Amendments to the 2008 Guidance on enforcement priorities
The 2008 Guidance on the European Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (“Guidance”) has been until recently the only piece of soft law applicable to Article 102.
In March 2023, the Commission amended the Guidance to account for the case law that has developed in the meantime. It published an accompanying brief that elaborates the amendments. The amendments are an interim solution until the guidelines on exclusionary behaviour enter into force, which is expected in 2025.
The amendments to the Guidance concentrate around five topics of relevance to the analysis of anti-competitive effects of an exclusionary form of abuse.
Extension of the notion of anticompetitive foreclosure. The Commission extended the meaning of “anticompetitive foreclosure” to include within the notion a situation where the dominant company’s behaviour allows it to negatively influence “various parameters of competition” and not only the price. Other relevant parameters are production, innovation, variety and quality of goods or services (para. 19 of the amended Guidance). Under the original 2008 Guidance, the notion of anticompetitive foreclosure was defined as a situation where a dominant undertaking can “profitably increase prices to the detriment of consumers” (para. 19 of the original Guidance).
Extension of the notion of “as-efficient competitor”. The Guidance originally stated that the Commission will prioritise the cases where abusive behaviour by a dominant undertaking was capable of foreclosing as-efficient competitors. As-efficient competitors were defined from a cost perspective. The Courts have developed a broader definition of the notion of “as-efficient competitor” which is not limited to price/cost considerations, but includes other parameters of relevance from the consumer’s point of view, such as choice, quality, and innovation (Case C-413/14 P – Intel). Furthermore, the practice has shown that meaningful competition may also come from less efficient competitors, especially in the markets with high barriers to entry or expansion. The Guidance was therefore amended to include into the notion of “as-efficient” the parameters other than costs, and to note that the Commission will in certain circumstances take into account whether anticompetitive behaviour of a dominant company will also lead to foreclosure of less efficient competitors.
Clarification with respect to the use of AEC test. The third amendment concerns the use of the as-efficient competitor test (AEC test). The original Guidance left some doubt as to whether and to which type of cases the Commission was obliged to apply the AEC test. The amendments reflect the Commission’s practice, confirmed by the Courts, that the application of AEC test is not a must. When it does apply the test, the Commission must read the results in conjunction with other qualitative and quantitative data included in the analysis. According to the case-law, the AEC test is particularly warranted in predatory pricing and margin squeeze cases (see cases C-23/14 Post Denmark II and T-612/17 Google Shopping). With respect to other exclusionary practices, the AEC test has been assessed by the Courts as less efficient, particularly with regard to exclusionary rebates. The Commission, however, remains obliged to engage with the AEC test analysis brough forward by the dominant undertaking in the proceedings (see Case C‑413/14 P Intel).
Constructive refusal to supply. Constructive refusal to supply exists when a dominant company does not outright refuse to supply, but makes the supply subject to unfair conditions. The Guidance originally treated constructive and outright refusal to supply in the same manner. However, as the case law developed, it proved that Bronner criteria and in particular the indispensability criterion (see Case C-7/97 Oscar Bronner v. Mediaprint) are not appropriate for assessing constructive refusal to supply.
Distinction between margin squeeze and refusal to supply cases. Consequently, the fifth amendment separates margin squeeze from refusal to supply and treats them as separate forms of abuse, clarifying that the Bronner criteria do not apply to margin squeeze cases.
The aim of all five amendments is to make the analysis of anticompetitive effects more sophisticated and more facts based.
Adoption of the Guidelines on exclusionary abuses of dominance
The Commission has announced its plan to codify its understanding of the case law, consisting of 32 judgements delivered since 2008 by the Union courts in the exclusionary abuse of dominance cases. The case law would be codified within the new Guidelines on exclusionary abuses of dominance to be adopted by the end of 2025. The expectation is that the Guidelines will provide clarity to the national competition authorities and courts with respect to many issues related to application of Article 102 to exclusionary abuses.
Despite a considerable body of case-law, uncertainty remains around the application of the existing tests developed by the Commission and the Courts, especially with respect to the standard of proof the authorities must meet to prove the existence of abuse. In terms of the degree of probability of anticompetitive effects required to prove abuse of dominance, the 2008 Guidance refers to “likely effects” (para. 20), as well as to conduct “capable of hampering competition” (para. 23), while the Courts have interchangeably used the terms “capable”, “potential”, “probable”, or referred to the conduct that has “capability” or “tends” to harm competition. Even though AG Kokott stated in her Opinion in British Airways (Case C-95/04 P) that all these terms are used without distinction and were meant to describe the same legal standard, the abundance of terms has proven to be confusing. What also proved to be ambiguous is the use of the term “potential”, as it may refer both to a degree of likelihood that a certain behaviour may cause anticompetitive effects and to the antipode of “actual effects”.
Relevance for the non-EU NCAs
Although the authorities in Serbia, Montenegro and Bosnia and Herzegovina have produced a modest case law on exclusionary abuses, it is expected that, in the absence of local guidelines, the amended 2008 Guidance, and ultimately the new Guidelines on exclusionary abuses, will continue to inform their assessments of the existence of dominance and foreclosure effects. Meanwhile, the authorities will have to strengthen their capacities to conduct effects-based approach on a case-by-case basis, especially following the amendment to the Guidance which extends the notion of competitive foreclosure to more sophisticated foreclosure strategies employed by dominant undertakings.
