This paper, published in the Journal of European Competition Law & Practice and available at https://academic.oup.com/jeclap/article-abstract/7/8/544/2194480, looks at the as efficient competitor test (known as AEC by its acquaintances) – the economic test that refuses to come to life (and God knows that some have tried to breathe life into it). After the European Commission tried to make this test the cornerstone of its enforcement activities on abusive practices (in its Guidance on Enforcement Priorities for Exclusionary Practices), and the European Courts first dismissed the relevance of the test in virtually all scenarios (Post Danmark II) before saying that it may actually be useful under certain circumstances (Intel), we have this piece is by an economist trying to identify when the test can be useful.
A number of conclusions are reached, in particular:
- it is sensible to decide that an AEC test is not a prerequisite for establishing the abusive character of a retroactive rebate scheme, since such a test can only be one piece of a more general assessment;
- when reliable data are available, the AEC test can be a useful tool for minimising errors in evaluating the abusive nature of standardised retroactive rebate schemes if it is used together with data about the coverage of the rebate scheme (i.e. the proportion of customers affected by foreclosure) and the size of potential foreclosed sales;
- thus, the AEC test is useful – when authorities are able to pursue the test at all – to determine how the indications provided by the level of the effective prices and the relative importance of foreclosing cases contribute to improve the agency’s theory of harm.
It all looks good and dandy to me, and it also seems to fit neatly with the European Courts’ use of the test (inasmuch as this can be discerned from the case law…). I would have liked to have seen a discussion regarding the value of legal certainty in these cases. After all, companies (or, more precisely, the employees granting the rebates) may not know or lack the means to assess whether they are pricing under AEC, and will very often just prefer not to risk it at all. In some cases – say, bundles – pursuing the AEC test at all will be fiendishly difficult.
The value of clear rules for enforcement in most cases is the (invisible) elephant in the room in all these discussions – a bit like how no one talks about how compliance is where most the benefits of competition law enforcement ultimately lie.