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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