The inside ‘scoop’ on the CJEU’s decision in Unilever v AGCM
On 19 January 2023, the CJEU delivered its preliminary ruling in the case Unilever Italia Mkt Operations Srl v Autorità Garante della Concorrenza e del Mercato, C-680/20 (“AGCM”) (“Unilever”), on two questions posed by the Consiglio di Stato (Italian Council of State). The first related to the interpretation of “single economic entity” (or unit), specifically the circumstances when formally autonomous and independent companies, could be deemed to form part of the same economic entity for the purposes of Articles 101 and 102 TFEU. The second question related to whether a competition authority, when assessing whether there has been an abuse of dominance through the use of exclusivity clauses, was obliged to examine economic analyses produced by the dominant company pertaining to whether the conduct in question had the ability to exclude ‘as efficient competitors’ from the market (the “AEC” test).
The AGCM adopted an infringement decision against Unilever finding it had breached Article 102 TFEU following an investigation into its conduct in the market for individually packaged ice-creams (such as those sold in cafes, bars and swimming pools). The AGCM found that Unilever had abused its dominant position through the use of exclusivity clauses in its contracts with its network of distributors, together with a system of exclusivity rebates designed to incentivise the distributors to exclusively sell Unilever ice-creams.
The first question: single or double? A question of ‘cone-trol’
Although the conduct in question involved both Unilever and its network of independent ice-cream distributors, the AGCM found there to have been an abuse of dominance in breach of Article 102 TFEU by Unilever which was implemented through its distributors rather than an “agreement between undertakings” within the meaning of Article 101 TFEU. Although the conduct giving rise to the restriction of competition was carried out by the distributors, the AGCM imputed the conduct to Unilever on the basis that Unilever and its distributors formed a single “economic unit” due to Unilever’s ‘interference’ in the distributors’ commercial policy such that they did not act independently and fined only Unilever.
The first question posed by the referring court concerned the circumstances in which the conduct of one “formally autonomous and independent” entity may be imputed to another. The referring court asked whether it was necessary for there to be a “hierarchical” relationship between the relevant undertakings, whereby the distributors were required to “submit” to management and coordination by Unilever. Advocate General Rantos (“AG Rantos") focused instead in his opinion on “imputability, drawing direct influence from the court’s case law on the concept of a “single economic unit” and the shaping of the term “undertaking”. AG Rantos referred to the concept of unity of conduct on the market as being the decisive criterion in assessing whether liability for an act committed by one legal entity should be imputed to another legal entity. He noted that there have been two distinct objectives in the CJEU’s application of the concept of “single economic unit”; the first, to exempt agreements between entities belonging to the same undertaking from the scope of Article 101 TFEU; the second, to impute the anti-competitive conduct of a subsidiary to the parent company. The overarching aim being to ensure that undertakings cannot circumvent liability both under Article 101 and Article 102 TFEU. This distinction is sometimes referred to as the “shield” (as in Béguelin Import v GL Import-Export) as it potentially exempts agreements between undertakings from Article 101 TFEU; and, other times, as the “sword” (as in Skanskaand Sumal) as it potentially imputes the conduct of a subsidiary to its parent.
In contrast to AG Rantos, the CJEU did not make express reference to the concept of “single economic unit” and its related case law in its judgment; instead focusing on the conditions that are necessary for the imputation of liability between independent legal entities. The CJEU noted that the conduct in question was “not, in principle, unilateral conduct” and could therefore fall under Article 101 TFEU. Notwithstanding this, it concluded that the conduct was a breach of 102 TFEU on the ground that a dominant company may, if certain conditions are fulfilled, be held responsible for the conduct of its contractual parties. The CJEU relied in this regard on a dominant company’s “special responsibility not to allow its behaviour to impair genuine, undistorted competition on the internal market,” noting that this obligation extends beyond infringements of competition law that are caused directly by the conduct of the dominant undertaking itself and also applies where the implementation of the anticompetitive conduct has been delegated to independent legal entities. The CJEU noted that there were three specific conditions to be fulfilled before liability could be imputed in this way: (i) the dominant undertaking must give specific instructions; (ii) the relevant conduct must be decided unilaterally by the dominant undertaking; and (iii) the independent legal entities who carry out the conduct are required to comply with the specific instructions of the dominant undertaking.
This conclusion by the CJEU is not surprising given its emphasis in its case law on substance over form. Both the CJEU and AG Rantos referred to the enforcement gap that could otherwise be created where a company could avoid liability under Article 101 TFEU, in addition to escaping liability under Article 102 TFEU. Indeed, AG Rantos cited this as one of the reasons to maintain a consistent and narrow interpretation of the concept of an economic unit.
It is noteworthy that the CJEU did not go so far as to suggest that the implementation of anticompetitive conduct by a separate legal entity (on the instruction of the dominant undertaking) makes that entity part of the dominant undertaking’s “economic unit” for competition law purposes. The CJEU simply spoke in terms of imputation of liability to the dominant undertaking (subject to the three conditions mentioned above). There is a clear underlying logic to this from a private enforcement perspective as a victim of anticompetitive conduct can bring an action for damages against any undertaking forming part of the economic unit responsible for the conduct. If the CJEU had expanded the concept of single economic unit to include such relationships, victims of such conduct would have been able to pursue damages claims against an entity that merely implemented anti-competitive conduct on the instruction of a dominant undertaking, rather than the dominant company being the entity responsible for compensation.
The second question: examination of the ‘cone-ditions’ of competition
On the surface, the second part of the judgement merely provides clarification of the scope of the CJEU’s decision in Intel Corporation Inc v European Commission (“Intel”), which held that (in the context of an examination of Intel’s exclusivity rebates) where the (dominant) undertaking maintains that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects, and produces evidence which supports this proposition, the relevant competition authority is required to analyse that evidence and assess whether the conduct at issue is, in fact, capable of excluding ‘as efficient competitor’ from the market. The referring court in Unilever sought clarification of whether this requirement only applied to exclusivity rebates or whether it also applied where the conduct at issue concerned other exclusivity obligations, other rebates, and loyalty payments.
Behind this relatively anodyne question is a more significant conceptual issue; whether there is conduct which constitutes by its “very nature” an abuse of a dominant position, such that economic analysis produced by the dominant company regarding the ability of the conduct to actually (or potentially) produce the alleged effects need not be examined. The early decisions of the CJEU in cases such as Hoffmann-La Roche v Commission,suggested that such types of conduct could exist: “Obligations of this kind to obtain supplies exclusively from a particular undertaking…are incompatible with the Common Market.” However, more recently, even where the CJEU concluded that “the rebates at issue were by their very nature capable of restricting competition” (emphasis added), it nevertheless carried out an in-depth examination of whether the rebate in question had the capability to foreclose competition in the market.
In answering the first part of the second question (whether a competition authority must carry out an AEC test when assessing whether an exclusivity clause constitutes an abuse of dominance), the CJEU in Unilever followed the approach adopted in Intel, ruling that, although “by reason of their nature, exclusivity clauses give rise to legitimate concerns of competition, their ability to exclude competitors is not automatic….”Therefore, where there is a suspected infringement and the fact of the infringement is disputed by the dominant company, the competition authority must ensure “that those clauses were, in the circumstances of the case, actually capable of excluding competitors as efficient as that undertaking from the market.” The justification for this set out in Intel was that a system of rebates may be objectively justified when its exclusionary effect is counterbalanced or outweighed by efficiencies which benefit consumers. Such an assessment therefore required an analysis of the actual capacity of the conduct in question to foreclose an “as efficient” competitor (the “AEC test”).
In answering the second and third parts of the second question (whether the competition authority is required to examine economic analysis produced by the dominant undertaking that disputes that the conduct in question is capable of producing such exclusionary effects, and whether a competition authority is required to use the AEC test in relation to exclusionary exclusivity clauses and/or conduct), the CJEU held that evidence which disputes that the conduct under investigation was, in fact, anti-competitive cannot be disregarded. This applies particularly when such evidence considers the ability of a practice to produce anti-competitive effects by reference to the ability of a hypothetical competitor of the dominant company to get customers to switch to it without it suffering losses. This position follows the CJEU’s previous reasoning in ENEL,in which the CJEU stated that a competition authority must pay “due attention” to observations and evidence submitted by the undertaking under investigation. As to whether the competition authority must use the AEC test, in line with the CJEU’s prior judgment in Post Danmark, the CJEU dismissed the suggestion that there was any positive requirement to conduct or adopt a specific form of economic test (in this case, the AEC test) in order to establish that the alleged conduct has the ability to produce anti-competitive effects. Further, the Court noted that the AEC test is only one of a number of methods for assessing whether conduct is capable of producing exclusionary effects and, because it is conducted by reference to the cost structure of the dominant undertaking itself, it may not be an appropriate test to adopt in relation to non-pricing practices, such as refusal to supply or exclusivity clauses.
This most recent decision establishes that the CJEU will not ‘cone-done’ the abusive conduct of dominant undertakings, whether the abuse is carried out by the dominant undertaking itself or implemented by a third-party where the dominant undertaking exerts (and exercises) ‘dec-ice-ive’ influence over that third party. Further, in order to establish whether exclusivity clauses in fact have exclusionary effects, competition authorities are required to evaluate evidence submitted by a dominant undertaking which demonstrates that the practices in question were not, in fact, capable of ‘freezing out’ effective competition on the relevant market.
*Lesley Hannah is Partner and Ilia Sigarev is a Legal Intern in London
 C-22/71 Béguelin Import v GL Import-Export  ECR 949
 C-724/17 Vantaan Kaupunki v. Skanska Industrial Solutions Oy, NCC Industry Oy, Asfaltmix Oy.
 C-882/19 Sumal SL v Mercedes Benz Trucks España SL
 See B. Cortese ‘Piercing the Corporate Veil in EU Competition Law: The Parent Subsidiary Relationship and Antitrust Liability’ in B. Cortese (ed.) EU Competition Law – Between Public and Private Enforcement, Kluwer (2014) 73, 74.
 See the three conditions listed below and at para 29, Unilever.
 C-413/14P Intel Corporation Inc. v European Commission (“Intel”)
 Para 29, Unilever.
 C-413/14P, footnote 6 supra.
 Para 46, Unilever.
 C-85/76 Hoffmann-La Roche & Co. AG v Commission of the European Communities ECLI:EU:C:1979:36 (“Hoffmann-La Roche”)
 Para 90, Hoffmann-La Roche.
 Para 142, Intel.
 Paragraph 51, Unilever.
 Para 52, Unilever.
 Para 140 Intel.
 Para 52, C-377/20 Servizio Elettrico Nazionale SpA and Others v Autorità Garante della Concorrenza e del Mercato and Others (“ENEL”)
 C-23/14 Post Danmark A/S v Konkurrencerådet ECLI:EU:C:2015:651
 Paras 57 and 58 Unilever.
 Paras 58 and 59 Unilever.