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EU – European Commission publishes draft Guidelines on exclusionary abuse, requests feedback

Introduction

On 1 August 2024, the European Commission (“Commission”) launched a public consultation on its draft Guidelines on exclusionary abuses of dominance (“Draft Guidelines”). Interested parties are invited to submit comments on the Draft Guidelines by 31 October 2024. The Commission plans to adopt the final Guidelines during 2025. 

The Draft Guidelines have an extensive history. After the publication of a discussion paper in 2005, the Commission published a Guidance Paper on Enforcement Priorities for Exclusionary Abuses (“Guidance Paper”) in 2008. In this Guidance Paper, the Commission introduced the so-called “effects-based approach”, according to which the abusive nature of a conduct is determined by its effects, regardless of its form or external characteristics. This represented a significant departure from the previous form-based approach and was later, to some extent, endorsed by the EU courts. 

In March 2023, the Commission announced its intention to adopt new guidelines on exclusionary abuses. As an initial step, the Commission immediately amended the Guidance Paper, to reflect the most recent cases of the EU Courts (see here). 

This process continued with the publication of the Draft Guidelines, in which the Commission proposes a novel direction, which, on several points, diverges significantly from the effects-based approach set out in the Guidance Paper. 

In this article, we briefly outline the contents of the Draft Guidelines and provide a few insights. 

When is a company “dominant”? 

The first step in assessing whether a company has a dominant position on the relevant market often involves examining its market share.[1] The Commission reconfirms existing practices and case law that market shares exceeding 50% are, barring exceptional circumstances, indicative of a dominant position. The Draft Guidelines also propose a soft safe harbour for companies with a market share below 10%.[2] However, in practice, companies with a market share less than 25% are unlikely to fall under Article 102 of the TFEU.[3]

The analysis, however, does not end there and other factors are relevant to evaluate whether an undertaking is dominant, such as the market share of the dominant undertaking’s competitors,[4] whether there are any barriers to expansion and entry to the market[5] or whether buyers’ have countervailing market power.[6]

The Draft Guidelines also offer advice on the less-common ‘collective dominance’. This refers to the situation where two or more legally separate undertakings act or present themselves as a collective entity. Cross-ownership, participating in joint ventures, or having overlapping directorships can cause this. Even the way the undertakings interact in the market can lead to such a situation.

When is behaviour an exclusionary [7] abuse? 

One of the key novelties of the Draft Guidelines is that it establishes three categories of conduct: (i) a general category; (ii) conduct which is presumed to be abusive but where the dominant undertaking can rebut that presumption; and (iii) “naked restrictions”, which have no other economic object but to restrict competition. 

Category 1: The general test 

Reflecting the case law of the Courts, the Draft Guidelines explain that conduct can only be classified as abusive if it: (i) deviates from competition based on merit; and (ii) possesses the potential to produce exclusionary effects.

  • Competition on the merits – The Draft Guidelines define this concept as “conduct within the scope of normal competition on the basis of the performance of economic operators and which, in principle, relates to a competitive situation in which consumers benefit from lower prices, better quality and a wider choice of new or improved goods and services.”[8] 

The Commission also lists a number of factors that are relevant to this assessment, including whether the conduct prevents consumers from exercising free choice, whether the conduct involves providing misleading information or misuse of regulatory procedures, or violates other areas of the law.[9] For certain pricing practices, the Draft Guidelines also explain that a price-cost test is required.[10] 

  • Conduct capable to produce exclusionary effects – In order to establish an abuse, the Commission needs to demonstrate that the conduct is at least capable of producing exclusionary effects. 

The Draft Guidelines contain guidance on the elements that may be relevant to assess whether conduct is capable of restricting competition.[11] However, much more interesting, is the section on the type of evidence that the Commission deems not required. Notably, the Commission considers it unnecessary to prove actual harm to competition, the profitability of the conduct, direct consumer harm or that the competitors that are affected by the conduct are as sufficient as the dominant undertaking.[12]

Category 2: Rebuttal presumption for behaviour to which a specific legal test applies 

The Draft Guidelines also instate a presumption that certain behaviour is deemed to fall outside the scope of competition on the merits and is capable of producing exclusionary effects. This is notably the case for five types of behaviour for which the EU Courts have developed a specific legal test:

  • Exclusive dealing – This includes exclusive purchasing and supply obligations as well as rebates or other advantages which are conditional upon the customer buying from, or the supplier selling to, the dominant business exclusively (exclusivity rebates). Other requirements such as stocking or volume requirements can produce similar effects in practice and will therefore, also trigger the presumption. 
  • Certain tying and bundling practices – These refer to situations where two separate products can only be bought together. Tying can result from technical or physical integration or because of a contractual obligation. Bundling occurs when two separate products are offered together as a single package.[13]
  • Refusal to supply[14] – This refers to the situation where the dominant undertaking, which is active in the upstream and downstream markets, has developed an input which is indispensable to compete with the dominant undertaking in the downstream market.
  • Predatory pricing – This refers to strategies that involve pricing below cost. 
  • Margin squeeze – This refers to a situation where a business is active in an upstream input market and a related downstream market and sets its upstream or downstream prices at a level that prevents its downstream competitors, who rely on that input, from operating profitably on a long-term basis. The presumption is triggered when the difference between the upstream and downstream prices is negative.

The Draft Guidelines clarify that a business can present evidence to counter the presumption that a behaviour can have exclusionary effects. This could include evidence demonstrating that the case circumstances significantly differ from the underlying assumptions on which the presumption is based, to the extent that any potential effect is purely hypothetical. The Commission is obligated to consider such evidence, as a direct result of the Court’s judgment in the Intel case

However, the Draft Guidelines propose a relatively low threshold for the Commission, stating that the capability to produce exclusionary effects is established if the Commission: (i) proves that the arguments and supporting evidence submitted by the dominant business are insufficient to challenge the presumption; or (ii) “provides evidentiary elements” showing the behaviour’s capacity to have exclusionary effects. This, in our view, falls short of a requirement for the Commission to prove the capability to produce exclusionary effects.

Category 3: Naked restrictions – an (almost) irrebuttable presumption 

  1. Lastly, the Draft Guidelines also clarify that certain “naked” restrictions, which are restrictions that have no purpose other than to limit competition, are inherently a deviation from competition based on merits and capable of restricting competition. Only in highly exceptional circumstances will a business be able to demonstrate that this type of conduct was not capable of producing exclusionary effects.
  2. The Draft Guidelines give the following examples: (i) payments by the dominant business to customers that are conditional on the customers delaying or cancelling the launch of products that are based on products offered by the dominant business’s competitors; (ii) the dominant business agreeing with its distributors that they will replace a competing product with its own under the threat of withdrawing discounts benefiting the distributors; or (iii) the dominant business actively dismantling an infrastructure used by a competitor. 

Objective justification

The Draft Guidelines indicate that it remains possible for a dominant company to show that the conduct at issue is either objectively necessary and proportionate,[15] or that its negative effects are counterbalanced (or even outweighed) by the advantages in terms of efficiency that also benefits consumers.

The Draft Guidelines make it clear that category-2 and category-3 conduct can also be justified on the basis of an objective justification, but the threshold is high. For category-2 behaviour, the Draft Guidelines state that the high potential to lead to exclusionary effects must be given “due weight” in the balancing exercise.[16] Category‑3 conduct is “highly unlikely” to be able to benefit from this exemption.[17]

First thoughts

Since its publication last month, the Draft Guidelines have been subject to considerable criticism, including for their lack of clarity on some crucial parts of the legal test. Below we set out our first observations on the draft text.   

Back to a form-based approach

The Guidance Paper was launched as a significant step towards embedding a more economics-focused orientation within EU competition law. The Court of Justice has since largely endorsed this approach,[18] confirming that the conduct must produce “at least potentially, an anti-competitive effect.”[19]

The current Draft Guidelines make a significant shift, reverting to a large extent to the form-based approach. Consequently, effects are relegated to a secondary role, as demonstrated by the conspicuous absence of concepts such as “theory of harm” or “anti-competitive foreclosure” from the Draft Guidelines. The section of the Draft Guidelines that enumerates elements unnecessary to prove a conduct's potential for producing exclusionary effects, also underlines that evidence of anti-competitive effects is subordinate to form when identifying the abusive nature of conduct. 

This is not to imply that effects will be entirely ignored. As previously indicated, dominant undertakings will still be permitted to challenge the presumption, because of the EU Courts’ case law. However, in comparison to the Guidance Paper, effects appear to have been demoted to an afterthought.

The introduction of a presumption

Arguably, the most innovative aspect of the Draft Guidelines is the introduction of a presumption for category-2 conduct. This point is likely to provoke debate during the consultation, as we believe it is on strenuous footing with the legal framework[20] and the EU Courts’ case law. As the Commission itself concedes, “the Union Courts have not always made explicit use of the term “presumption” for each one of these practices” and it remains questionable whether the Court ever intended to establish such a presumption for each of the category-2 conduct scenarios. It remains to be seen whether this approach will gain the Courts’ approval.

Moreover, the practical implications of the presumption may prove to be limited. Given that dominant firms can still compel the Commission to consider effects by arguing that their behaviour was incapable of producing exclusionary effects, it cannot be excluded that the presumption may only have a limited impact in practice. 

The role of economic analysis 

Perhaps counterintuitively, the introduction of the presumption for category-2 behaviour may increase the importance of economic analysis for potentially dominant companies. 

The Draft Guidelines make it clear that the Commission is only required to look at the effects of category-2 conduct when the dominant company presents evidence rebutting the presumption. Moreover, the breadth of the evidence also determines the Commission's scope of assessment. As such, the Draft Guidelines make it clear that the Commission is only obligated to determine whether the presumption is refuted based on the arguments and supporting evidence presented. A comprehensive effects analysis is not required beyond this point.[21]

As a result, potentially dominant undertakings have an incentive to ensure that, first, they can substantiate their claims that their conduct is not capable of producing foreclosure effects and, second, the evidence is sophisticated and sufficiently broad. Potentially dominant firms may therefore, somewhat paradoxically,  have an increased incentive to carry out thorough economic analysis before engaging in certain conduct. Although many companies already adopted this as a standard practice before, it may now become more common.

Protection of competition as a process v consumer harm

The 2008 Guidance Paper prioritised preventing consumer harm: the Commission made it clear it would focus on conduct types most detrimental to consumers. The paper heavily emphasised ‘anti-competitive foreclosure’, referring to exclusionary effects harmful to consumers. 

The Draft Guidelines move away from this stance, explicitly stating that it is not necessary to prove that the conduct results in direct consumer harm.[22] Consequently, the Commission also no longer differentiates between anti-competitive and pro-competitive foreclosure. The focus seems to have shifted from consumer harm prevention towards safeguarding the competitive process as such.

For more information, please contact Baptist Vleeshouwers and Álvaro López de Ochoa García

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[1] The Draft Guidelines as such do not offer any guidance on market definition but instead refer to the Market Definition Notice of February 2024. See here.

[2] Draft Guidelines, fn. 41. 

[3] Recital 32 of Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation), OJ L 24, 29.01.2004, pp. 1-22; DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, 19 December 2005. 

[4] For instance, a market share below 40% can still suggest a dominant position if it is multiple times the market shares of the relevant competitors (T-219/99, British Airways v Commission, EU:T:2003:343, para. 211).

[5] These could be legal or regulatory, such as licensing requirements or intellectual property rights, but also other factors like the existence of an established distribution and sales network or doctors' prescribing habits. The Draft Guidelines also mention topical issues like data-driven and first-mover advantages, and network effects in platform markets

[6] Strong buyer power that covers a large customer segment may prevent suppliers from exercising market power.

[7] The Draft Guidelines only cover exclusionary abuses. This type of abuse has been most prominent in the EU Courts’ case law with over 30 judgments. 

[8] Draft Guidelines, para. 51.

[9] Draft Guidelines, para. 55.

[10] Draft Guidelines, para. 56.

[11] Draft Guidelines, Section 3.3.3.

[12] Draft Guidelines, Section 3.3.1.

[13] Mixed bundling, which refers to the situation where the two products are available separately but offered at a discount when purchased jointly, does not trigger the presumption. 

[14] There seems to be an inconsistency in the Draft Guidelines. On one side, the draft states that the behaviour for which the Courts have developed a specific analytical framework “is deemed to be liable to be abusive because it falls outside the scope of competition on the merits and is capable of having exclusionary effects.” These five types of conduct are detailed in Section 4.2 of the draft guidelines, which also includes refusal to supply. Refusal of supply is also mentioned in para. 53, which repeats the presumption that these categories of conduct depart from competition on the merits. However, on the other side, paragraph 60(b) of the draft guidelines does not mention refusal to supply as one of the behaviours deemed to produce exclusionary effects. Considering the reference in paragraphs 47 and 53, as well as its inclusion in Section 4.2, it is in our view likely that it was the Commission’s intention to extend the presumption to refusal to supply. This should however be clarified in the final version of the guidelines. 

[15] An objective necessity may arise from legitimate commercial considerations (e.g., protection against unfair competition), or from technical justifications (e.g., maintaining or improving the performance of the product).

[16] Draft Guidelines, para. 60(b).

[17] Draft Guidelines, para. 60(c).

[18] See e.g. Case C-280/08 P, Deutsche Telekom v Commission, EU:C:2010:603; Case C‑52/09, TeliaSonera Sverige, EU:C:2011:83; Case C-295/12 P, Telefónica and Telefónica de España v Commission, EU:C:2014:2062; Case C-209/10, Post Danmark, EU:C:2012:172; Case C-413/14 P, Intel Corporation v Commission, ECLI:EU:C:2017:632; Case C-165/19 P, Slovak Telekom v Commission

EU:C:2021:239 Case C-680/20, Unilever Italia Mkt. Operations Srl, EU:C:2023:33.

[19] Case C-52/09, TeliaSonera Sverige, EU:C:2011:83, para. 77.

[20] Article 2 of Regulation 1/2003 makes it clear that it is for the Commission to prove the infringement of Article 102 TFEU.

[21] Draft Guidelines, para. 60(b).

[22] Draft Guidelines, para. 72.

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competition, competition law, eu, eu law, antitrust, antitrust law, european commission, abuse of dominance, europe, competition and eu law, competition & eu law insights, exclusionary abuse, guidelines exclusionary abuse, commission guidelines abuse