Rebalancing the ‘effects-based’ approach: European Commission set to revamp guidelines on exclusionary abuses
On 27 March 2023, the European Commission announced its intention to adopt new Guidelines on exclusionary abuses of dominance under Article 102 of the Treaty on the Functioning of the European Union (TFEU). A public consultation has been launched, with the Guidelines due to be adopted in 2025 after publication of a draft next year.
In parallel, it published a Communication (and Annex) amending its 2008 Guidance on enforcement priorities concerning exclusionary conduct by dominant undertakings (the Guidance), which will be effective in the interim.
Background
In its original version, the 2008 Guidance was an attempt by the Commission to introduce a consistent, “more economics-based” [1] approach to the enforcement of Article 102, which focused on the effects of the potentially abusive conduct on the competitive process and, hence, consumers. While the 2008 Guidance itself provides that it does not constitute a definitive statement of the law, the EU Courts have over the years largely confirmed the expansion of this effects-based approach to exclusionary abuse of dominance cases, most notably with the ‘as-efficient competitor’ (AEC) test.
The judgments in Intel (Case C-413/14), Servizio Elettrico Nazionale and Others (Case C-377/20) and most recently in Unilever (Case C-680/20) have solidified support for an effects-based assessment of exclusionary conduct cases, and emphasised that conduct that may eliminate less efficient rivals will normally not be deemed to infringe competition law. Since Intel, the EU General Court has also overturned aspects of the Commission’s analysis in its Qualcomm [2] and Google Android [3]decisions on this basis.
The amendments to the Guidance
The recent changes to the Guidance are intended to – within the constraints of the precedents established by the EU Courts – reduce the pre-eminence of the effects-based or “economic” approach to abuse of dominance cases. This is also reflected in the statement in the Policy Brief accompanying the amendments that “an overly rigid implementation of the effects-based approach could set the bar for intervention at a level that would render enforcement […] unduly burdensome or even impossible.”
A key focus of the amendments is the application of the AEC test. The revised Guidance emphasizes that, in certain circumstances, companies that are not (yet) as-efficient competitors may also warrant protection from exclusionary behaviour by dominant companies, on the basis that “genuine competition may also come from undertakings that are less efficient than the dominant firm, in terms of their cost structure.”
In the Policy Brief, the Commission indicates that this may be the case in markets where barriers to entry and expansion are significant, including where there are network effects and economies of scale, such as in digital markets. The Guidance stresses that the Commission “may” rather than “will” examine economic data relating to cost and sales prices, and that in any event the price-cost AEC test is only one of several tools to assess exclusionary effects and its results should be only one element in a broader assessment including other (so far unspecified) quantitative and/or qualitative evidence.
Nevertheless, the case law of the EU courts – in particular the recent EU Court of Justice ruling in Unilever – establishes that a competition authority must test the probative value of any economic analysis, including the results of an AEC test, submitted by the dominant undertaking in question.[4] Whilst the revised Guidance is silent as to the need for the Commission to examine AEC arguments adduced by defendants, it is likely that the findings of the Court of Justice in this regard will be binding and that the Commission will continue to examine such arguments given the Commission expressly acknowledges that the Guidance is intended to reflect “the experience gained through the Commission’s enforcement practice and the clarifications provided by the case law of the Union Courts”.
Further, the Guidance also widens the notion of anti-competitive foreclosure to encompass situations where the dominant undertaking’s conduct is capable of adversely impacting the competitive structure of the market – allowing it to negatively influence “prices, production, innovation, variety or quality of goods and services” – without a need to show that market access for competitors has been foreclosed and the dominant undertaking is able to profitably raise prices.
Finally, in line with developments in the case law (particularly Slovak Telekom (Case C-165/19) and TeliaSonera (Case C-52/09)) the Guidance explains that cases of constructive refusal to supply (i.e. where the dominant company makes access subject to unfair conditions) should be distinguished from situations of outright refusal to supply such that an Article 102 infringement can subsist in those cases even if the product or service supplied is not “indispensable.”
Comment
Whilst we have yet to see the text of the Guidelines, it is clear from the revised Guidance that the Commission wishes to increase its flexibility – within the confines of relevant case law confirming the importance of an effects-based approach – when engaging in an effects-based analysis in future investigations. This is likely to give the Commission greater latitude to intervene in markets where there are concerns regarding contestability, in particular in digital markets. The publication of the revised Guidelines in due course will be valuable in setting the parameters for the application of this more flexible approach.
Footnotes
[1] See speech by the DG Competition Director General Olivier Guersent at the 2023 Antitrust Enforcers Summit, held in Washington, DC on 27 March 2023.
[2] EU General Court judgment of 15 June 2022 in Case T-235/18, ECLI:EU:T:2022:358.
[3] EU General Court judgment of 14 September 2022 in Case T-604/18, ECLI:EU:T:2022:541.
[4] EU Court of Justice judgment of 19 January 2023 in Unilever, ECLI:EU:C:2023:33, at para. 60.