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The Commission’s upcoming Guidelines for Abuse of a Dominant Position under Article 102 TFEU has raised a lot of attention
A New Approach for Assessing Alleged Abuse of a Dominant Position under Article 102 TFEU?
Many pharmaceutical companies risk facing acquisitions regarding abuse of a dominant position and the number of investigations into companies in the sector have continued to increase over the last few years both at an EU and national level. As have been seen these cases can lead to very high fines as well as claims for damages. It is thus important to stay on top of the developments in the field in order to ensure compliance and also act in relation to competitors that do not abide by the rules and to ensure that all procedural safeguards are taken into account if under scrutiny.
On 27 March this year the European Commission launched a Call for Evidence seeking feedback on the intended adoption of Guidelines on exclusionary abuses of dominance, prohibited by Article 102 TFEU. Exclusionary abuses are aimed at excluding competitors from the market and include e.g. exclusive dealing or purchasing, conditional rebates, tying and bundling, predatory pricing, refusal to supply and margin squeeze. Article 102 TFEU also prohibits exploitative abuses, such as excessive pricing, but such conduct is not covered either by the 2008 Guidance or the new guidelines.
In parallel, the Commission has published a Communication (and Annex) amending with immediate effect its 2008 Guidance on enforcement priorities concerning exclusionary abuses (the “2008 Guidance”). A Policy Brief entitled “A dynamic and workable effects-based approach to Article 102 TFEU” has also been published, which further explains the background to the launch of the Guidelines initiative as well as the changes to the 2008 Guidance.
The 2008 Guidance has contributed to promote an approach focused on the potential effects of alleged abusive conduct through the analysis of market dynamics (the so-called “effects-based approach”). Since the adoption of the 2008 Guidance, the Commission has issued 27 decisions relating to exclusionary conduct, and the EU courts have issued 32 judgments. Thus, in parallel to the Commission’s decisional practice there has been important developments of case law by the EU Courts in Luxemburg.
The 2008 Guidance differs from guidelines in other fields of competition law since it sets out the Commission’s enforcement priorities without providing any detailed guidelines on the substantive application of the competition rules. However, it seems like the Commission now wants to take a firmer approach with Guidelines instead of a guidance. According to the Commission “it seeks to ensure that abuse of dominance rules are clear, effective and applied vigorously to the benefit of European consumers and the economy at large.” Whether that will be the case can however be discussed.
Feedback in the public consultation
The public consultation on the adoption of guidelines attracted a lot of attention. No less than
45 stakeholders have provided feedback, among them academics, large companies, law firms, competition economist firms, competition law associations and consumer organisations. A number of the commentators have questioned the Commission’s interpretation of the case law from the EU Courts in Luxembourg, arguing that, rather than interpreting these judgments, it is setting its own policies. The Commission now has an important task ahead to review and consider these comments.
More in-depth assessment regarding abuse of dominance required according to the EU Courts
The EU Courts have during the last few years quashed several decisions from the Commission regarding abuse of a dominant position, inter alia in Case C-413/14 P, Intel regarding exclusivity rebates, due to a lack of a proper effects-analysis by the Commission. That case law was recently extended to exclusive dealing. In the latter case, C-680/20, Unilever Italia-, the ECJ referred to its ruling in Intel and held that when the dominant firm provides evidence in support of an argument that the conduct was incapable of restricting competition, the national competition authority must assess the possible existence of a strategy to exclude as efficient competitors and analyse the dominant firm’s capacity to foreclose the market (without having to prove any actual effects). In addition, the authority must also assess any objective justifications presented by the dominant firm. In a recent case, Case C-377/20 Servizio Elettrico Nazionale and Others, the ECJ once again held that in addition, the dominant firm may show that the disputed conduct is counterbalanced or even outweighed by advantages in terms of efficiencies that also benefit consumers. Thus, today there exists a similar exemption mechanism under Article 102 TFEU as under Article 101.3 TFEU governing anti-competitive agreements, although this follows from case law rather than the Treaties. In the Servizio Elettrico Nazionale-case, the Italian Supreme Court later found that no abuse had been proved.
Next steps
The Commission plans to publish draft Guidelines for public consultation by mid-2024, in order to adopt them in 2025. Upon their adoption, the Commission will withdraw the 2008 Guidance.
Until the final Guidelines are adopted, the Commission provides certain clarifications on its approach to determine whether to pursue cases of exclusionary conduct as a matter of priority. The Commission has therefore adopted a Communication that amends specific parts of the 2008 Guidance. In the meantime, any cautious company should make sure to carefully assess whether the company risks being in a dominant position and if any contemplated pricing or other business strategy which might be perceived to have an exploitative or exclusionary effect could be considered as an abuse and, if so, whether there are any objective justifications or pro-competitive effects justifying such practices.