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On 19 April 2012, the European Court of Justice
("ECJ") issued its judgment in the appeal by Tomra
against the General Court's September 2010 judgment, ruling
that Tomra's appeal should be dismissed in its entirety.
In its earlier judgment, the General Court upheld the European
Commission's findings that Tomra had abused its dominant
position in reverse vending machines ("RVMs") in several
national markets by implementing an exclusionary strategy involving
exclusivity rebates, individualised quantity commitments and
individualised retroactive rebate schemes, and upheld the fine of
€ 24 million (see VBB on Competition Law, Volume
2010, No. 9, for further details of the General Court's
judgment, and Volume 2006, No. 4, for further details of the
Commission's Decision, available at www.vbb.com).
Amongst other arguments challenging the General Court's
judgment, Tomra submitted that, when analysing whether the
Commission had established that Tomra intended to foreclose the RVM
market, the General Court refused to consider evidence showing that
Tomra's intent was to compete on the merits. The ECJ rejected
this argument by pointing out that the notion of abuse under
Article 102 TFEU is an objective concept and that the Commission
had not relied exclusively on evidence of Tomra's subjective
intent. Following the reasoning of the February 2012 Opinion of
Advocate General Mazak in the appeal (see VBB on Competition Law,
Volume 2012, No. 2, available at www.vbb.com), the ECJ noted that
the evidence of an undertaking's intent may not be completely
irrelevant to the assessment of a behaviour, which requires an
understanding of the economic rationale of that behaviour, its
strategic aspects and the effects it is capable of having.
Nonetheless, the ECJ held that the Commission was under no
obligation to provide evidence of anti-competitive intent, but
rather to provide evidence establishing, in light of the relevant
circumstances, that Tomra's conduct was liable to foreclose
competition.
In assessing the extent of foreclosure necessary for Tomra's
exclusivity agreements to infringe Article 102 TFEU, the ECJ
concluded that the Commission correctly found that the portion of
the market tied by Tomra's exclusivity agreements and
retroactive rebates was significant and sufficient to restrict
entry to one or a few competitors. Tomra had argued that a more
concrete test with more objectively determinable benchmarks should
have been applied, but the ECJ rejected this approach, holding that
competitors should be able to compete on the merits for the entire
market, and not just for a part of it. This holding suggests that
any exclusivity agreement, even one covering a de minimis
portion of the market could conceivably be deemed an abuse, though
the ECJ tempered this point by stating that it is only possible to
determine the portion of the tied market beyond which the practices
of a dominant undertaking become exclusionary after conducting an
analysis of the circumstances of the case, as carried-out by the
Commission. In any event, according to the judgment, the portion of
the market tied by Tomra's agreements was more than sufficient
to establish that the conduct was exclusionary.
Finally, the ECJ rejected Tomra's allegation that the
Commission had failed to show that the retroactive rebates at issue
were actually capable of foreclosing competition since the
Commission had not shown that the rebates would lead to average
prices which were beneath Tomra's long-run average incremental
costs. Tomra's argument, which is based on the methodology set
out in the Commission's Article 102 Guidelines (published after
the decision in this case), essentially calls for an effects-based,
quantitative approach to determining whether rebates are capable of
foreclosing competitors, similar to the approach commonly used in
predatory pricing analyses, among other areas. The judgment holds
that a finding that a rebate results in average prices which are
below costs is not a necessary prerequisite to a finding that the
rebate is abusive. Instead, the Commission need only assess whether
a rebate offered by a dominant undertaking tends to remove or
restrict the customer's freedom to choose its source of supply.
In this case, it was sufficient for the Commission to show that the
rebate thresholds applied by Tomra, which generally covered all or
nearly all of each customer's anticipated demand, combined with
the retroactivity of the rebates, provided a strong incentive for
customers to obtain all of their needs from Tomra. This suggests
that, notwithstanding the Commission's nuanced approach in the
Article 102 Guidelines, the ECJ still considers that any
retroactive rebate scheme implemented by a dominant undertaking
which covers all or most of any customer's demand will
constitute an abuse.
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