Towards a Less Effects-Based Approach? European Commission Takes Action to Amend EU Framework on Exclusionary Abuses of Dominance

In Short

The Situation: On 27 March 2023, the European Commission ("Commission") published a Communication amending its 2008 Guidance on enforcement priorities concerning exclusionary abuses ("amended 2008 Guidance Paper"), and launched a consultation process for the adoption of Guidelines on exclusionary abuses of dominance. In parallel, the Commission also released a policy paper explaining the background of these initiatives.

The Result: This package signals the Commission's willingness to rebalance the so-called "effects-based" approach to applying the Article 102 Treaty on the Functioning of the European Union ("TFEU"), towards a "more dynamic and workable approach," while also taking into account certain developments in the Court of Justice of the European Union ("ECJ") caselaw. In practice, the changes should facilitate the Commission's ability to investigate several types of conduct by dominant companies, such as: (i) pricing practices that exclude less efficient competitors; (ii) the imposition of unfair conditions for access to an input that is not necessarily indispensable; and (iii) exclusive rebate practices without conducting an as-efficient competitor ("AEC") test.

Looking Ahead: Changes under the amended 2008 Guidance Paper are effective immediately. Companies can provide comments on the planned adoption of Guidelines until 24 April 2023, and following this consultation, the Commission envisages releasing draft Guidelines for public consultation by mid-2024. Upon adoption of the final Guidelines in 2025, the amended 2008 Guidance Paper will be withdrawn.

Amended 2008 Guidance Paper

The 2008 Guidance Paper provided for the Commission's enforcement priorities on exclusionary abuses of dominance and promoted an approach focused on the potential effects of alleged abusive conduct, through the analysis of market dynamics (so-called "effects-based approach"). Since then, significant developments in ECJ caselaw on the application Article 102 TFEU (some 32 judgments) have endorsed the effects-based approach. However, in annulling several Commission decisions, these judgments also underlined the Commission's difficulties in applying such an approach in practice. In recent years, the Commission has increasingly seen the 2008 Guidance Paper as burdening its antitrust enforcement.

The Commission's amended 2008 Guidance Paper thus makes several main changes: 

  1. The amendments provide a specific definition of anticompetitive effects, which reflects that foreclosure can exist even when rivals have not been fully excluded or marginalized. The definition focuses instead on the "structure of the market," taking into account all its parameters, such as price, production, innovation, variety, or quality. This definition of anticompetitive effects also removes the reference to the dominants undertaking's ability to "profitably increase prices" as a result of the anticompetitive practice. This limits the ability of dominant undertakings to rely on the performance of competitors or the absence of recoupment as a justification for their alleged abusive practice. 
  2. The amendments recognize that, in certain circumstances, a less efficient competitor may constitute a constraint that must be taken into account in determining whether a particular price-based conduct leads to anticompetitive foreclosure. This may be the case, for instance, in markets where the emergence of equally efficient competitors is not possible due to the market structure or where the relevant market is protected by significant barriers to entry and expansion. By taking account of less efficient competitors, this could reduce the ability of a dominant undertaking to rely on its own higher efficiencies to justify its practices.
  3. The amendments consider that requiring evidence of foreclosure of as-efficient competitors (so-called AEC test) likely would lead to under-enforcement in certain scenarios. Thus, the AEC test is deemed "not legally required" in some situations, such as exclusive rebates. Nevertheless, the Commission recognizes in its policy paper that the caselaw requires that it assesses the probative value of all AEC studies submitted by the parties. 
  4. The amendments distinguish situations of outright refusal to supply from situations in which the dominant firm makes access to a key input conditional on unfair terms. The Commission considers the latter case to be a "constructive refusal to supply," such that it is unnecessary to demonstrate the indispensability of the input, which is reserved for situations of outright refusal to supply.
  5. For the same reason, the amendments emphasize that margin squeeze is not a type of refusal to supply. Rather, it is an independent form of abuse, and the indispensability requirement does not apply to this practice either. This means that dominant undertakings now may think twice before giving access to an input, as it may be more difficult for them to justify the conditions under which access is given, rather than simply a blanket refusal to provide such access. 

Prospective Guidelines on Exclusionary Abuses of Dominance

The amended 2008 Guidance Paper is a short-term fix, as the Commission intends to adopt Guidelines on exclusionary abuses of dominance for a longer term solution and, in this respect, launched an initial consultation process that closes on 24 April 2023. Draft Guidelines are to be published in 2024 for final adoption in 2025. 

The Commission sees a difference between such "Guidance" and the "Guidelines," as the 2008 Guidance Paper simply set out the types of corporate behavior it would investigate as a priority, while the Guidelines will  codify the existing caselaw on Article 102 TFEU to provide more legal certainty for consumers and businesses, national competition authorities, and courts.

Once the Guidelines on exclusionary abuses of dominance are adopted, the Commission will withdraw the amended 2008 Guidance Paper.

Three Key Takeaways

1. The Commission is reviewing its policy for exclusionary abuses by dominant undertakings in view of making the effects-based approach "more dynamic and workable" through:

  • In the short term, a modification of the 2008 Guidance Paper; and
  • A longer term approach with the adoption of Guidelines on exclusionary abuses of dominance.

2. Modifications under the amended 2008 Guidance Paper, which are effective immediately and include the possibility for the Commission to investigate pricing practices that exclude less efficient competitors or conduct imposing unfair conditions of access to a particular input without proving the indispensability of that input, as well as the non-mandatory nature of the AEC test for assessing exclusive rebate practices.

3. The prospective Guidelines on exclusionary abuses of dominance, to be adopted in 2025, which will replace the existing 2008 Guidance Paper on enforcement priorities concerning exclusionary abuses and will codify the interpretation of competition law in relation to exclusionary abuses.

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