid after a rebate are predatory: it is a resource-intensive exercise which the Commission committed itself to in the Intel decision, despite considering that it was unnecessary to do so to condemn Intel.
The significance of the Court’s very brief reformulation of the case law on rebates cannot be under-estimated. The tenor of the judgment indicates a willingness to shift away from a line of case law that has been roundly criticised for facilitating an overly aggressive stance on discounting practices that may well reduce retail prices and promote competition. Henceforth, an effects-based assessment will have to be carried out whenever a sufficient defence is submitted, whether by means of AEC test or other means. Furthermore, this approach has been adopted in other cases as well. In Meo (reviewed here), the Court agreed to an effects-based approach when testing whether price discrimination constitutes an abuse. Further, the AKKA/LAA judgment not only provides further guidance on determining whether prices are excessive, but also appears set to increase the rigor with which national competition authorities must confront such claims.
Section III looks at trends that can threaten the case law’s present orientation.
The discussion above suggests that the ECJ might have now set the course for abuse of dominance along a path where one tests for likely anticompetitive effects on the basis of convincing evidence as opposed to form-based classifications of abuse. However, alternative visions for how to read abuse of dominance can be glimpsed on the horizon. First, digital markets might lead competition agencies to look to establish novel concepts of market power or abuse that will require refinement though the courts, and entail an expansion of the abuse doctrine. A number of decisions and studies in Europe have found that dominant digital platforms pose certain risks that a firm like Intel does not, and can justify interventions to, for example, ensure equal treatment between the dominant firm and all its downstream rivals, or prevent the market from tipping. A second risk is that the demands of an effects-based test can lead agencies to rediscover form-based abuses. As has been noted (in a very good paper I reviewed here), the so-called effects-based approach to Article 101 has led to the disappearance of effects-based cases and for the European competition authorities punishing solely restrictions by object.
Section IV looks at remedies and sanctions.
Given that infringement and commitment decisions have been issued to address similar types of conduct, there seems to be no compelling reason why the process for identifying remedies could not be aligned across both types of decisions. However, this is not what occurs. Remedies proposed by the parties in commitment decisions are market tested, which allows third parties to participate in the process. Commitments are also sometimes designed to secure compliance via third party monitoring, and might contain review clauses. None of these attributes is to be found in most infringement decisions: parties are simply required to cease their conduct and pay a fine. However, one might wonder if, in a setting where what matters is the anticompetitive effects of conduct, an infringement decision should be subject to the kind of structure found in commitment decisions, in particular to a public process which allows remedies to be market tested. This would be particularly helpful in fast-moving high technology markets, where obtaining information from a range of stakeholders can improve the precision of remedies.
Regarding fines, the author suggests that the current fining guidelines might be appropriate for cartel cases, but they appear ill suited to abuse of dominance cases. For example, in cases where the conduct of the dominant firm makes no economic sense but for the exclusion of a rival, a fine should be higher than in instances where proof of anticompetitive impact requires a detailed assessment of exclusionary potential. In the latter case, it may at times even be harsh to conclude that the undertaking’s conduct is negligent, and the imposition of a large penalty may be disproportionate. Furthermore, the aggravating and mitigating circumstances in the Guidelines are targeted at cartel conduct, but there ought to be analogous examples for unilateral conduct e.g. exclusionary intent or the disrespect of sector-specific regulations might be aggravating factors. One might also discuss whether, in cases where a behavioural remedy is imposed, a fine could be dispensed with except as regards reincidence or when an undertaking “games the system” and circumvents the remedy.
This is a short and thoughtful piece on where EU enforcement against abusive practices is heading. One need not share the author’s reading of Intel – particularly as regards the relevance that the ECJ ascribed to the as-effective-competitor test, where everyone seems to have a different opinion – to agree that the European courts are becoming increasingly amenable to economic analysis and efficiency considerations. On the other hand, this development occurs at the same time as the political winds regarding how to deal with big (digital) corporations, and the role of competition law in this, are pushing for more aggressive and faster intervention. These two trends are not necessarily irreconcilable, but this is a topic that probably merits more attention than what it has received thus far.