Abuse of dominance, I presume? The European Commission’s draft guidelines on exclusionary abuses

On 1 August 2024, the European Commission published its much-awaited draft Guidelines on exclusionary abuses of dominance under Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) (“Draft Guidelines”). The Commission is now inviting comments on the text of the Draft Guidelines before it is finalised and adopted next year. Pending the outcome of the consultation, the current text aims to allow greater flexibility for the Commission to pursue abuse of dominance cases, including by classifying a number of practices as "presumptively harmful".

Background

The Draft Guidelines follow last year’s update by the Commission to its 2008 Guidance on Enforcement Priorities for Exclusionary Abuses (“Revised Guidance”), which was accompanied by a Policy Brief setting the tone for the prospective Guidelines. The Revised Guidance and Policy Brief already indicated an intention by the Commission to move away from a restrictive “effects-based” approach to the assessment of exclusionary conduct which could render the enforcement of Article 102 TFEU unduly burdensome. The Commission vouched for increased flexibility in future investigations, including for example a more flexible application of the as-efficient competitor (AEC) test. This would allow the Commission to intervene in markets characterized by significant barriers to entry – such as digital markets – where not (yet) as-efficient competitors may still warrant protection from exclusionary conduct by dominant companies. Hausfeld provided a recap and commentary on last year's updates. 

The Draft Guidelines  

The Draft Guidelines published last month set out the Commission’s proposed parameters for the application of the more flexible approach advocated in its Revised Guidance.

Under the Draft Guidelines, the Commission can find an exclusionary abuse if conduct by a dominant firm: (i) departs from competition on the merits; (ii) is capable of having exclusionary effects; and (iii) is not objectively justified. The key changes relate to the second step in the Commission’s evaluation of exclusionary abuses, i.e. the assessment of whether the conduct by the dominant undertaking is “capable of producing exclusionary effects”. The Draft Guidelines envisage three categories of conduct in this respect:

• The first category (which represents the general rule), where the Commission bears the burden of proving that the impugned conduct is capable – beyond hypothetical possibility – of producing exclusionary effects. The threshold for the Commission is relatively low in this respect, and the fact that the conduct enhances the likelihood of such effects arising on the market is deemed sufficient to meet the standard.
• The second category, where the Commission considers that exclusionary effects can be presumed. This comprises conduct such as exclusive dealing, exclusivity rebates, predatory pricing, margin squeeze and certain forms of tying and bundling. Given that harmful effects are presumed, the Commission is not required to carry out an effects analysis beyond the consideration of any evidence submitted by the dominant firm to rebut the presumption.
• The third category, concerning certain “naked restrictions” that have no economic rationale other than to restrict competition. The exclusionary effects are presumed also in relation to this category, and the dominant company will only exceptionally be able to rebut that presumption. The Draft Guidelines envisage that “naked restrictions” would include, for example, situations in which a dominant undertaking actively dismantles part of its infrastructure that is used by a competitor, or agrees with distributors to replace a competing product for its own under threat of withdrawing discounts.

Notably, and in line with the Revised Guidance, the Draft Guidelines downplay the relevance of the AEC test in determining whether the impugned conduct is capable of producing exclusionary effects. Whilst the AEC test is given prominence in the context of the assessment of margin squeezes, where this has been explicitly required by the case law of the CJEU, it is otherwise characterized as one of a number of possible metrics the Commission might use to show exclusionary effects in its analysis. In the context of conditional rebates, the Draft Guidelines go further and expressly state that there may be circumstances in which “a less efficient competitor may also exert a genuine constraint on the dominant undertaking” and “the use of a price-cost test may not be appropriate”.

Interaction with the CJEU case law

The Draft Guidelines are intended to be a statement of the Commission’s understanding of Article 102 and the evolution of the EU Courts’ case law on exclusionary abuses, but they remain subject to interpretation by the EU Courts.

The EU Courts have thus far sought to implement the “effects-based” approach laid out in the 2008 Guidance Paper, so it remains to be seen how some of the novelties introduced by the Commission in the Draft Guidelines will be received.

For example, whilst the introduction of a presumption-based rule for certain tying and bundling conduct is presented as stemming from existing case law, the cases referenced by the Commission in this context (e.g. Microsoft) are ones where the Commission chose to adopt an effects-based approach in its analysis. Therefore, the exact scope of application of the presumption has yet to be clarified. Similarly, whilst the CJEU has made clear that the use of the AEC test is not compulsory, its judgment in Unilever does establish that competition authorities must assess the probative value of any AEC test results submitted by the undertaking concerned during the investigation – which appears to contrast with the Commission’s intention in the Draft Guidelines to downgrade the utility of the test outside margin squeeze and other pricing practices.

Next steps

The Draft Guidelines are very important in laying out the Commission’s proposed interpretive roadmap on these issues. If adopted in their current form, they are likely to increase the Commission’s flexibility to address exclusionary conduct and enhance enforcement opportunities under Article 102. The Commission is inviting comments on the Draft Guidelines until 31 October 2024, following which it plans to publish the final version early next year.