In a surprise move, the European Commission has published a revised version of its 2008 guidance on enforcement priorities for abusive exclusionary conduct by dominant undertakings (Guidance). The amendments were published on 27 March 2023, without prior consultation and with immediate effect. In parallel, the Commission also launched a public consultation on a new set of guidelines, which in 2025 will replace the (now amended) Guidance.
It is remarkable that the Commission amended the existing Guidance at the same time as it launched a consultation process on its future version. Are the Commission’s amendments intended to reflect developments in EU Court case law – as it claims – or is it an attempt to predetermine the outcome of the consultation on the future guidelines?
Time will tell. In the meantime, we set out the key novelties of the revised Guidance and what companies should expect.
The Commission bit off more than it could chew: a U-turn on the "effects-based” approach
The key changes in the revised Guidance are clearly intended to reduce the pre-eminence of the effects-based or “economic” approach to abuse cases – in particular in the application of the “as-efficient competitor” (AEC) test – and so lower the bar for intervention.
This is a clear U-turn compared to the Commission’s position when publishing its 2008 Guidance, where it made the AEC test the cornerstone of analysis in price-based abuse cases. This meant that “in principle” only companies that are at least “as efficient” as the dominant undertaking were to be protected under Article 102 TFEU. This contrasted with the more formalistic approach taken by the EU Courts up till then, where, for example, the legality of rebates offered by dominant companies was determined by their objective characteristics – rather than their effects.
However, in the 2017 Intel judgment, the European Court of Justice fully embraced the AEC test, which was seen as an important step to acknowledging a more effects-based approach. As a result of this shift, the Commission faced an increased bar when bringing abuse of dominance cases.
Pre-Intel, the last time the Commission had seen a full annulment of a finding of abuse was in 1979. Since Intel, two more dominance cases have been quashed by the EU Courts on the basis of the effects-based approach (Qualcomm and Google Android).
After these three strikes, the Commission now clearly feels the need to restore the balance, and so has revised the Guidance. The changes it has made to that end are discussed below.
The protection of less efficient competitors
The revised Guidance now recognises that – in certain (unspecified) circumstances – companies that are not (yet) as-efficient competitors may also warrant protection from exclusionary behaviour by dominant companies.
It cites the Post Danmark and Unilever Italia judgments to support the change. However, while the “less-efficient competitor” principle echoes the 2015 Post Danmark judgment (where the Court held that the structure of the market prevented the emergence of an AEC), the more recent Unilever Italia case clearly points towards the relevance of an AEC benchmark, as is also the case in the Intel, SEN and Google Shopping judgments.
This amendment may therefore be at odds with the EU Courts’ settled position on protecting less efficient competitors. It would in any event be helpful to understand in which circumstances the Commission considers that the AEC test does not apply and less efficient competitors deserve to be shielded from exclusion. A Policy Brief, setting out the background of the Commission’s initiatives, refers to markets where barriers to entry and expansion are significant (usually considered to be the case in a dominance decision) and provides digital markets as an example (revealing the focus of where the Commission wants to see its hands untied?).
What remains of the AEC test?
In addition, the revised Guidance stresses that the AEC test is only one among many tools to assess exclusionary effects and its results should be only one element in a broader assessment including other (unspecified) quantitative and/or qualitative evidence. In other words, the AEC test should not be a “get out of jail free card”, even if its outcome is unfavourable for the Commission’s case.
The EU Courts indeed confirmed that the Commission has no obligation to carry out an AEC test, although it must assess the evidence submitted by the dominant company in this respect.
It remains unclear what other evidence would be considered sufficient to outweigh a robust AEC test submitted by the dominant company.
A lower bar for “anti-competitive foreclosure”
The revised Guidance also lowers the bar on what (the Commission considers) constitutes “anti-competitive foreclosure”. The bar is no longer set at exclusion of competitors linked to the ability of the dominant company to profitably increase prices. Rather, it is sufficient if the dominant company’s conduct adversely impacts an effective competitive structure of the market, allowing it to “negatively influence” the parameters of competition (such as price and innovation) – without the need to show the strategy is profitable.
On this point, the references to the case law appear to be more convincing. The Court indeed does not require potential profitability as a condition for a strategy to be considered anti-competitive, let alone that the company actually profited from the strategy (as long as the strategy is capable of producing anti-competitive effects).
Nevertheless, if a company is able to show that the anti-competitive strategy imputed to it by the Commission could not be profitable, should this not be a relevant factor for the legal test?
Other changes
Finally, the revised Guidance also lowers the bar for the Commission to bring cases for two specific types of abuses, namely “constructive” refusal to supply and “margin squeeze” cases.
For these types of abuses, the Guidance no longer provides that the goods/services in question should be indispensable inputs in order for the Commission to intervene – which is indeed supported by the case law. This is in contrast to cases dealing with outright refusals to supply, where this remains a condition for intervention.
A loss of legal certainty?
While the Commission claims that its revisions are aimed at “enhancing transparency on the principles underpinning the Commission’s enforcement action”, they lead to additional uncertainty. In addition to the points raised above, plenty of other questions arise – for example:
- How will the Commission treat economic evidence (particularly AEC tests) already submitted by companies in the context of an investigation?
- More importantly, how will the revised Guidance impact companies’ ex-ante self-assessment? How should companies know whether an AEC test is considered appropriate in their market and – where it is – which elements could outweigh its application?
- Will the new protection of less efficient competitors lead to “efficiency offences”, whereby the exclusion of rivals as a result of them being less efficient risks becoming the dominant company’s responsibility?
- Will the cumulative effect of these changes make it more difficult for companies accused of abusing a dominant position to defend themselves in the investigation?
- Will the EU Courts agree with the Commission’s interpretation of its case law, for example on the protection of less efficient competitors?
Certainly, a space to watch.
Interested companies can make submissions in response to the Commission’s call for evidence (until 24 April 2023) and again in mid-2024 when the public consultation on the draft new Guidelines will be opened.
Please contact us or your usual contact in our Antitrust, Competition and Trade team if you would like to discuss this update further. To read more about other antitrust developments, refer also to our Global antitrust in 2023: 10 key themes report.
