New guidance from the European Commission on abuse of dominance – Key changes and implications
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On 27 March 2023, the European Commission announced its intention to adopt a new set of guidelines on exclusionary abuses of dominant positions. The proposal represents a significant step forward, as the European Commission has – contrary to other areas of EU competition law – so far not provided guidelines on abuses of dominance. Until now, the European Commission has only published guidance on its enforcement priorities (“the 2008 Enforcement Priorities”) in relation to Article 102 TFEU.
The European Commission plans to publish draft guidelines for comments in mid-2024 before adopting a final version by the end of 2025 (“the Guidelines").
In the meantime, the Commission has – without prior consultation – amended the 2008 Enforcement Priorities in a Communication and an Annex, updating it to more accurately reflect more recent case law of the European Court of Justice (“ECJ”).
In this article a description of the key changes to the 2008 Enforcement Priorities that companies should be aware of is provided. Moreover, we consider what the potential implications of the future Guidelines may be.
The European Commission aims to reduce the importance of the AEC-test in abuse cases
The 2008 Enforcement Priorities had the objective of setting out the European Commission’s enforcement priorities based on a more economic and effects-based approach, which at the time went beyond the required standard for legality established by the Union Courts. In fact, the 2008 Enforcement Priorities made it clear that the European Commission would “normally only” intervene where companies that are at least “as efficient” as the dominant undertaking were foreclosed.
Nonetheless, the key change in the amended 2008 Enforcement Priorities is an attempt to reduce exactly the importance of this economic approach to exclusionary abuse cases; in particular the application of the “as-efficient-competitor test” (“AEC-test”), to lower the threshold for intervention.
Under the amended 2008 Guidance, the Commission considers that the “as-efficient competitor test” is optional and follows this up by specifying that it will “generally” (rather than “normally only”) intervene where the dominant undertaking threatens an as-efficient competitor.
According to the accompanying policy brief, the background for this change is primarily that the European Commission considers that “genuine competition may also come from undertakings that are less efficient than the dominant firm, in terms of their cost structure.” Such considerations are likely to be most important in markets where the emergence of as-efficient competitors may not be possible because of the “structure of the market” or where the relevant market is protected by significant barriers (i.e. likely often digital markets).
Further, the amended enforcement priorities specify that the European Commission “may” rather than “will” examine economic data relating to cost and sales prices.
The background for this wish to reduce the importance of the AEC-test is likely that the European Commission has recently faced three annulments of its finding of abuses on the basis of either a flawed AEC-test or a failure to carry out an AEC-test (in the Intel, Qualcomm and Google Android-cases).
Lower threshold for establishing anti-competitive foreclosure
While the 2008 Enforcement Priorities established that anti-competitive foreclosure required that the dominant company would later be in a position to profitably increase prices, the amended 2008 Guidance lowers this threshold with references to the Union Courts’ judgments in Unilever and Google Android.
Now, the amended 2008 Guidance stipulates that it is sufficient to establish that there is an infringement of Article 102 TFEU if the conduct adversely impacts an effective competitive structure of the market, which would be the case if the conduct allows the dominant company to negatively influence the parameters of competition (such as price and innovation). Again, a change aimed particularly at digital markets.
Lower threshold for intervention in conduct concerning input foreclosure
Lastly, it should be noted that also in relation to both margin squeezes and constructive refusals to supply, the European Commission also seeks to lower the threshold for intervention under Article 102 TFEU.
In relation to these types of abuses, the amended 2008 Enforcement Priorities, specify that for a case to be an enforcement priority, an input will no longer need to be shown to be indispensable.
What will the role of the AEC-test be now?
While the amended 2008 Enforcement Priorities stress the AEC test is only warranted in predatory pricing and margin squeeze cases, and that the European Commission will not generally carry out an AEC test when assessing rebates, it is left to be seen exactly what types of evidence that an authority may rely on to refute a robust AEC-test submitted by the defendant.
For now, the amended 2008 Enforcement Priorities solely provide that an AEC-test will be integrated into the “analysis in the general assessment of anti-competitive foreclosure (…), taking into account other relevant quantitative and/or qualitative evidence” (referred to in the policy brief as a “dynamic and workable effects-based approach”). No specific examples of such evidence are, however, provided. As provided above, it is, however, likely that this principle will most often be applied in relation to digital markets, where the structure of market could necessitate the use of alternative tests.
Consequently, it appears from the amended 2008 Enforcement Priorities that “less-efficient competitors” may in certain cases also be protected under Article 102 TFEU in the future decisional practice of the European Commission.
This may, however, go against the recent judgments of the Union Courts, such as the recent Unilever judgment, which clearly require that AEC-tests put forward by a dominant company are assessed by the European Commission.
The future Guidelines
As stated earlier, the draft Guidelines are expected to be published in 2024 for final adoption in 2025. Upon adoption of the Guidelines, the European Commission will withdraw the 2008 Enforcement Priorities, including its amendments.
Exploitative conduct will not be subject to these Guidelines, most likely due to the overwhelming relative focus on exclusionary conduct in the decisional practice of the European Commission and the case law of the Union Courts.
Unlike the 2008 Enforcement Priorities, which simply set out the types of conduct that the European Commission prioritises investigating, the future Guidelines will codify the existing caselaw from the Union Courts on Article 102 TFEU, thus hopefully providing increased legal certainty as to the application of Article 102 TFEU to exclusionary conduct.
It will therefore be interesting to see how the European Commission bridges the current potential gap between its enforcement priorities and the caselaw of the Union Courts. It could, however, be speculated that the sudden amendments to the 2008 Enforcement Priorities are a part of an attempt to predetermine the outcome of the future guidelines, as opposed to solely reflecting developments in the caselaw of the Union Courts.
We have finally noted that the European Commission has so far not publicly discussed including newer forms of exclusionary abuses, such as disparagement (the European Commission has initiated investigations into this against Teva (Copaxone) and Vifor) or self-preferencing (Google Shopping). It is to be seen whether the European Commission will include some analysis of such potential exclusionary conduct less focused on price.
For more information, please contact Morten Nissen or Alexander Brøchner
