[PDF] The Application of Article 102 TFEU by the European

EU Competition Law Abuse of Dominance (Article 102 TFEU)

Article 102 TFEU Article 102 TFEU (ex Article 82 EC, ex Article 86 EC) “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States

The Law and Economics of Article 102 TFEU - GBV

1 4 1 Article 102 TFEU And General Principles Of EU Law 1 4 2 The Relationship Between Articles 101 And 102 TFEU 1 4 3 Article 102 TFEU And Merger Control Laws 1 4 4 Article 102 TFEU And The Rules On Slate Action 1 4 5 Article 102 TFEU And Regulation 1 4 6 Article 102 TFEU And National Abuse Of Dominance Laws

Competition: Antitrust procedures in abuse of dominance

Article 102 TFEU cases Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits abusive conduct by companies that have a dominant position on a particular market An Article 102 case dealt with by the European Commission or a national competition authority can originate either upon receipt of a complaint or through

The Application of Article 102 TFEU by the European

The Application of Article 102 TFEU by the European Commission and the European Courts Romano Subiotto QC, and David R Little* I Introduction At the end of 2012, there were a total of 30 active Article 102 TFEU dossiers We include in this count five cases that were at a preliminary stage, with dawn raids conducted but apparently no further

Assessing Rebates under Article 102 TFEU

12 Guidance on the Commission's enforcement priorities in applying Article [102 TFEU] to abusive exclusionary conduct by dominant undertakings, OJ C 45, 24 2 2009 13 See Article 288 TFEU and AG Kokott’s opinion in case C-226/11, Expedia, EU:C:2012:544, para 30

Interpretation of Articles 101 & 102 of TFEU

Article 101 TFEU is to protect competition on the market as a means of enhancing consumer welfare and of ensuring on efficient allocation of resources (Horspool and Humphreys 2012, 430) Article 101 & 102 TFEU prohibit two separate forms of anti-competitive behaviour: Article 101 (1) TFEU prohibits

WHITHER ARTICLE 102 TFEU: A COMMENT ON AKMAN AND CRANE

Crane’s articles on the enforcement of Article 102 TFEU 1 Professor Akman discusses whether the Commission’s Guidance on the enforcement of Article 102 TFEU2 (Guidance) has had a practical impact on the way unilateral con-duct by companies with market power is assessed by the European Commis-

The Role of Article 102 in European Pharmaceutical Sector

substantial case law related to parallel trade, Article 102 of the Treaty of Functioning of the European Union (‘TFEU’) enforcement in the sector has started to be developed after the Commission’s decision on Astra Zeneca7 In that case, possession of intellectual property rights (‘IPR’) is recognized

elf-preferencing and EU competition law

Self-preferencing is not, in general, prohibited by Article 102 TFEU Instead, it is subject to an “effects” test This means that self-preferencing conduct may constitute an abuse of a dominant position depending on its effects on competition and consumers The reason for this is that the question of whether self-

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Survey

The Applicationof Article 102TFEUby the

European Commissionand theEuropean Courts

RomanoSubiotto QC,and David R.Little*

I. Introduction

Atthe endof 2012,ther ew ere atotalof30 active

Article102 TFEUdossiers. We includein thiscount

fivecases thatwer eat apreliminary stage,w ithda wn raids conductedbutappar entlyno furtheractionye t taken. 1

Of ther emaining25casesin whichformal pro-

ceedingshad beenopened, aStatement ofO bjections had beenissued infiv epro ceedings. 2

The Commission

closed anumber ofAr ticle102 investigationsin 2012, including thoseinto protection andindemnityinsur - ancein themarine sector, 3 and intopurported individ- ual orjoint actionto delay mark etentryof generic medicines (AstraZeneca/Nycomed 4 andSynthon/GlaxoS- mithKline 5 ). Ac omplaintintoallegedabusiv econd uct byN umericablewasformallyr ejected inter aliabecause the Commissioncons ideredthatcertain ofthe impugned practiceswere theresultof technicaloutages rather thanex clusionaryconductand/orwer eamatter for contractlaw ratherthancompetition law . 6

The Commissionmaintainedits recent trend of

using theAr ticle9,Regulation 1/2003c ommitments mechanism toinformally resolv einvestigations,includ- ing thoseinto ReutersIn strumentCodes7 andRioT into

Alcan.

8

A setof commitments offeredby theincumbent

electricity providerinthe Czech Republic, CEZ,to addressc oncernsrelatingtoac cesstothe Czech whole- sale electricitymark ethavebeen sentoutformark et testing. 9

Google andthe Commissionha veenter edinto

discussions withav iewto developingaset ofAr ticle9commitmentsthatw ouldbring toanendthe Commis-sion'songoingin vestigation intothecompany, whichwas openedformally inN ovember 2010.Vice-PresidentAlmunia recentlystatedthatthe two parties had' sub-

stantially reduced[their] differences' overthecourse of these discussions.

This surveyfocusesonrulings handeddown by the

General Courtandthe Court ofJ ustice(theCommis-

sion didnot issuean yArticle 102prohibitiondecisions * RomanoSu biottoQCisapar tnerin theBrussel sand Londonoffices,

and DavidLittle isan associatein theLondon office,of Cleary Gottlieb , Steen &Hamilton LLP. Theauthorswish tothank theirc olleaguesEsther Kelly,SophieSahlin, CatherineFielden, andCaroline Petit fortheir assistance inpreparing thisartic le.

1 CaseN os.39493 - CPUs/PC Retailers;Case39442 - Frenchelectricit y

wholesale market(EDF); andthe Commission 's investigationsintothe truck sector(see MEMO/11/29), therailfreightsector (seeMEMO/11/

152), andcontainer linershi pping. (MEMO/11/307).

2 Case37985 - PO/DB GVG/SJ(Deutsche Bahn)(SO issuedon October15,

2001); Case37663 - B2/Telia(SO issuedon December19, 2003);Case

39612 - Perindopril(Servier) (SO issuedon 30J uly2012); Case39523 -

Slovak Telecom(andDeutsche Telekom) (SO issuedon 8Ma y2012); Case

39939 - Samsung (enforcementof UMTSstan dardsessential patents)

(SO issuedon 21December 2012).3,http://europa.eu/rapid/press-release_IP-12-873_en.htm?locale=en. (last accessed26Mar ch2013). (last accessed26Mar ch2013).

5 COMP/38.574.Thecase wasclosed foradministrative reasons,as

confirmed ina briefnote postedon theDG COMPwebsi te.Little is known aboutthe investigation, althoughithas beenreportedthat

Synthon withdrewitscomplaint.

6 CaseN oCOMP/39.892 - Numericable-Luxemb ourg.

7 CaseN oCOMP/39.654 - Reuters InstrumentCodes .

8 CaseN oCOMP/39.230 - Rio TintoAlcan .

9 CaseCOMP/39.727 - CˇEZ andothers . Thenon-confidential textof the

proposed commitmentsisavailableat ,http://ec.europa.eu/competition/ antitrust/cases/dec_docs/39727/39727_1734_9.pdf.(last accessed26 March2013). JournalofEuropean CompetitionLaw &Practice , 2013SURVEY1of9

The Author2013.Pu blishedby OxfordUniversityPr ess.All rights reserved.ForPermissions, pleaseemail:journals.permissions@oup .comKeyP oints

†Whilethe Commissiondid notadopt any Article

102 prohibitiondecisionsin 2012,c ommitment

proceedingsunderArticle 9of Regulation 1/2003 and publicstatements bysenior officialsshed some lightonits likely analyticalappr oachand

futureenfor cementpriorities.†The GeneralCourt and/orCour tof Justiceupheld prohibitiondecisionsin several import- ant judgments,including inAstraZeneca,which

establishes anew category ofabuseconsisting in the exclusionarymisuseof regulatorypr oceed- ings.

†The Courts'rulingsare broadly consistentwith previouscasela wand/or theanalyticalappr oachdescribed inthe Commission' sGuidancePaper ,

Journal of European Competition Law & Practice Advance Access published

May 10, 2013

at Cleary Gottlieb Steen & Hamilton LLP on May 13, 2013http://jeclap.oxfordjournals.org/Downloaded from

in 2012).Ho wever,anotablefeatureof Ar ticle102 enforcementduring2012 wasthe Commission' suse of informalchannels andnon-abuse proc eedingsto developits thinkingon issuesrele vantto future Article

102 cases.M ostnotably,in itsGoogle/Motorola

Mobility

10 merger investigation,theCommissionc on- sideredat lengthho wholders ofstandard-essential patents mightusetheir IPRto exclude rivals.The theme wassubsequentlyexplor edin severalpresenta- tions bysenior officials. 11

In thesec ommunications,

the Commissionhas statedthat anSEP holderma yr e- strict competitionwhere itusesinjunctions orthe threatof injunctionsto extracthig herrates ora broadercr osslicence fromawillinglic enseethan wouldother wisehavebeenpossible (ortootherwise excludethat willing licensee). 12

There maybecir cum-

stanceswher etheright holdercan entirelylegitimately refuseto license itsrights,such aswher ethelicensee is not negotiatingingood faith.Ha ving developed its thinking inthis area, theCommissionin December issued aStatement ofO bjectionsto Samsungconcern- ing allegedinfringements of Article102 inenforcing patents essentialto theUMTS standard. TheCommis- sion hasindicated informallythat itis lookinginto severalfur thercomplaints relatingtotheexclusionar y use ofIPR by patentholders.Thisis likely tobe a focus forthe Commission 'sworkoverthe comingyear .

The casessummaris edbelowinclude: twoprelimin-

aryrulings onissues referr edb yMemberStatecour ts (PostDanmark ,Compass-Datenbank); twoECJrulings dismissingappeals intheirentirety( Tomra,AstraZeneca); andthe Genera lCourt'sjudgme ntdismissingT elefonica's appealagainst theCommissio n'sd ecisioninWanadoo Espana/Telefonica. Asin20 11, thecasesc over arangeof theoriesofha rm:pric inganddiscri minationinPost Danmark;rebatesinTomra, marginsqueeze inTelefonica, misuseofr egulato ryproceedingsinAstraZeneca,and refusaltosupplyi nCompass-Datenbank. Although thec asesaddresse ddifferenttheo riesofharmandvery differentfactualc ontexts,somerecurr ingthemesand issuesemerge .Beforesumma risingeachofth esecases,

wem akeanumber ofob servationsonth ese commonthemesandon theco ntr ibutio nofthejudgmentstotheArticle102c asela wmoregen erally.

The Commission's2009Guidance Paper hasbeenre-

ferredto ,althoughnotal ways followed, inseveral

Commission decisions,Cour trulings,andA GOpi-

nions. 13

WheretheG uidance Paperhasbeencitedbut

not followedthisis becauseit wasissued afterthe initi- ation ofCommission proc eedingsortheadoptionof the contestedCommissiondecision. Similarly, in

Tomra, theECJ followed astrictanalysisof loyalt y

rebatesthat isnot consistent with the'effects-based' analysis proposedinthe Guidanc eP aper.AstheECJ explained, '[although] theGui danceprovidesfor acom- parativeanalysis ofpr icesand costs...the Guidance, published in2009, hasno relevance tothe legalassess- ment ofa decision, suchasthecontested decision, which was adoptedin 2006'.Ther eisafur thertension between theG uidancePaperand2012 caselawin Tele- fonica. Althoughthe Guidanc ePapergroupedmargin squeeze andrefu saltosupplyin thesame section (implyingthat marginsqueeze isa variety ofc onstruct- iver efusaltosupply),in Telefonicathe GeneralCour t stated explicitlythat' it isthe margin squeeze[notthe excessive upstreamorpredator ydow nstreamprice] that, in theabsence ofan yobjective justification,is initself capable ofc onstitutinganabuse' (emphasisadded). This isc onsistentwiththe ECJ's2011rulings inTelia-

SoneraandDeutsche Telekom. Whetherthereis an

abusivem arginsqueezeisdetermined byrefer ence to the spreadbetweentw ov erticallyrelated prices,regard- less ofwhether eitheror bothpric eswer ethemselv es excessive,discriminatory, orpredatory. Thetension seems formalrather thansubstantiv e.The Guidance Paperand TeliaSonera/DeutscheTelekom/T elefonicaline of casela wbothprov idethat incertainspecificcases (eg wherethedominant compan y's positionupstream resultsfr omspecialorex clusive rights) thereisnoneed to showindispensability inorder toestablishamargin squeeze, despiteit beinga necessar yelement ofan abusiveref usaltosupply.

Measuringantic ompetitiveeffectsandharmto con-

sumers isan areaof somec ontentionin Article 102

10 CaseN oCOMP/M.6381 - Google/MotorolaMobility , Commission

decision of13 February2012.

11 See,for example, thefollowingspeechesby Vice-P residentAlmunia:

'Competition Enforcementinthe Knowledge Economy' (Fordham,20 September 2012);' AntitrustEnforcement:ChallengesOld andNew' (St. Gallen,8 June 2012);CompetitionPolicy forthe Post-Crisi sEra' (WashingtonDC,30 March 2012).See alsoDirectorGeneralItalianer , 'Innovation andCompe tition'(Fordham,21Septembe r2012)and 'Innovation andCompe titionPolicyin theITSector:the European

Perspective'(Beijing,26 June2012).

12 CaseN oCOMP/M.6381 - Google/Motorola Mobility, para.107. 13 See,eg ,CaseCOMP/39.402 - RWEGas Foreclosure , Commission

Decision of18 March 2009;CaseCOMP/C-3/37.990 - Intel, Commission Decision of13 May 2009;CaseCOMP/39.530 - Microsoft (Tying), Commission Decisionof 16December 2009;Case C-549/10P ,Tomra Systems andOthers vCommission , Judgmentofthe Court of19 April

2012; CaseC-52/09, KonkurrensverketvT eliaSoneraS verigeAB, Opinion

of AdvocateGeneralMaza

´k of2 September2010; CaseC-109/10 P, Solvay

SA vEuropean Commission, OpinionofA dvocateGeneral Kokottof14 April 2011;Case C-549/10,TomraSystems andOthers vCom mission,

Opinion ofA dvocateGeneralMaza

´k of2 February 2012.

JournalofEurop ean CompetitionLaw&Practice, 20132of9SURVEY

at Cleary Gottlieb Steen & Hamilton LLP on May 13, 2013http://jeclap.oxfordjournals.org/Downloaded from

theoryand casela w. Whileitiswell-established that actual orpotential anticompetitiv eharmissufficient (a factthat thec ourt inTelefonicaconfirmed),it isless clear whetherthis assessmentis subjectto ade minimis/materialitythreshold. Consistentwithan effects-based analysis,the Guidanc ePaperdoesnot stipulate athr esholdatwhichfor eclosure isdeemed anticompetitive,insteadlisting factorsr elevantto asses- sing themagnitude ofalleged foreclosur eeffects (eg,per centageoftotalsalesaffected bythe conduct).

Although theG uidancePaperwasnot applicablein

Tomra, theECJ inthat casealso declinedto establisha threshold.Instead, theECJ confirmed theGeneral Court'sandCommission 's reasoningthat'by foreclosing a significantpart ofthe market,the To mra grouphad restrictedentr ytooneorafew competitorsand thus limited theintensity ofcompetition onthe marketas a whole.' Onthefacts, 40per cent ofthe market wascon- sidereda substantial portion.Butthe ECJ'semphasis on thefr eedomofcustomersto benefitfro mw hatever degreeof competition ispossibleleav esopen thepossi- bility thatantic ompetitiveforeclosurec ouldbefound at am uchlowerthr esholdondifferent facts.

Consistentw iththeove rridingc ompetitionlawaim

of promotingefficiency, therulesonabuse ofdomin- anceha vebeendeveloped with aviewto prohibiting conductthat might enableacompan yto exclude an equally ormor eefficientrival.The consideration of the 'asefficientc ompetitor'test inTelefonicaand

PostDanmark is consistentwith the2011judgmentsin

TeliaSoneraandDeutche Telekom, confirmingthat:

†Notev eryexclusionaryeffect isnecessarilydetrimen-tal toc ompetition.Competitiononthe meritsmaylead tothe marginalisationof lessefficient competi- tors (PostDanmark , para.22).

†In assessingan allegedpricing abuse,c ompetitionauthorities mayusethe dominantc ompany' sc ostsas abenchmark butnot thec ostsof itsc ompetitors(Telefonica, para.190), althoughother factorssuch

as thedominant compan y'sstrategyarealsor elevant (PostDanmark , para.28).

†Wherethe dominant company'spric escoveritscostsin largepart,anequ ally effic ientcompeti torwillbeableto com petewithoutsufferin glossesthatar eun-sustainableinthelon gte rm(PostDan mark, para.38).

Article102 doesnot definewhat constitutes anabuse

and theECJ' srulinginDeutsche Telekomconfirmedthat thefour categoriesof abuseslisted therein are notexhaustive.N evertheless,whileArticle102cases neednot bepigeon-hol edintoanexisting category ofabuse, previouscasesha ve tendedtofallwithinone ofthe established groups.Major expansionsofthec oncept ofabuse havebeeninfr equent.The AstraZenecaruling is

thereforesignificantin confirming theCommission 's and GeneralCour t'sidentificationofa distinctform of abuse consistinginthe misuseof regulator ypro ceed- ings byproviding 'objectively misleading' statementsto applicable regulatorybodiesinord erto exclude rivals.

The ECJc onfirms,further, thatitisnotnecessar yto

showfraud orintent todec eive onthe partofthe dominant companyinorder toestablish thisabuse. It willbeinter estingto seehowthe authoritiesat the

EU andM emberStatelevels, andc omplainants,seekto

apply thistheor yofharmboth within andoutside the contextof pharmaceutical proceedings.

Weha venotincludedin thissur vey theGeneral

Court'srecent rulinginMicrosoft,

14 on thegr oundthat it focusesprincipally onpro cedural issues.Theappeal arosefr omtheperiodicpenalty paymentimposed by the Commissionon Microsoft underArticle24of Regulation1/2003, forfailur eto complywith arem edy imposed inan earlierpro hibitiondecision (thefirst time theCommission hadmade useof thispo wer).In its judgment,the GeneralCour tupheld theCommis- sion'sdecisionbut reduc edslig htlythefineimposedon Microsoft.The rulingc onfirmsthat significantfinancial penalties maybeimposed fornon-c ompliance even wherether ecouldin theoryhave beensome reasonable disagreementas tothe precise meaningof theremedy's terms (inthis case,the meaningof 'reasonable rates').

On thefacts, theGeneral Court heldthat Microsoft

couldha veassessedcorr ectlyitself thereasonableness of theterms onw hichit providedac cess toitsin- dispensable interoperabilityinformation. Contraryto Microsoft'sassertions,the Commissionwasnotr equired to specifyan acc essfeeinitsremedy andMicr osoft couldnot relyon theappointment ofa monitoring trustee aspro ofthatany remuneration paidbylicensees under therem edywouldha vebeenreasonable.

II. Summaryof casela w

This Sectionpro videsachronological rev iewofthe

rulings handeddo wnbytheGeneralCour tand Court of Justiceconcerning theenforcementofArticle 102

TFEU duringthe calendarye ar2012.

14 CaseT -167/08 - Microsoft Corp.v Commission, Judgmentofthe Court of

27 June2012.

Romano Subiottoand DavidR. Little.The Applicationof Article 102TFEUbythe European Commission andthe Europ eanCourts SURVEY3of9

at Cleary Gottlieb Steen & Hamilton LLP on May 13, 2013http://jeclap.oxfordjournals.org/Downloaded from

A. CaseC-209/10 Post DanmarkA/S v

Konkurrenceradet

On 27M arch2012,theECJ issuedan opinionfollo w-

ing ar eferenceforapreliminary rulingfro mthe

SupremeCour tofDenmark(Hojesteret), considering

whether selectiveprice cutsbya dominantuniv ersal serviceprov idermayconstitutean abuseofadominant position.

The Danishc ourt'srequestaroseout ofadispute

between PostDanmarkand For burgerK ontakt(FK), competitorsin thesupply ofpostal serv ices in

Denmark. PostDanmarkwas ar egulatedmonop olyfor

the deliveryof'reg ularmail, 'thatis,lettersandpar cels (withinc ertainstandardweig htlimits)sentto named addressees.P ostDanmarkwasalso active inthe fully liberalised 'bulkmail' segment,that is,the deliver yof promotionaland marketing materialswithno named addresseesent tor esidentialcustome rs.PostDanmark used thesame distributionnetw orkfor bothsets of mail.

Competitionin thesupply ofbulk mailclients was

organised aroundyearly tenders.Duringthetender for

2003, PostDanmarkw ona numberofFK's largest

currentclients, includingnational supermarket chains, byoffering more favourablerates thanFK.Post

Danmark didnot extendthese offersto othercusto-

mers. TheDanish competition authorityandlaterthe

Danish lowercour tfoundthatPostDanmark had

engaged inantic ompetitiveselectivediscounting and predatorypricingin thebulk mailsegment, cross-sub- sidised byitsdominant positionin ther egularmail segment.

A numberof issueshad beenr esolved priorto the

referralby theDanish court tothe ECJ:theDanish courtfoundthat Post Danmarkwas dominantinthe regulatedsector andthat itsselectiv epricing practices wereunr elatedtoeconomies ofscale. TheDanishcour t also determinedthat therewas noevid ence Post Danmark hadintentionally soughtto eliminatec ompe- tition. Accordingly,applyingtheAKZOtest (ie,that pricesbelo waverage totalcostsbutabov ea veragevari- able costsare abusiveonlyif theyarepar tof aplan for eliminating ac ompetitor),theDanishCour tfound that PostDanmarkhad notengaged inpre datory pricing.

On appeal,P ostDanmarkarguedthat theAKZO

rule asapplied by theCommissioninDeutsche PostAG requiredthec ompetitionauthority toshowP ost

Danmark hadan intentto driveits competitor from

the market.(InDeutsche PostAG , theCommission held that adominant universal service operatoractiveinreservedandliberalisedmark etsegments will befound to haveunlaw fullycross-subsidiseditsactivities in the latterwher eitsprices were lowerthanits incremen- tal costsinthat segment.)The Danishc ompetition authority disagreed,arguingthat itwas notabsolutely necessarytosho wintent inorderto establisha dis- criminatorypricing abusewher ethe dominantcom- pany'sprices werelower thanaverage totalcostsbut higherthan ave rageincrementalcosts.

The Danishc ourttherefore askedtheECJtoclarify

when adominan tcompany' spolicyofcharginglow pricesto cer tainofitscompetitors' customers ma ybe consideredanex clusionary abuseand,specifically, whether apric ebelowa veragetotalc ostsbutabove averageincremental costscould beabusiveabsent ex- clusionaryintent.

The ECJr eviewedtheDanishcompetition author-

ity'smethodology forcalculatingthe' ave rageincr e- mental costs'ofthenon-r eserve dser vice,notingthat this analysisc onsiderednotonlyfixed andvariable costsattributabl esolelytothe non-reser ved segment but alsoa portion ofcommonc ostsattributable to both theres ervedandnon-reserved segments. TheECJ approvedthiscalculation, statingthat 'in thespec ific circumstancesofthe case' theDanish court' sestimate reflected' the greatbulk ofthe costsatt ributable ' tothe non-reservedactivity.

The ECJr ecalledthatnotev ery exclusionar yeffect

was necessarilydetrimental tocompetition.Competi- tion onthe meritsma y, bydefinition,leadto themar- ginalisation ofless efficientc ompetitors.Less efficient competitors,the ECJargued, areless attractive toc on- sumers inr elationto,inter alia, price,choice, quality,quotesdbs_dbs21.pdfusesText_27