UK: Commission Consults On Guidelines On Exclusionary Abuse Under Article 102 TFEU And Amends Its Enforcement Priorities

1. Introduction

In a significant step, the European Commission (EC) has launched a Call for Evidence on new Guidelines on exclusionary abuse of abuse of dominance under Art. 102 TFEU. In parallel, it published a Communication and an Annex to amend the existing Guidance on enforcement priorities in applying Art. 102 TFEU to abusive exclusionary conduct (the Guidance). Given the 32 judgements on exclusionary practices under Art. 102 TFEU delivered by the EU Courts since 2008, the EC's aim is to codify the case law in substantive guidelines, provide guidance on applying Art. 102 TFEU and, ultimately, enhance legal certainty and transparency.

Exclusionary conduct can be broadly defined as practices directed at actual or potential competitors of a dominant undertaking to hamper or eliminate their access to supplies or markets, and include predatory pricing, exclusive purchasing obligations, certain rebates, refusal to deal, margin squeeze and price discrimination.

2. Why issue Guidance?

In the early 2000s, the EC sought to reorient the enforcement of Art. 82 EC (now Art. 102 TFEU) away from a formalistic approach to an effects-based approach (putting more weight on economic analysis, e.g., the equally efficient competitor test and consumer welfare). The EU Courts' interpretations of Art. 102 TFEU have departed from the EC's approaches in key cases. However, the EC issued Guidance on its own enforcement priorities, enabling it to prioritise cases where it perceived harm to consumers to be most likely. Notably, that Guidance explicitly states in para.3 that it is not intended to constitute a statement of the law (and is without prejudice to the interpretation of the EU Courts). Despite this, the Guidance has been somewhat controversial, and is now 15 years old.

The EU Courts have often stressed that they are not bound by the Guidance and have applied Art. 102 more strictly than the Guidance would suggest.¹Some commentators have considered this disconnect between the case law of the EU Courts and the Guidance as giving rise to legal uncertainty and suggested that the EC should withdraw the Guidance. However, judgments like Post Denmark I and II and Intel suggest that the EU Courts are recognising the merits of a "more economic" approach.²

The EC itself has been criticised for not adhering to its Guidance. This may reflect a variety of factors including, perhaps, the high bar to implementation set by the effects-based approach. Recently³Olivier Guersent - Director-General of DG Competition - acknowledged: "We might have overdone it a bit, for example by suggesting we would conduct an as-efficient competitor test in all cases. There are cases where it is not very suited." He added: "Try not to issue guidance when you do not have a solid record of enforcement because you have to guess."⁴

3. Key Changes to the Guidance

The new Guidelines will not be adopted until 2025. In the interim, the EC has amended the Guidance to reflect changes in its enforcement priorities, and has published a policy brief explaining the background of the initiative and the amendments to the Guidance.

Importantly, in determining its enforcement priorities, conduct by a dominant entity need not be profitable to be considered to amount to "anti-competitive foreclosure". Further, the EC will consider conduct that can lead to full exclusion or marginalisation of competition and conduct that adversely impacts an effective competitive structure by negatively influencing, to the benefit of the dominant entity (and detriment of consumers), price, production, innovation, variety or quality of goods or services.

With a view to applying the "as-efficient competitor test" only where it is appropriate, the revised Guidance will state that the EC "may" (rather than "will") examine economic data relating to cost and sales prices to determine whether a hypothetical as efficient competitor would be foreclosed by the dominant undertaking's conduct. The "as-efficient competitor test" will explicitly be characterised as being optional, allowing for genuine competition to come from undertakings that may be less efficient than the dominant firm, in terms of their cost structure (especially in markets with significant barriers to entry including network effects and economies of scale).⁵Further, the EC will take into account other relevant quantitative and/or qualitative evidence where an "as-efficient competitor test" is performed, and integrate this into its general assessment of anti-competitive foreclosure.

The Guidance generally treated "constructive refusal to supply" and "margin squeeze" in the same manner as outright refusal to supply, considering these practices to be an enforcement priority if the Bronner criteria were fulfilled, i.e., the practices were related to a product or service that was indispensable; likely to lead to the elimination of effective competition; likely to lead to consumer harm, and could not be objectively justified.⁶The EU Courts, however, have clarified that this parallel is inappropriate, and have stated that the Bronner criteria, in particular the indispensability criterion, only apply to outright refusal of supply.⁷As a result, to be an enforcement priority, an input will no longer need to be indispensable in cases of "constructive refusal to supply" and margin squeeze.

4. Conclusions

A rich body of case law and extensive enforcement practice enables the EC to issue substantive Guidelines in an area that - 15 years ago - was rife with disagreements. From the perspective of legal certainty, this is a positive development.

At the same time, the amended Guidance signals the EC's desire to retain maximum discretion when taking an effects-based approach. This is reflected in the EC's adjustments regarding the economic analyses in certain cases. Recent jurisprudence has led the EC to conclude that enforcement otherwise risks becoming 'unduly burdensome", such that it has proposed a "dynamic and workable effects-based approach to Article 102 TFEU".⁸It remains to be seen whether the Commission can strike a workable balance between the discretion it wishes to leave itself, and providing Guidelines that offer legal certainty, and are consistent with existing (and evolving) jurisprudence. In any event, the first draft of the Guidelines, expected by mid-2024, is keenly awaited.

Footnotes

1 Case C-52/09 TeliaSonera Sverige AB v Konkurrensverket, EU:C:2011:83; Case T-155/06 Tomra Systems v Commission EU:T:2010:370 (General Court), upheld on appeal Case C-549/10 P Tomra Systems v Commission EU:C:2012:221 (Court of Justice).

2 E.g. Intel v. Commission (Case C-413/14 P) EU:C:2017:632, paras. 133-136.

3 Spring 2023 Enforcers Summit in Washington, DC, on 27 March 2023.

4 Mlex special report about the ABA Antitrust Spring Meeting 2023, p. 123.

5 Competition policy brief, Issue 1, March 2023, p. 5.

6 Oscar Bronner v. Mediaprint, (Case C- 7/97), EU:C:1998:569, para. 41.

7 Slovak Telekom v Commission (Case C-165/19 P), EU:C:2021:239, paras. 50-51; Lietuvos gele~inkeliai AB v European Commission, (Case C-42/21 P), EU:C:2023:12, paras. 81-84 and 91.

8 Competition policy brief, Issue 1, March 2023, p. 4.

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