European Commission’s draft guidelines on exclusionary abuses of dominance: an attempt to settle the question of who needs to show what

The European Commission (Commission) has published its draft guidelines on exclusionary abuses of dominance (Guidelines), seeking feedback through a public consultation. The main novelty of the Guidelines is the introduction of a categorisation for different types of conduct with a related allocation of the burden of proof. In other words, the Commission attempts to settle who needs to prove what in exclusionary abuse cases.

Background

The Guidelines follow last year’s surprise update by the Commission to its 2008 Guidance on Enforcement Priorities for Exclusionary Abuses (Guidance), which was accompanied by a Policy Brief that set out the direction of travel for the Guidelines. The Guidance introduced an “effects-based” approach, which was first ignored, but eventually endorsed, by the EU Courts. This led to a higher bar for intervention – which the Commission is now trying to lower again with its Guidelines (see our previous blog).

The Guidelines are a statement of the Commission’s understanding of Article 102 TFEU and its interpretation of the EU Courts’ case law on exclusionary abuses (there have been over 30 judgments by the EU Courts since the 2008 Guidance), but they remain subject to interpretation by the EU Courts. 

Despite the Commission’s renewed interest in exploitative abuse cases, these are not covered by the Guidelines, which are limited to exclusionary abuses. This is likely because there is limited case law from the EU Courts on exploitative abuses, for decades the “unloved child” of EU competition law.

Commission’s proposed allocation of the burden of proof

According to the Guidelines, a finding of abuse requires conduct that:

1. Departs from “competition on the merits”;
2. Is capable of producing exclusionary effects; and
3. Is not objectively justified or efficiency-enhancing.

The Commission must prove the first limb, while the dominant undertaking can defend itself by adducing evidence in relation to the third limb. Since the rise of the “effects-based” approach, the key question has been who bears the burden of proving the capability of producing exclusionary effects (i.e. the second limb). The Guidelines introduce three categories in this respect: one where the Commission must prove the capability of producing exclusionary effects and two others where the Commission considers that this can be presumed.

First, the general rule is that the Commission needs to prove that the impugned conduct (not covered by the below two categories) is “capable of producing exclusionary effects”. While the effects must be more than hypothetical, the Guidelines set a relatively low evidentiary threshold for the Commission, which supposedly is not required to show: actual exclusion, capability to exclude competitors that are at least “as efficient” as the dominant company, intent to exclude, direct consumer harm, or an appreciable effect.

Second, the Commission has identified certain types of conduct which – if proven – can be presumed capable of producing exclusionary effects. However, the dominant company can submit evidence to rebut that presumption and the Commission is required to engage with such evidence. This category consists of exclusive dealing, exclusivity rebates, predatory pricing, margin squeeze and certain forms of tying.

Third, the Commission has identified certain “naked restrictions” that have no economic rationale other than to restrict competition. The exclusionary effects are presumed and the dominant undertaking will rarely be able to rebut this presumption. This includes, for example, a dominant company dismantling part of its infrastructure that is used by a competitor, or paying a customer to cancel the launch of a product that incorporates a competitor’s input. 

Evaluation of the Commission’s proposal

The general rule that the Commission bears the burden of proof (i.e. the first category), as well as arguably the third category, are based on the EU Courts’ case law. However, some of the elements that the Commission states it is supposedly not required to show where it bears the burden of proof appear more like the Commission’s wish list than a summary of the EU Courts’ position (see for example the “as-efficient competitor” (AEC) point below).

The main novelty is the second category. The presumption that certain types of conduct, for example exclusivity rebates or certain forms of tying, are capable of exclusionary effects (which the dominant undertaking must then rebut) is not settled case law and is also contested by many economists. The key question is to what extent the EU Courts will agree with what the Commission proposes.

Relatedly, the Guidelines play down the importance of the AEC-principle and the related AEC-test. They: (a) assert that an AEC-test is only required to establish whether conduct departs from competition on the merits for predatory pricing and margin squeeze practices; and (b) only provide guidance on the use of an AEC-test for these two practices and conditional rebate schemes. The implication appears to be that the AEC-test is otherwise of little relevance for assessing whether conduct departs from competition on the merits and/or is capable of producing exclusionary effects.

While it may be true that the Commission is not always required to conduct an AEC-test proactively, it remains an important tool to apply the AEC-principle which – according to the EU Courts’ case law – must guide the Commission in (nearly) all exclusionary abuse cases. Also, where a company submits its own AEC-test, the Commission is obliged to engage with it. Given the practical relevance of the AEC-test, it would be helpful if the Guidelines contained more guidance on when this test is relevant (beyond predatory pricing and margin squeeze cases) and what factors may outweigh a “successful” AEC-test submitted by the dominant company. 

The Guidelines fall short on accurately summarising the case law on the importance of the AEC principle. On top of this, considering the scarce references in the Guidelines to consumer welfare, the Commission – in its focus on trying to lower the bar for intervention – risks losing sight of what Article 102 TFEU is intended to do.

Other elements

In other respects, the draft Guidelines contain helpful summaries, for example on:

1. The principles of dominance, including on the opaque notion of “collective dominance” (albeit largely based on merger control precedents which seem ill-suited for abuse cases);
2. The legal tests for specific types of conduct, including both novel (e.g. self-preferencing) and established (e.g. non-exclusivity rebates) behaviours; and
3. How the dominant undertaking can justify the legality of conduct that appears to depart from competition on the merits with exclusionary effects.

Next steps

Interested parties can comment on the draft Guidelines as part of the public consultation by 31 October 2024. The Commission aims to finalise the Guidelines in the course of 2025, which gives the “new” Commission a chance to weigh in prior to their formal adoption.

Freshfields is preparing a submission as part of the public consultation. Please contact us or your usual contact in our Antitrust, Competition and Trade team if you would like to discuss any aspects of the Guidelines and/or make your own submission.