European Commission amends Article 102 TFEU guidance paper and announces guidelines on abuse of dominance

Europe

In 2008, the Commission adopted its Guidance on the Commission`s enforcement priorities in applying Article 82 of the EC Treaty (now Article 102 TFEU) to abusive exclusionary conduct by dominant undertakings. This Guidance Paper strongly endorsed the "more economic approach", explaining that the Commission would focus its enforcement on conduct having the most harmful effect on consumers. The Guidance Paper was controversial from the outset because the effects-based approach it contained differed in part from the more formalistic approach of the EU courts. In recent decisions, courts have confirmed the effects-based approach contained in the Guidance Paper but took a closer and more thorough look at the Commission's economic tests than the Commission may have expected. The legal situation regarding Art. 102 TFEU was thus characterised by uncertainties, especially since this is the only policy area in EU competition law in which no Commission guidelines exist.

On March 27 of this year, the Commission addressed this situation with a major policy initiative: it amended the Guidance Paper with immediate effect (the Communication was published in the OJ on 31 March). Furthermore, the Commission launched a consultation seeking feedback on the adoption of new Guidelines on exclusionary abuses of dominance.

The Commission initiative

For the purpose of amending the Guidance Paper, the Commission published a communication and an Annex to this communication, listing the amendments of the Guidance Paper and explaining the reasons for these amendments. As a service for readers the Commission also published a track-changes version of the Guidance Paper showing the amendments.

In addition, since Article 102 TFEU is one of the few areas of European competition law without guidelines clarifying its application, the Commission launched a Call for Evidence with a view to introduce guidelines on exclusionary abuses under Article 102 TFEU. The guidelines should reflect the case-law of the EU courts, in which there are no less than 32 decisions dealing with exclusionary practices since 2008 including landmark cases such as Post Danmark, Intel, Google or Unilever Italia, as well as the Commission's own enforcement experience in the years since 2008. These guidelines are envisaged for 2025 (with a draft to be presented in 2024) and will replace the Guidance Paper.

Finally, members of the Commission's DG Competition have commented on the initiative in a Policy brief entitled "A dynamic and workable effects-based approach to Article 102 TFEU”, which further explains the background to the launch of the Guidelines initiative as well as the changes to the 2008 Guidance Paper introduced in the Communication.

What amendments were made to the Guidance Paper?

Article 102 TFEU prohibits abusive behaviour by dominant undertakings in any given market. Relevant cases of abuse of dominance often concern practices having an exclusionary effect on actual or potential competitors. With the Guidance Paper, the Commission had adopted an approach focused on the potential effects of the alleged exclusionary conduct (i.e. the "effects-based" approach). While the EU courts originally followed a more formalistic approach, they have in the meantime confirmed the main elements of this approach, requiring that for an abuse of a dominant position the potential effects of the conduct in question must be more than merely hypothetical.

The amendments to the Guidance Paper reflect some of the key developments in the case-law of the EU courts on cases of exclusionary conduct. They are meant to provide certain clarifications until the adoption of future guidelines .

  • The first amendment concerns the concept of "anti-competitive foreclosure". Prior to the amendments, the Guidance Paper referred only to the dominant company's ability to profitably increase prices due to its abusive conduct. In the amended Guidance Paper, "anti-competitive foreclosure" describes a situation where the behavior of the dominant undertaking has a negative impact on effective competitive structure (e.g. on parameters like price, production, variety or quality of goods or services). With this change, the Commission clarifies that the element of profitability is not appropriate for determining the Commission`s enforcement priorities.
  • With the second amendment to the Guidance Paper, the Commission clarifies that competition from less efficient competitors may be considered when determining whether particular price-based conduct leads to "anti-competitive foreclosure". This applies particularly to markets where barriers to entry and expansion are high, or where the emergence of as-efficient competitors may not be possible due to the current market structure. The Commission points out in this context that, in general, it is not the purpose of Article 102 TFEU to ensure that competitors less efficient than the dominant undertaking remain in the market. Consequently, intervention is generally necessary if the conduct in question has already affected or is capable of affecting competition from competitors as efficient as the dominant undertaking. However, pursuing only price-based exclusionary conduct that might lead to market exit or marginalisation of competitors that are as efficient as the dominant firm in terms of their cost structure is not sufficient, since competition may also come from less efficient firms.
  • The third amendment concerns a key element of the Guidance Paper, the as-efficient competitor (AEC) test. The Commission now clarifies that the use of the AEC test is optional and not legally required to prove abusive conduct. (Note: According to ECJ case-law, the Commission is bound to engage with any such analysis produced by the investigated company in its defence). The Commission further explains that it may not even be appropriate in every case and that, if an AEC test is performed, its results should be evaluated in any case together with all other relevant quantitative and qualitative evidence. The policy brief provides further insight on, in what situations the Commission considers the AEC test relevant. In line with case-law, the AEC test is necessary in predatory pricing and margin-squeeze cases. In rebate cases, for the EU Commission the suitability of such an AEC test depends on the type of rebate. For non-exclusivity rebates, the use of an AEC test may be useful but this depends on the individual circumstances and the test will be only one factor of the overall analysis. Regarding exclusivity rebates, according to the Commission, AEC test may be appropriate only in exceptional cases.
  • In a fourth amendment, the EU Commission clarifies that situations of outright refusal to supply are not equal to situations in which the dominant firm makes access dependent to unfair conditions (i.e. "constructive refusal to supply"). For the latter cases, in line with case-law of the EU courts, indispensability of the input good is not a criterion.
  • With a fifth final amendment, the Commission clarifies that margin squeezing is not a specific type of refusal to supply, but an independent form of abuse, following its own assessment criteria. This means that indispensability of the product or service does not apply here as a criterion.

Next steps

The amendment of the Guidance Paper is just an interim measure.

After 15 years of putting the Guidance Paper to the test of competition law enforcement of the EU courts, it was time for an overhaul of the Commission's guidance in the area of dominance. The Commission has recognised that mere guidance on its enforcement priorities is not sufficient, but that – like in other fields of competition law – comprehensive guidelines reflecting case-law and decisional practice are required. Moreover, after 15 years in the field the Commission does not seem completely happy with the approach adopted in the Guidance Paper in the high time of the more economic approach and appears to have realised that a more economic approach increases the burden also for the enforcers. With some suspense, the competition law community is now awaiting the draft guideline, which might move the Commission's approach further away from the Guidance Paper. The Commission intends to open draft guidelines for public consultation by mid-2024 and adopt them in 2025.

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