The presumption that rebates granted by dominant companies in exchange for customers buying all or most of their requirements from the dominant company – or incentive schemes for travel agents based on minimum targets – will be an abuse, will no longer apply if the dominant company can show that the rebates are not capable of restricting competition (Intel judgment of CJEU (C-413/14 P 6/9/17).

Article 102 TFEU prohibits the abuse of a dominant position by an undertaking occupying such a position in a substantial part of the EU. A share of 39.7% of sales to travel agents in the UK was found to confer a dominant position on British Airways in Virgin/British Airways (Commission Decision 2000/74/EC of 14 July 1999; British Airways v Commission (T-219/99, C-95/04)).

The granting of quantitative rebates, linked solely to the volume of purchases, fixed objectively and applicable to all possible purchasers – as opposed to being based on estimates made for each customer according to its presumed capacity – has been presumed not to be abusive.

Article 102 has, however, prohibited schemes involving rebates or discounts which are expressly conditional on customers buying all or most of their purchases from the dominant undertaking – whether expressed as a target or a percentage of total purchases. These are known as 'loyalty' or 'fidelity' rebates. Schemes whereby dominant airlines offer rebates in exchange for travel agents meeting minimum targets have also been condemned. Actual proof that they are capable of restricting competition has not been required (Hoffmann La-Roche v Commission 85/76, British Airways v Commission T-219/99, C-95/04).

When the European Commission fined Intel, a dominant manufacturer of central processing units, €1.06 bn in 2009, it applied this reasoning to condemn rebates offered to computer manufacturers such as Dell, Lenovo and IBM. It also carried out an assessment of whether an as efficient competitor (AEC) would have had to offer prices which would not have been viable for it, such that the scheme was capable of foreclosing such a competitor. It concluded that it would have.

Intel challenged this assessment on appeal to the General Court, which rejected the appeal on the ground that it was not necessary for it to consider whether the Commission had carried out this further assessment correctly.

On appeal by Intel against this judgment, however, the Court of Justice of the European Union has set aside the General Court's judgment and referred the matter back for the General Court to examine Intel's arguments in this regard.

In so doing, the CJEU has moved away from previous case law which applied an 'inherently anticompetitive' / per se prohibition approach, and has required that where a dominant company submits evidence that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects, the Commission is obliged to review that evidence.

If an economic analysis shows that rebates or incentives are not capable of restricting competition (eg due to short duration, market coverage of rebates, market share trends – there were for example modest increases in the market share of Virgin while the BA rebates were in place in Virgin/British Airways - efficiency of competitors, or their capacity to meet demand), the Commission (or competition authority bringing the proceedings under Article 102) must now assess that evidence. In its judgment the General Court will in due course be carrying out such an assessment, which will provide further clarity.

Going forward, dominant airlines may, therefore, benefit from seeking competition law advice before automatically concluding that they cannot offer agents rebates based on targets or percentages.

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