Antitrust Alert: Will the European Commission Reduce Use of the Commitment Procedure in Dominance Cases?
Eleven years after its entry into force, the EU commitment procedure still appears as a formidable success. Recent developments nonetheless show that the tide may be turning. This is true even in cases concerning potential abuses of a dominant position, for which the commitment procedure had de facto become the standard procedure. In fact, even in abuse of dominance cases, as illustrated by recent European Commission decisions, the commitment procedure may now appear as a less obvious choice for the Commission and investigated parties.
"Commitment procedure" or "standard procedure"?
The main advantages of the commitment procedure for investigated undertakings are well known. The case is closed without any finding of infringement and no fine is imposed. In the end commitments can of course be burdensome, but they are the result of a negotiation and may therefore also reflect concessions made by the Commission. In addition, commitments are generally quite detailed. As a result, they provide more helpful guidance for the future than a decision that prohibits a practice without any indication of what the permissible course of action would be. The definition of a (relatively) safe harbor in a commitment decision can be a decisive upside in an area of EU law which is as complex, uncertain and unstable as the law on Article 102 TFEU (i.e., the provision of the Treaty on the Functioning of the European Union that is aimed at preventing undertakings that hold a dominant position in a market from abusing that position.). Finally, the judicial risk is limited: while complainants or other interested third parties can appeal a commitment decision, it results from the case law of the Court of Justice, and in particular from the Alrosa judgment, that the Commission enjoys broad discretion when it determines whether proposed commitments should be accepted and made binding.
Obviously, the commitment procedure also results in significant procedural gains for the Commission, as it can adopt simplified decisions without necessarily issuing a statement of objections. In addition, since the investigated party accepts the commitments, this reduces, when it does not suppress, the litigation risk before the EU Courts.
All these upsides quickly ensured the success of the commitment procedure. Between May 2004 (the entry into force of the commitment procedure) and December 2013, no less than 77% of the Article 102 TFEU proceedings closed by the Commission led to commitments, with four years (2008, 2010, 2012 and 2013) showing a 100% rate. In practice, what was believed to be an alternative procedure became the most common way of closing abuse of dominance cases.
A tide that may be turning
The year 2014 appears as a potential turning point for the application of the commitment procedure. In 2014 the European Commission adopted five decisions closing proceedings in an Article 102 TFEU case. Only one of these was a commitment decision (Case AT.39939, Samsung, a standard essential patent injunction case), whereas the four others found a formal infringement (Case AT.39984, OPCOM/Romanian Power exchange, a discrimination case; Case AT.39985, Motorola, a standard essential patent injunction case; Case COMP/AT.39612, Perindopril (Servier), a pay-for-delay case, and Case COMP/AT.39523, Slovak Telekom, a refusal to supply and margin squeeze case).
It should not come as a surprise that the European Commission did not apply a commitment procedure to practices of a dominant undertaking which, in its view, were coupled with cartel-like behavior, such as those sanctioned in Perindopril (Servier). It must also be noted that in Motorola, even though the Commission found a formal infringement, it refrained from imposing a fine on account of the novelty of the case and diverging conclusions of the national courts on the issue.
The fact remains that, in stark contrast with the previous years, 80% of the decisions closing Article 102 TFEU proceedings in 2014 did find a formal infringement. In fact, 40% of the decisions finding an infringement of Article 102 TFEU since May 2004 were adopted in 2014.
A new light on some limits of the commitment procedure
The year 2014 may well be an outlier, but it may also be the sign of a relative decline of the commitment procedure. In the future this potential trend might be strengthened by the Google case, in which the European Commission decided to reject the commitments submitted by Google and instead to issue a statement of objections. Admittedly, the Google proceedings may still be closed through a commitment procedure, since commitments may be submitted even after a formal statement of objections has been issued. Moreover, the Google case is special due to its political context, since the European Parliament exerted pressure on the Commission to take a harsher stance than the one favored by former Commissioner Almunia. However, at the very least the Google case shows that in complex cases the procedural gains of the commitment procedure can be overestimated. It took the European Commission more than four years to send a statement of objections in this case, after it carried out two market tests and rejected no less than three different versions of proposed commitments.
Beyond this, one cannot exclude that the Commission has now become more sensitive to a limit of the commitment procedure which, precisely due to its success, appears quite vividly: commitment decisions have poor precedential value, as they do not make any legal findings on liability and normally escape litigation before the EU Courts. This may result in a significant depletion of the case law on Article 102 TFEU that cannot be compensated by preliminary references from national courts to the European Court of Justice. In 2013 and 2014, national courts sent a total of only 14 preliminary references concerning competition law matters to the Court of Justice. Only three of these references concerned the law on abuses of a dominant position. This falls short of guaranteeing a steady pipeline of Article 102 TFEU cases before the Court of Justice.
Finally, the relative decline of the commitment procedure might reveal that some investigated parties find the cost of the commitment procedure too expensive. This cost obviously includes the concessions needed to obtain a commitment decision, as well as a waiver (that the investigated party must accept in practice) of the right to appeal the decision before the EU courts. But it also includes the cost of monitoring compliance with commitments, which may be very burdensome. In March 2013 Microsoft was imposed a € 561 million fine due to its breach of a commitment given to the Commission, even though Microsoft declared it took full responsibility for the incident, which it had blamed on a technical error (Jones Day Antitrust Alert of March 2013).
There is no doubt that the commitment procedure remains a very useful tool in EU competition law proceedings. It nonetheless becomes increasingly clear that the standard procedure still has a significant role to play in Article 102 TFEU cases.
This may change the way dominant undertakings apprehend the antitrust risk, as their margin of maneuver increases with the use of the commitment procedure. In a world where the commitment procedure is systematically applied, a dominant company facing unclear legal principles – such as those that populate the case law on Article 102 TFEU – can trust that, should it take a risk, it will escape a finding of infringement and the imposition of a fine by the Commission, provided that it is ready to change its behavior in the future. By contrast, in a world where the commitment procedure is less systematically applied, a dominant company that needs to weigh the commercial benefits of a practice against its antitrust risk faces a more complex decision.
Finally, a more balanced use of the commitment procedure might result in increased litigation before the EU courts. Paradoxically, maintaining such a litigation stream is necessary to ensure that the commitment procedure remains a genuine option: it is only if the EU courts can show that they exercise an in-depth review of the Commission's decisions finding an infringement that the commitments submitted by parties in other cases will remain voluntary.
For more information, please contact your principal Jones Day representative or the lawyer listed below.
Eric Barbier de la Serre
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