Restrictions of EU Competition Law in the Digital Age: The Meaning of 'Effects' in a Digital Economy 3031313380, 9783031313387

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Studies in European Economic Law and Regulation 25

Bernadette Zelger

Restrictions of EU Competition Law in the Digital Age The Meaning of 'Effects' in a Digital Economy

Studies in European Economic Law and Regulation Volume 25

Series Editor Kai Purnhagen, University of Bayreuth, Bayreuth, Germany Editorial Board Members Alberto Alemanno, HEC Paris, Paris, France Mads Andenaes, University of Oslo, Oslo, Norway Stefania Baroncelli, University of Bozen, Bozen, Italy Franziska Boehm, Westfälische Wilhelms-University Münster, Münster, Germany Anu Bradford, Columbia Law School, New York, USA Jan Dalhuisen, King’s College London, London, UK Michael Faure, Maastricht University, Maastricht, The Netherlands Jens-Uwe Franck, Ludwig-Maximilians-University Munich, Munich, Germany Geneviève Helleringer, University of Oxford, Oxford, UK Christopher Hodges, University of Oxford, Oxford, UK Lars Hornuf, University of Bremen, Bremen, Germany Moritz Jesse, Leiden University, Leiden, The Netherlands Marco Loos, University of Amsterdam, Amsterdam, The Netherlands Petros Mavroidis, Columbia Law School, New York, USA Hans Micklitz, European University Institute, Florence, Italy Giorgio Monti, European University Institute, Florence, Italy Florian Möslein, Philipps-University of Marburg, Marburg, Germany Dennis Patterson, European University Institute, Florence, Italy Wolf-Georg Ringe, University of Hamburg, Hamburg, Germany Jules Stuyck, Katholieke Universiteit Leuven, Leuven, Belgium Bart van Vooren, University of Copenhagen, Copenhagen, Denmark

The series “Studies in European Economic Law and Regulation” is devoted to the analysis of European Economic Law. The series’ scope covers a broad range of topics within economics law including, but not limited to, the relationship between EU law and WTO law; free movement under EU law and its impact on fundamental rights; antitrust law; trade law; unfair competition law; financial market law; consumer law; food law; and health law. These subjects are approached both from doctrinal and interdisciplinary perspectives. The series accepts monographs focusing on a specific topic, as well as edited collections of articles covering a specific theme or collections of articles. All contributions are subject to rigorous double-blind peer-review.

Bernadette Zelger

Restrictions of EU Competition Law in the Digital Age The Meaning of ‘Effects’ in a Digital Economy

Bernadette Zelger Department of European Law and Public International Law University of Innsbruck Innsbruck, Austria

ISSN 2214-2037 ISSN 2214-2045 (electronic) Studies in European Economic Law and Regulation ISBN 978-3-031-31338-7 ISBN 978-3-031-31339-4 (eBook) https://doi.org/10.1007/978-3-031-31339-4 Diese Publikation wurde mit finanzieller Unterstützung aus den Fördermitteln des Vizerektorats für Forschung der Universität Innsbruck gedruckt. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

This piece considers case law, literature et al until May 2023.

THANKS TO Mum, Dad, Bernhard jun., Philipp Univ.-Prof. Dr. Walter Obwexer my doctoral supervisor the Austrian Academy of Sciences (Österreichischen Akademie der Wissenschaften) for funding my doctoral thesis being the basis of this monograph the Max-Planck Institute for Innovation and Competition in Munich for the opportunity to conduct research there the University of Innsbruck for funding this research stay in Munich as well as Univ.-Prof. Dr. Werner Schroeder, LLM (Berkley) and Assoz.-Prof. Priv.-Doz. Dr. Manfred Büchele for academic discussion, valuable input and feedback RA Dr. Peter Madl and RA Mag. Constantin Benes, LLM (Columbia) who trained me in thinking and working as a lawyer RA Dr. Hanno Wollmann, LLM (Exeter) who I owe my fascination for European Competition Law Dr. Maria Ioannidou LLB, LLM (Athens), MJur, MPhil, DPhil (Oxford) who encouraged me in pursuing an academic career and coined my academic work Mag. Marija Bilić and Jil Merlijn Abt who helped me proofreading this monograph Sabine Heis, Andrea Gruber, Gabriele Pedroß-Schwank for all their support in daily working life

Foreword

EU Competition Law has been at the heart of the EU internal market. Digitisation has been transforming and challenging EU legal doctrine. EU competition law, as we learn from Dr. Zelger’s book, is no exception to this. The rapid technological developments have given rise to a number of technological tools, whose challenges and benefits are yet to be proven. This moving target makes it challenging to coherently implement and translate the challenges of digitisation into rather static legal doctrine. Dr. Zelger’s work successfully faced this challenge and provides us with a highly topical book, grounded in a robust doctrinal analysis with solid references to technology and economic theories. How to implement these challenges and how to translate them into legal doctrine is the first lesson we can learn from Dr. Zelger’s book. With robust reference to economics as a “glue” between the ramifications of digitisation and doctrinal requirements, Dr. Zelger masterfully analyses, explains and gives guidance on the implementation of challenges of digitisation on EU competition law. This is the second lesson we may learn from Dr. Zelger’s book. Solid reference to economic insights and a consistent perspective on the effects of law and its interpretation can provide us with insights into how to solve the challenges of digitisation in EU competition law. This book is unique in many ways. What makes it attractive to both practitioners and academics is its rigorous application of an effects doctrine as a remedy for the problems resulting from digitisation. This rigorous application may also be reviewed critically. One may have wished to read a bit more about the background of the effects analysis, how are these measured, which data is taken into account and what are the limits of such an approach. One may have also wished for some introduction of alternatives and a critical review of these to make the claim of a superiority of effects analysis stronger.

ix

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Foreword

I am happy and proud to include Dr. Zelger’s work in the series and look forward to her future work on this and related topics. University of Bayreuth, Bayreuth, Germany March 2023

Kai P. Purnhagen

Acknowledgement

Diese Publikation wurde mit finanzieller Unterstützung aus den Fördermitteln des Vizerektorats für Forschung der Universität Innsbruck gedruckt.

xi

Contents

1

2

3

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 Research Questions and Outline . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.1 Setting the Scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3.2 The Underlying Conceptual Approaches of Article 101 and 102 TFEU . . . . . . . . . . . . . . . . . . . . . . Competition Law, Economics and the ‘More Economic Approach’: The Necessity of a Broader Perspective . . . . . . . . . . . . . 2.1 Setting the Scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Pluralism and the Goals of Competition Law: Their Meaning for the Use of Economics in Competition Law . . . . 2.2.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2.2 Goals, Values and Other Normative Foundations: The Competition Law Mosaic of Diversity . . . . . . . . . . . . . . . . 2.3 The ‘more Economic Approach’ and the Goals of Competition Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effects and Article 101 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 The Concept of Restrictions by ‘Object’ or ‘Effect’ . . . . . . . . . . . . 3.1.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1.2 Object vs. Effect: Pros, Cons, the ‘More Economic Approach’ and Enforcement Priorities . . . . . . . . . . . . . . . . 3.1.3 The Role of Economic Theory and Competition Policy . . . 3.2 Object Restrictions: General Principles . . . . . . . . . . . . . . . . . . . . . 3.3 Object Cases: ‘Context Analysis’ and the ‘Context-Specific’ Outcome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.1 Horizontal Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3.2 Vertical Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 5 5 8 11 11 13 14 17 19 21 23 24 24 29 32 35 38 39 41 xiii

xiv

Contents

3.4

3.5 3.6

3.7

3.8

3.9 4

3.3.3 Making Sense of the Case Law? . . . . . . . . . . . . . . . . . . . . The Notion of ‘Context Analysis’: The Relevant Test . . . . . . . . . . 3.4.1 Peeperkorn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.2 AG Bobek in Budapest Bank . . . . . . . . . . . . . . . . . . . . . . . 3.4.3 The Compatibility of the Two Tests of Peeperkorn and AG Bobek . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4.4 Content, (Legitimate) Objectives and the Legal and Economic Context: ‘Context Analysis’ and Pro-Competitive Aspects under Article 101(1) TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . ‘Context Analysis’ vs Pro-Competitive Aspects under Article 101(3) TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ‘Context Analysis’: From T-Mobile to Cartes Bancaires . . . . . . . . 3.6.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.2 T-Mobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.3 Allianz Hungária . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.4 Slovak Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6.5 Cartes Bancaires . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Age after Cartes Bancaires . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7.1 Maxima Latvija . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7.2 Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato . . . . . . . . . . . . . . . . . . . . . . . . 3.7.3 Budapest Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7.4 The Pharma Cases (Generics and Lundbeck) . . . . . . . . . . . The ‘Appreciable Effect’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8.1 The Concept of Appreciability . . . . . . . . . . . . . . . . . . . . . 3.8.2 The De Minimis Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8.3 Object Restrictions and Appreciable Effects . . . . . . . . . . . . Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

45 46 47 48 48

49 53 54 55 55 56 58 59 60 60 62 63 65 71 71 72 73 74

Effects and Article 102 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 4.1 The Notion of Abuse: Are There by Object and by Effect Abuses? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 4.1.1 General Remarks, Principles and Competition Policy . . . . . 78 4.1.2 The ‘More Economic Approach’ and Enforcement Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 4.2 Different Types of Abuse: An Overview . . . . . . . . . . . . . . . . . . . 85 4.3 Object Abuses: An Overview and Analogies to Object Restrictions Pursuant to Article 101(1) TFEU . . . . . . . . . . . . . . . . 88 4.4 Object Abuses: Case Law, Context Analysis and Context-Specific Outcomes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 4.4.1 Exclusive Dealing and Practices Leading to De Facto Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 93 4.4.2 Loyalty Rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 4.4.3 Tying and Bundling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Contents

4.5 4.6 5

6

7

xv

4.4.4 Predatory Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.5 Removal of a Railway Track . . . . . . . . . . . . . . . . . . . . . . The Concept of Appreciability, De Minimis and Article 102 TFEU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

122 129 130 132

Particularities of the Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . 5.1 The Age of Digitisation: Setting the Scene . . . . . . . . . . . . . . . . . . 5.2 Online Markets, E-Commerce and Digital Platforms: Challenges in a Digital Economy . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.2 Online Platforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2.3 Online Markets, E-Commerce and Free-Riding . . . . . . . . . 5.3 Chapter 5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

135 135

Competition Cases in the Digital Economy . . . . . . . . . . . . . . . . . . . . 6.1 Assessment Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2 Article 101 TFEU Cases in the Digital Economy . . . . . . . . . . . . . 6.2.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.2 Eturas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.3 Commission Cases in Asus, Denon & Marantz, Philips and Pioneer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.4 Coty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.5 Most Favoured Nation Clauses: Amazon, NRS and Booking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2.6 Interim Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Article 102 TFEU Cases in the Digital Economy . . . . . . . . . . . . . 6.3.1 General Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.2 Google Shopping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.3 Google Android . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.4 Google AdSense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3.5 Interim Conlusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Chapter 6 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

153 153 158 158 159

139 139 142 149 151

160 162 165 172 174 174 176 182 190 192 195

Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 7.1 An Overall Analytical Framework of Articles 101 and 102? . . . . . 197 7.2 A Hymn to Effect Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202

Primary Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EU Legislation and Policy Documents . . . . . . . . . . . . . . . . . . . . . . . . . Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Court of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . General Court . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commission Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pending Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AG Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

203 203 205 205 207 208 210 210

xvi

Contents

Commission Pending Investigations and Proocedings . . . . . . . . . Press Releases, Fact Sheets and Online Content . . . . . . . . . . . . . Decisions of National Competition Authorities . . . . . . . . . . . . . . US and European National Court Decisions . . . . . . . . . . . . . . . .

. . . .

211 211 211 212

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Secondary Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monographies, Commenteries, Book Contributions and Articles . . . . . . Government and Ministry White Papers, Reports, Working Papers . . . . . Speeches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Online Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

213 213 213 219 221 221

Abbreviations

AEUV AG CMLR ECJ e.g. et seq EU EuGH EuR FCO GC i.e. MFN ÖZK RPM TFEU US VBER

Vertrag über die Arbeitsweise der Europäischen Union Advocate General Common Market Law Review European Court of Justice exempli gratia et sequens European Union Europäischer Gerichtshof Europarecht Federal Cartel Office (Bundeskartellamt) General Court id est Most Favoured Nation Clause Österreichische Zeitschrift für Kartellerecht Resale Price Maintenance Treaty of the Functioning of the European Union United States of America Vertical Block Exemption Regulation

xvii

Chapter 1

Introduction

1.1

General Remarks

Competition law, as law in principle, cannot be applied in the abstract.1 Therefore, it is inherent to practicing law that the underlying facts and specific circumstances of a case are one aspect being decisive with respect to whether a certain measure falls within the realm of the law. Apart from ‘hard facts’, another aspect being decisive as regards the assessment of a measure from a competition law perspective is the underlying economic reality and context within which a measure occurs and needs to be assessed. As the way markets function is explained by economic theory and models, themselves being volatile disciplines prone to change and reaction to socio-political and societal developments and alterations over time, it becomes apparent that a solid framework for competition law assessment is influenced by various aspects as regards its flexibility. Take for example the industrial revolution in the nineteenth century, which undoubtedly had a great effect on society by changing economic circumstances and social conditions. Arguably, digitisation and the novel economic phenomena inherently linked thereto have a similar great impact not only on society and, for example, traditional work2 but also on the way our economic system functions. Economic developments and phenomena as, for example, the evolvement of digital markets and, in this respect, American technology companies acting as multi-sided platforms, such as Facebook, Amazon, Apple, Netflix and Google, also known under the acronym ‘FAANG’, serve as example to this effect. 1

Case C-519/04 P, Meca Medina [2006] ECLI:EU:C:2006:492 (Meca Medina), para 42; Case T-93/18, International Skating Union v Commission [2020] ECLI:EU:T:2020:610 (GC Decision ISU), para 77. 2 Re-imagining Work—Green Paper Work 4.0, German Federal Ministry of Labour and Social Affairs (April 2015), p. 16, available at (‘Green Paper Work 4.0’) accessed 6 February 2023. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_1

1

2

1 Introduction

Competition law, in the broadest sense, safeguards the functioning of our market economy. Therefore, it faces challenges as regards the development and evolvement of economic phenomena. Against this backdrop, this monograph aims to examine the role and meaning of ‘effects’ and economic theory in the context of by object restrictions of competition law in the context of a changing economic reality due to digitisation. Hence, light shall be shed on the—what I call—‘context analysis’ as necessary exercise to be carried out in order to establish a by object restriction or prima facie abuse of competition law. It will be argued that new challenges might call for new ways of thinking or conceptualising competition law. In this respect however, an ‘effects’-informed context analysis in the establishment of prima facie infringements might be a useful tool when testing and/or re-thinking the law.

1.2

Research Questions and Outline

The debate concerning the differentiation between ‘by object’ and ‘by effect’ infringements of competition has existed since the birth of EU competition law, that is, Article 101 and 102 TFEU. Moreover, whether effects and a negative impact on competition play a role also in the context of object infringements or prima facie abuses, somehow runs in the same vein. Insofar, the debate and controversies surrounding the latter are, arguably, anything but new. However, considering digitisation, recent market developments as well as the particularities of the digital environment and online markets, the debate arguably flared up again. Furthermore, although extensive research exists as regards the notion of by object infringements of competition, there is no systematic review of this topic covering both competition provisions, namely Articles 101 and 102 TFEU. This is, however, what this monograph aims to with respect to the analogue world and analogue cases while also covering new phenomena owed to the digital revolution and its impact on and altering of the functioning of traditional markets. Hence, this piece aims to shed light on prima facie infringements of competition, be it in form of a by object restriction or a behaviour qualified as per se abuse, in the context of the offline and online world by illustrating the current legal framework by means of an extensive analysis of the Court of Justice’s (‘ECJ’ or the ‘Court’) case law to this effect. Doing so shall shed light on the above-mentioned ‘context analysis’, which must be conducted in order to establish a prima facie infringement of competition law as well as the extent of the latter being informed by economic theory and thus potential anticompetitive effects of a measure. Against this backdrop, it will be argued that while some measures might, in an offline context, qualify as a by object restriction of competition or a prima facie abuse of a dominant market player, the very same behaviour may, in the digital environment, require a refined assessment and thus not qualify as object restriction or prima facie abuse. Such refined assessment and different outcome are owed to the fact that the functioning of digital markets might deviate from those (economic) rules and standards that we know from the analogue world. In other words, the different potential effects of a practice in this

1.2

Research Questions and Outline

3

new economic environment might require a different assessment of the very same behaviour or practice in the online world. Moreover, while it is clear that in the context of prima facie infringements of competition law there is no need to prove actual anticompetitive effects ‘[a] practice or transaction that is incapable of having anticompetitive effects is not subject to EU competition law’3 at all. Hence, in the context of restrictions by object, effects do appear, be it in form of ‘likely effects’ or ‘presumed effects’, as well as in the context of agreements of minor importance in form of an ‘insignificant effect’ on the market,4 to name few examples only. Against this backdrop, Chap. 2 of this monograph will provide an overview of the normative foundations of competition law and its goals, with the aim to put the occurrence of the concept of the more economic approach, the role of economics and of actual effects in competition law assessments into a holistic perspective. This is necessary in order to draw a holistic picture and illustrate the mosaic of normative values and multiple goals competition law is aiming to serve in a democratic society. Moreover, these multiple objectives might explain why competition provisions do and must show a certain degree of flexibility5 thereby providing a framework capable of adapting to changes gradually happening over time. This seems crucial for the meaning and interplay of economic analysis and effects as a means to establish competition law infringements. Thus, Chap. 2 shall provide the backdrop in which the more detailed analysis as conducted in Chaps. 3 and 4 is embedded. Chapter 3 and 4 will deal with effects in the establishment of Article 101(1) and 102 TFEU infringements. As regards Article 101 TFEU the focus lies on the meaning and role of the latter in the context of by object restrictions.6 In this context, the role of effects in the ‘context analysis’ as required for the establishment of an object restriction as well as the distinction between the concepts of by object and by effect restrictions is indispensable. As regards Article 102 TFEU the distinction of the form and effects-based approach shall be scrutinised with a focus on effects as regards the former category mentioned. The aforementioned shall, inter alia, be done by illustration and detailed scrutiny of the relevant case law concerning cases occurring in the ‘analogue world’, that is, in ‘offline’ markets. It will be shown that the legal framework developed by the Courts of the European Union (i.e. the ECJ and the General Court, both together referred to in the following as ‘EU courts’) for the establishment of prima facie infringements of competition law, be it by object

3

Colomo (2020b), p. 16. Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) of the Treaty on the Functioning of the European Union (De Minimis Notice) [2014] OJ C291/1. 5 As recognised by Sauter, such might result in the fact that competition law is ‘more favourable to flexibility than to coherence’; see Sauter (2016), p. 87. Furthermore, also Talbot recognises the deliberate room left ‘for the establishment of a strong enforcement agency with discretion to calibrate the implementation of the rules in a way it deemed appropriate’, see Talbot (2016), p. 271. 6 As the role of effects in by effect cases seems rather obvious: they need to be proved. 4

4

1

Introduction

restrictions pursuant to Article 101(1) TFEU as well as per se abusive practices according to Article 102 TFEU, is indeed a uniform and consistent one. Chapter 5 will then illustrate the changes digitisation brought as regards the digital economy and the functioning of digital markets. It will be shown why markets online differ from markets offline and why established classical economic theory and models might not necessarily provide a perfectly suitable toolkit for the assessment of a measure in the online environment. Undoubtedly, the changing economic environment, that is, economic trends and phenomena evolving due to digitisation7 (such as, for example, multi-sided platforms in any form whatsoever) seem particularly interesting and necessarily need to be taken account of when trying to define a coherent approach for the establishment of prima facie infringement of competition law and the meaning and role of effects in this respect. Against this backdrop, the relevant cases which have already occurred in the digital environment, that is, in ‘online’ markets, shall be analysed in Chap. 6. Therefore, prominent cases such as the Google triad (Google Shopping, Google Android, Google AdSense)8 will be subject to detailed scrutiny with the aim to conclude whether the rules and standards established with respect to practices occurring in the offline-world are suitable for the assessment of the very same measure in an online context. This monograph will therefore provide for an analysis of an overall, consistent and coherent analytical framework of both, Article 101 and 102 TFEU. In order to do so it is indispensable to analyse the status quo of the legal framework as established by means of the case law of the analogue world and thus in the context of traditional markets. Against this backdrop, while it will be concluded that the framework is indeed a consistent one, those cases that have already occurred and been decided in the online context will be subject to scrutiny. This is done with the aim to not only provide an analysis of whether our rules and standards from the offline world are transferred adequately to competition cases in the digital environment (i.e. digital markets), but also to map out the prospective developments necessary in order to maintain overall consistency. In other words, I aim to conduct an analysis of the concepts and underlying principles of Article 101 and 102 TFEU aiming to (i) conclude on a possible status quo as well as (ii) provide a glance into the future trying to propose a viable approach in order to meet the challenges as imposed by digitisation and, from a competition law perspective, a digital economy while at the same time maintaining consistency as regards our legal assessment framework. Chapter 7 will provide for an ‘in a nutshell’ and compact conclusion of the main findings. Therefore, while providing for an extensive analysis of the EU courts’ case law concerning prima facie infringements of competition law, this monograph also sheds light on the notions of by object restriction and per se abusive behaviour in

7

As mentioned above, e.g. the role of digital markets, FAANG as multi-sided platforms etc. Case T-612/17 Google and Alphabet v Commission (Google Shopping) [2021] ECLI:EU:T:2021: 763 (Google Shopping GC); Case T-604/18 Google and Alphabet v Commission (Google Android) [2022] ECLI:EU:T:2022:541 (Google Android GC); Case T-334/19 Google and Alphabet v Commission (Google AdSense) pending.

8

1.3

Background

5

digital markets as well as the (future) role of an effects-informed context analysis in this respect as well as the need for a deliberate, thoughtful use of the latter.

1.3 1.3.1

Background Setting the Scene

The fascinating component in competition law is that it can in no way ‘survive’ without economics9 when establishing and assessing a measure presumably being at odds with the competition provisions, namely Article 101 and 102 TFEU. Provocatively speaking and borrowed from Wils, ‘the relevance of economics for competition law is so obvious that it is hard to believe that ever an interpretation or application of competition law could arise that was not based on economic thinking’.10 Hence, the intertwining of the law and economics seems inherent to competition law.11 Furthermore, the idea of ‘fair’ competition providing a level playing field for undertakings to compete on the merits lies at the roots of economic theory and the notions of ‘complete competition’ and a ‘perfect’ market. Consequently, it is not possible to deal with a measure from a competition law perspective without the consideration of economic theories and models being necessary tools in order to assess a certain behaviour adequately. Put differently, in order to assess whether a measure is detrimental to competition and therefore harmful from a competition law perspective, it is necessary to know about its actual or potential effects. In this respect, however, the fact that economic science and theory are themselves volatile disciplines, prone to change and reaction to socio-political as well as societal developments and alterations over time further shows the complexity of competition law assessments and highlights the necessity and indispensability of a flexible system. Moreover, the difficulties as regards competition law and economics seem not only linked to the nature of competition law, but also to its various goals covering economic, political, social and moral objectives. In this context, economic thinking seems to serve as ‘lowest common denominator’ of various competition laws worldwide not only warranting adequacy with respect to competition law assessment, but also serving as ‘a constant benchmark which may provide a stabilizing effect and a focal point for antitrust enforcement’.12

9

Colomo (2014), p. 5; Ackermann (2017), p.523; Colomo (2018a), p. 13. Wils (2014), p. 9. 11 Ackermann (2017). 12 Ezrachi (2017), p. 59. 10

6

1

Introduction

Therefore, the interplay of the law and economic reality when it comes to the application of competition law provisions is especially challenging13 and the extent of effect analysis required with respect to the legal assessment of facts has ever since been a highly debated topic.14 This may also explain why the case law regarding the interpretation of Articles 101 and 102 TFEU ‘itself is not static but continuously changing and developing’.15 When looking back in history, the importance of economics in the application of the competition law provisions has constantly been growing. Academic commentators and practitioners have been observing a shift in the approach over the years.16 Whereas the initial approach—until the mid-nineties—was a formalistic or ‘formbased’ one,17 the subsequent trend developed by the Commission and the EU courts, the so-called ‘more economic approach’, requires an approach based on solid and sound economic principles. That is, arguably, a more effects-based analysis in order to establish a breach of the Treaty competition rules.18 This is somewhat misleading as one is tempted to ‘hastily’ assume that inherent to a ‘more economic approach’ there is a tendency to lead to a more prominent role of an actual ‘effect-analysis’, that is, an increase of measures treated under the ‘effectheading’ or ‘effect-based’ approach. However, an approach based on sound economics does not necessarily and consequently lead to an increase of effect-cases. Put differently, it is the sound economic theories (as the ‘engine’ to collect experience about the potential or likely effects of a measure), which decide upon whether an effect analysis is actually required, or whether a measure is inherently ‘evil’ and detrimental to competition so that a treatment under the ‘object-heading’ or ‘formbased’ approach seems justified. Furthermore, it cannot be overstated that also enforcement priorities and thus policy decision are decisive in this respect. Therefore, it is the interplay of economic theory but also policy considerations and enforcement priorities of competition authorities investigating that is crucial when it comes to finding the right balance as regards an adequate and effective implementation of effect-analysis in competition law enforcement. The ‘more economic approach’ as introduced by the Commission should therefore be seen as a means to an end in shaping the role of effects or effect-analysis, but not, however, as an end in itself. Furthermore, the debate concerning the ‘more economic approach’ runs along the lines and demand of accuracy in competition law decisions, on the one hand, as well

13

Colomo (2014), p. 5. See e.g. Jones (2010), pp. 655–656. 15 Peeperkorn (2017), para 5. 16 Gerard (2012), p. 18; Kroes (2005); Report by the EAGCP, ‘An economic approach to Article 82’ (July 2005). 17 Peeperkorn (2016), pp. 389, 393. Arguably, one reason for that might be the influence German competition law and the country’s civil law tradition had on the evolvement and development of European competition law. 18 Ibid, see also Yi Heng (2016), p. 179; Monti (2010), p. 1. 14

1.3

Background

7

as the need for a somewhat flexible framework inherently required by the nature of competition law, as ‘the idea of a stable, predictable [. . .] antitrust discipline is in all of our interests, [but] not inherent to the law’,19 on the other hand. In this light, the shift towards an approach based on sound economics, that is—one way or another (as there are different levels where effects might come into play)20—putting emphasis on the role of the actual effects a measure might have, was a welcomed one. Moreover, there is no doubt that the central role of economics is widely recognised in all competition law jurisdictions.21 As mentioned above, considering all characteristics and goals of competition law, economic thinking, in various competition law systems worldwide, serves as ‘lowest common denominator’ warranting adequacy of competition law decisions by serving as ‘a constant benchmark’ and stabilising effect for antitrust enforcement.22 In addition, competition law provisions tend to consist of broad and vague legal terms,23 a fact that is—in a way—inherent to their nature. Firstly, the use of undetermined legal notions in European Union Law is no peculiarity of the competition provisions, but rather a characteristic of the Treaties of the European Union.24 Secondly, considering the multiple goals, complexity and interconnection with other disciplines and interests (for example, economics, politics or social agendas) the framework provided by competition law must—to a certain extent—leave room for flexibility, that is, discretion and policy considerations. This is anything but new as already at the end of the nineteenth century, namely, in fin-de-siècle Austria it was noticed that ‘the role of competition law was to provide a general framework, [which] meant that the controls had to be flexible, leaving significant ad hoc discretion to decisionmakers [. . .] and required an examination of the economic circumstances of the case’25 (emphasis added). Looking at the EU Treaty provisions, Article 101(1) TFEU prohibits agreements, decisions by associations of undertakings and concerted practices, which may affect trade between Member States and have as their object or effect the prevention, restriction or distortion of competition within the internal market. The Treaties themselves do not contain any definition of the criteria set out in Article 101(1) TFEU. In other words, they do not provide, for example, an answer to what discerns an agreement from a concerted practice, when a measure affects trade between Member States, and when a measure should qualify as restrictive ‘by object’ or ‘by effect’.26

19

Ezrachi (2017), p. 49. See below Sect. 2.2.1. 21 Blair and Sokol (2005), p. 14. 22 Ezrachi (2017), p. 59. 23 Colomo (2018b), pp. 21 and 23; Maher (2000), p. 161; Talbot (2016), p. 271. 24 Colomo (2014), p. 23. 25 Gerber (1992), p. 435. 26 Witt (2016b), p. 439. 20

8

1

Introduction

The same is true for Article 102 TFEU, which prohibits any abuse of one or more undertakings holding a dominant position within the internal market or within a substantial part of it insofar as it may affect trade between Member States. The provision contains no definition of, for example, when an undertaking should be considered dominant. This also applies to the non-exhaustive27 catalogue provided in its second paragraph exemplifying what could constitute an abuse, listing measures, themselves being vague legal terms28 (as, for example, no hint of what might constitute an unfair purchase or selling price is given). Unsurprisingly, the EU courts as well as the European Commission (‘Commission’ or ‘EC’) have ‘filled’ these vague legal terms and fundamental concepts of the competition provisions with ‘life’ and shaped them from the very beginning.29 A fact that is inherent to the nature of EU legal framework and thus also true with respect to other areas of European Union law.30 Moreover, the provisions and their concepts within are still subject to controversy and court decisions today.31

1.3.2

The Underlying Conceptual Approaches of Article 101 and 102 TFEU

Looking at the TFEU competition provisions, there are two distinct conceptual approaches when it comes to the application of Articles 101 and 102 TFEU, the so-called ‘result-orientated’ (effect-based) approach and the ‘conduct-orientated’ (form-based) approach.32 With respect to the former, behaviour needs to be assessed in light of the given circumstances and with respect to its actual effects. Regarding the latter however, the nature of such conduct-oriented approach is that certain

27

See for example Case T-83/91 Tetra Pak II [1994] ECLI:EU:T:1994:246, para 37; O’Donoghue and Padilla (2013), pp. 256 et seq. 28 Wils (2014), p. 13. 29 Witt (2016b), p. 439; Zalewska-Glogogwska (2017), p. 130; Talbot (2016), p. 271. 30 In the context of the free movements of goods, for example, take the ECJ’s decisions in: Case C-8/ 74 Dassonville [1974] ECLI:EU:C:1974:82; Case C-120/78, Rewe/Bundesmonopolverwaltung für Branntwein [1979] ECLI:EU:C:1979:42 (Cassis de Dijon); Case C-267/91 Keck and Mithouard [1993] ECLI:EU:C:1993:905. 31 On the concept of ‘by object’ or ‘by effect’ infringements see, for example, General Court Decision of 12 December 2018 (T-691/14), on appeal Cases C-201/19 P etc. Servier and Others v Commission, pending (Servier); Case C-591/16 Lundbeck v Commission [2021] ECLI:EU: C:2021:243 (Lundbeck). See also e.g. Killick and Jordan (2014); Nazzini and Nikpay (2014). On the controversy regarding a too formalistic approach vs. a more economic approach in the application of Article 102 TFEU see, for example, Colino (2017), p. 18; Colomo (2014), p. 5; Whish and Bailey (2018), p. 182; opposite view: Wils (2014). 32 See in this respect for example: Pablo Ibàñez Colomo, ‘What I talk about when I talk about the “form-based” approach to Article 102 TFEU’ (Chillin’ Competition, 17 December 2014) accessed 6 February 2023.

1.3

Background

9

conduct is prohibited without any consideration of the actual effects of a respective behaviour on competition, because it is considered being very likely to harm competition. The core difference between the two concepts is the extent to which an analysis of the actual effects of the alleged anticompetitive measure is required.33 Therefore, considering a broader and more fundamental perspective: The dichotomy of the latter approaches mirrors the tension between the notion of ‘accuracy’ on the one hand,34 as well as the notion of ‘legal certainty’ on the other hand. With respect to Article 101(1) TFEU the illustrated distinction of the two concepts can be found in the Treaty provision itself. The very clear wording of Article 101(1) TFEU stipulates two alternatives thereby excluding the concept of object restrictions from a full-analysis of a measure’s effects, simply by mentioning the concept of effect infringements as its ‘opponent’ or ‘alternative’.35 Therefore, where an agreement has as its object the restriction of competition it is not necessary to prove actual anticompetitive effects.36 However, how much ‘effect’ or ‘context analysis’ withstands the concept of ‘by object’ restrictions in order not to mingle with the concept of a full effect analysis? An exercise, which is still subject to debate and court proceedings nowadays.37 With respect to Article 102 TFEU, however, there is no such formal distinction of object and effect infringements within the Treaty provision. Furthermore, the qualification of certain behaviour as per se infringements, thus the existence of a ‘by object’ approach with respect to Article 102 TFEU, has also been condemned by the Commission.38 However, in light of the given case law, the fact that a practice can restrict competition by object or effect is also true in the context of Article 102 TFEU.39 A ‘form-based’ approach with respect to some practices such as, for example, exclusive dealing and loyalty rebates, has ever since been applied in the context of Article 102 TFEU too.40 Another example provides predatory pricing, where the ECJ has established the rule that a low price qualifies as per se abusive in

33

Jones (2019), pp. 215 et seq. Ibid. 35 Case 56/65 Societé Technique Minière v Maschinenbau Ulm [1966] ECLI:EU:C:1966:38 (STM), para 249. 36 STM (n 35), p. 249; Case C-8/08 T-Mobile Netherlands BV v Raad van Beestuur van de Nederlandse Mededingingsautoriteit [2009] ECLI:EU:C:2009:343 (T-Mobile), para 30; Whish and Bailey (2021), p. 125. 37 See e.g. Lundbeck (n 31); Case C-179/16 Hoffmann-LaRoche v AGCM [2017] ECLI:EU:C:2018: 25 (Hoffmann-LaRoche v AGCM). 38 Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C45/7 (Guidance on Article 102 Enforcement Priorities). 39 Colomo and Lamadrid (2017), p. 9. 40 Case 85/76 Hoffmann-La Roche & Co v Commission [1979] ECLI:EU:C:1979:36 (Hoffmann LaRoche); Case C-62/86 AKZO Chemie BV v Commission [1991] ECLI:EU:C:1991:286 with respect to predatory pricing (AKZO). 34

10

1

Introduction

case a dominant firm sells below average variable costs.41 Moreover, another practice that has recently been condemned as abusive by object provides the dismantling of a railway track.42 To conclude, some practices have indeed been declared prima facie abusive or, in other words, ‘presumptively unlawful’,43 unless objectively justified. In this respect for example Colomo44 distinguishes between practices subject to rules and other practices which are subject to standards. Whereas the latter requires an analysis of the impact of the practice in question, or put differently, requires an analysis of the circumstances and effects as necessary pre-requisite in order to establish an infringement of Article 102 TFEU; with respect to the former, a ‘(qualified) rule’45 applies, as they are ‘presumed to be abusive by [their] very nature’.46 However, a too formalistic approach in the application of Article 102 TFEU has been subject to persistent academic criticism and debate47; regarding rebates especially since its establishment in the ECJ landmark judgement in Hoffmann LaRoche.48 This criticism and the EU courts’ rulings in Michelin II49 and British Airways50 were followed by the Commission Guidance on Article 102 Enforcement Priorities51 in 2008. After the General Court’s (‘GC’) judgement in Intel52 in 2014, the discussion flared up again as the GC’s approach was seen as step away from the ‘more economic approach’.53 In light of the above, particularly when considering recent developments in digital markets and challenged practices occuring within the latter, the role and meaning of effects in the context of the establishment of prima facie competition law infringements as well as the potential advantages of a full effect-anaylsis (as conduted in the context of by effect restrictions), seem worth being subject to an in-depth analysis.

41

AKZO (n 40), paras 70, 71. Case T-814/17 Lietuvos geležinkeliai AB v Commission [2020] ECLI:EU:T:2020:545 (Lithuanian Railways); Case C-42/21P Lietuvos geležinkeliai AB v Commission [2023] ECLI:EU:C:2023: 12 (Lithuanian Railways ECJ). 43 Case C-413/14 P Intel v Commission [2017] ECLI:EU:C:2017:632 (INTEL) Opinion of AG Wahl ECLI:EU:C:2016:788, para 80. 44 Colomo (2014), p. 4. 45 A ‘qualified rule’—as defined by Colomo—means that the finding of a breach of the rule (i.e. competition law) can be rebutted by the respective undertaking concerned. 46 Ibid. 47 Colino (2017), p. 18; Colomo (2014), Whish and Bailey (2021), p. 204; opposite view: Wils (2014). 48 Hoffmann LaRoche (n 40). 49 Case T-203/01 Manufacture française des pneumatiques Michelin v Commission [2003] ECR II-407 (Michelin II). 50 Case C-95/04 P British Airways plc v Commission [2007] ECLI:EU:C:2007:166 (British Airways) and Case T-219/99 British Airways plc v Commission [2003] ECLI:EU:T:2003:343 (British Airways GC). 51 Guidance on Article 102 Enforcement Priorities (n 38). 52 Case T-286/09 Intel Corp v European Commission [2014] ECLI:EU:T:2014:547 (Intel); Nihoul (2014), p. 521. 53 See e.g. Colino (2017), p. 18. 42

Chapter 2

Competition Law, Economics and the ‘More Economic Approach’: The Necessity of a Broader Perspective

This chapter sheds light on the normative values and goals of competition law. It will be shown that competition law goals have always been multiple ones not only serving the economy, but rather society as a whole. Put differently, competition law should be seen as a means to serve society and a liberal democracy not being driven by economic objectives only. However, a focus on economic purposes and goals makes sense from a consistency perspective, economic theory serving as the ‘lowest common denominator’. Moreover, this section also aims to illustrate and shed light on the increasing importance of economics, that is, economic theories and thinking by means of the Commission’s commitment to the so-called ‘more economic based approach’.

2.1

Setting the Scene

The competition provisions lie at the heart of the European integration project. Their goal is to create an internal market. Therefore, they act as corresponding rules to those related to the fundamental freedoms of the European Union, namely the free movement of goods, persons, services and capital within the European Union.1 These fundamental freedoms are seen as cornerstones for the promotion and creation of the European Single Market by eliminating nation-state barriers. In addition to these obligations, which are addressed to the Member States, the complementary function of the competition law provisions is to also prevent obstacles to the integration process imposed by private undertakings in their economic capacity.2

1 2

Terhechte, Article 3 EUV in Grabitz et al. (2020), para 41. Sauter and Schepel (2009), p. 2; Gerard (2012), p. 5.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_2

11

12

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

Therefore, the latter rules exclusively apply to undertakings3 but not the State as such or any of its ‘subsidiaries’ in their capacity to exercise public power.4 Furthermore, the State aid rules as well as further obligations of the Member States relating to the adherence to the Treaty in general5 as well as to the compliance with the competition law provisions6 contribute to an overall set of rules warranting and serving the idea of the establishment of an internal market and ‘a system ensuring that competition is not distorted’.7 Arguably, this echoes the role and function of competition law in a liberal democracy. When it comes to the application of the competition law provisions, it nowadays seems apparent, that economics must play a prominent role in competition cases. However, in the early days of European competition law, the role of economics was rather subordinate, and the law developed in a fairly formalistic manner.8 In this sense, the law was strongly criticised for being guided ‘by rules of a legalistic nature’.9 However, beginning in the middle of the nineties of the last century, this approach started to change and the Commission committed itself10 to a ‘more economic’ or ‘more economic based approach’, that is, the idea to develop an approach to European competition law, which is not ‘legalistic’ but rather ‘based on sound economic principles’.11 Thus, it seems that the ‘more economic approach’ gave green light for the age of increased usage of economics and economic theory in EU competition law. There is no cut-off date of the introduction of the ‘more economic approach’. However, there is no doubt that Mario Monti, a former Competition Commissioner, was a strong advocate of the ‘more economic approach’ and—as a leading figure— played a major role in increasing the impact of economic theory on the application of the competition law provisions. However, all other aims competition law is tempting to serve, that is, political, social and moral goals cannot entirely be left aside. Rather 3

Sauter and Schepel (2009), p. 75. For the purpose of the application of the EU competition law provisions, any entity engaged in an economic activity, that is, an activity consisting in offering goods or services on a given market, regardless of its legal status and the way in which it is financed, qualifies as undertaking. Furthermore, there is neither an intention to earn or an actual earning of profits required, nor are public bodies excluded. As long as they are engaged in an economic activity (being the counterpart of the exercise of public powers), they might qualify as undertaking. 4 However, the State can still qualify as ‘undertaking’ when engaged ‘in economic activity’, as the approach to the definition of an undertaking is a functional one. 5 That is, Art 4(3) TFEU (duty of sincere cooperation) as well as 106 TFEU (compliance with the Treaties). 6 Ibid. 7 Consolidated version of the Treaty on European Union—PROTOCOLS—Protocol (No 27) on the internal market and competition (2008) OJ C115/309. 8 Whish and Bailey (2021), pp. 2 et seq.; Gerard (2012), p. 2. 9 Ibid; see also, for example, Kallaugher and Sher (2004), p. 263; Vickers (2003), p. 95; Kolasky (2002), p. 533; Hawk (1995), p. 973; Korah (1986), p. 85. 10 Monti (2003): ‘In making this revision, we have shifted from a legalistic based approach to an interpretation of the rules based on sound economic principles.’ 11 Monti (2001).

2.2

Pluralism and the Goals of Competition Law: Their Meaning for the Use of. . .

13

it is necessary to consider the normative foundations, values and goals of competition law as it seems apparent ‘that the relative importance of economic theory in applying competition law is dependent on the goals that competition law is attempting to serve’.12 As will be seen in the following, the multitude of the competition law goals is systemic and inherent to the meaning and role of the law in a liberal and democratic society. Provocatively speaking: ‘Unlike science, it is necessarily messy, tentative, nonuniversal, changing, and specific to particular countries at particular times’.13 In other words, as Ezrachi puts it ‘while sharing the same basic properties, competition laws around the world, being rooted in the domestic landscapes, echo a wide range of interests and enforcement policies’.14 In a further step, it will be argued that the notion of the ‘more economic approach’ led to a change in the focus of the European competition law goals and actually narrowed it down aiming to predominantly enhance ‘consumer welfare’ and ‘market integration’.15 From the perspective of legal consistency, such focus seems gratifying, as it eliminates potentially conflicting economic goals, such as, for example the efficiency or total welfare goal on the one hand, as well as the consumer welfare standard, on the other hand.16 Moreover, the emphasis of competition law goals on efficiency and welfare objectives makes economics the ‘lowest common denominator’ serving the need ‘for a constant benchmark [. . .] provid[ing] a stabilizing effect’.17

2.2

Pluralism and the Goals of Competition Law: Their Meaning for the Use of Economics in Competition Law

Against this background, this section shall briefly shed light on the normative values and multiple goals competition law is aiming to serve in a democratic society. Arguably, these multiple objectives might explain why competition provisions do and must show a certain degree of flexibility. Furthermore, they also equip the given framework with the capability to adapt to changes gradually happening over time. This seems crucial for the meaning and interplay of economic analysis and effects as a means to establish competition law infringements. Furthermore, it will be shown

12

Van den Bergh (2016), p. 1. Foer and Durst (2018), p. 508. Regarding the characteristic of competition law to ‘vary over time’ and its tendency to create ‘a heterogeneous landscape [with] [. . .] blurred enforcement boundaries’ also see Ezrachi (2017), p. 51. 14 Ezrachi (2017), p. 59. 15 Witt (2016a), p. 109. 16 Van den Bergh (2016), pp. 16 and 39. 17 Ezrachi (2017), p. 59. 13

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

that the introduction of the ‘more economic approach’ was preceded by a change and focus as regards the respective relevant objectives competition law serves.18

2.2.1

General Remarks

As noted by Witt ‘attempting to capture the objective of EU antitrust law may appear like little more than a philosophical exercise without practical relevance.’19 However, as noted by the latter, this is not the case, as the objectives a set of rules aims to seek are ‘essential for interpreting unclear terms in a coherent way [. . .]’.20 Furthermore, it seems apparent ‘that the relative importance of economic theory in applying competition law is dependent on the goals that competition law is attempting to serve’.21 Furthermore, another interesting aspect is the level on which economic theory or actual economic effects should be taken into consideration, as economic theory and the consideration of economics can play a role at different levels22 of an economic system. In this respect, the perspective of constitutional economics plays an important role, that is, its distinction between a constitutional level and a sub-constitutional level.23 Whereas the former is about ‘choices among rules’24 the latter follows the principle of ‘choices within rules’.25 Therefore, on the one hand, for example ordoliberalism, as a school of economic thought and its holistic approach to society is about the normative foundations and values of competition law. Discussions and controversy in this respect boil down to the question about the proper objectives of competition law, or put differently, what goal competition policy should ultimately and predominantly seek to advance (for example, consumer welfare, total welfare, maintenance of an effective competitive structure, freedom to compete etc). On the other hand, economic theory considerations when applying competition law provisions within a ‘given’ and established framework, that is, a free society, liberal democracy, social market economy, are a whole new ballgame. This seems crucial for any analysis of the ‘more economic approach’, as the level where economic theory or actual economic effects should be considered needs to be determined.

18

Witt (2016a), p. 103. Witt (2016a), p. 34. 20 Ibid. 21 Van den Bergh (2016), p. 1. 22 Colomo (2018a), p. 13. 23 Vanberg (2009), p. 1. 24 Ibid. 25 Vanberg (2009), p. 1. 19

2.2

Pluralism and the Goals of Competition Law: Their Meaning for the Use of. . .

15

Economic theory and the consideration of economic effects can play a role at two different levels26: (i) the constitutional level as well as (ii) the sub-constitutional level. Therefore, whereas the sub-constitutional level concerns economic considerations ‘within a given legal-constitutional framework’,27 that is, when applying the competition law provisions, at the constitutional level economics play a role with respect to the ‘shaping [of the] framework’.28 This is essential as the ‘more economic approach’ at EU level seems to fall within the first ‘category’ mentioned, as it speaks for an application of the rules based ‘“on sound economic principles” in line with current economic thinking’.29 However, this has been subject to criticism, and was labelled as ‘construction error’,30 as with respect to these critics the competition rules themselves (at the constitutional level) ‘should be grounded in economics’.31 This criticism seems to fall short of the fact that such shift towards a more economic approach was not without effect on the normative level though. The introduction of a ‘more economic approach’ at the application level of the competition law provisions also had an influence on the focus of the goals and objectives of competition law32 (see under Sect. 2.3). Therefore, although the most evident effect of the ‘more economic approach’ can be found at the level of applying the competition law provisions, alterations at the constitutional level, that is, regarding their respective goals and objectives seem necessarily associated therewith. Loosely and untechnically speaking, in order for a ‘more economic approach’ (at the level of applying the law) to be established, ‘a more economic goal’ must be defined.33 In short, the former works as pre-condition of the latter. Against this backdrop, when defining the various objectives of competition law, one should keep in mind the illustrated distinction between the different levels on which the latter are located. Therefore, one should distinguish whether the identified objective is located at the normative level, that is, the level of the creation of the rules shaping the framework within which competition in a free society should happen (constitutional level); or whether such objective is rather settled at the sub-constitutional level, that is, when actually applying the law. Arguably, beyond (or at least at) the constitutional level, there might even be a further (sub-)category of aspects competition law aims to safeguard, namely, broader values of a liberal democratic society, such as for example freedom, equality of opportunity or fairness.34 With that in mind, Ezrachi, for example, talks about the

26

Vanberg (2009), p. 25. Vanberg (2009), p. 10. 28 Ibid. 29 Witt (2016a), p. 34. 30 Schmidt and Voigt (2007), p. 47. 31 Christiansen and Kerber (2006), p. 237. 32 Ezrachi (2018a), p. 5; Witt (2016a), pp. 103 and 109; Witt (2018), pp. 417–488. 33 Witt (2016a), p. 103. 34 Which seem to be fundamental values and ideals of the European Union as they are basically covered by or explicitly mentioned in the preamble of the Treaty on European Union (‘TEU’). 27

16

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

‘sponge-like characteristics’35 and nature of competition law. He uses this metaphor to catch the multitude of objectives and the competition law’s ‘ability to stretch or narrow its application and harness it [. . .] to protect a wide range of social goals’. Thereby, Ezrachi catches all those aims of competition law, ‘which may go beyond the competitive process as understood by many’.36 However, why emphasise the different levels on which the respective aims of competition law are to be realised? Such understanding seems essential, especially with respect to laws that serve a wider spectrum of aspects such as, for example, economic welfare as well as a society’s (social, political and economic) structure as such by supporting and underpinning its legal and economic system, that is, in our case, a liberal democracy based on the economic system of an open or, more specifically, social market economy.37 Against this backdrop, the economic discipline serves as ‘lowest common denominator’ aiming for a ‘constant benchmark which may provide a stabilizing effect and a focal point for antitrust enforcement’.38 Put in Ezrachi’s words considering his ‘sponge’ metaphor, economics are the ‘membrane’ surrounding the sponge.39 The intertwining of law and economics lies at the roots of EU competition law and might in part40 be traced back to the ordoliberal tradition, as there seems to be little academic controversy regarding the impact of the latter on the drafting and conceptualising of the EU competition provisions.41 Therefore, there is no doubt that the objectives of European competition law have always been multiple ones.42 Such multitude of goals seems somehow planted in European competition law’s—as Ezrachi puts it—DNA43 and result, on the one hand, from the meaningful role competition law plays in order for a free society, liberal democracy, social market economy to function persistently. In this respect, the influence ordoliberal thoughts had on EU competition law seems obvious. On the other hand, as indicated above, also the uniqueness of the project of the European Union and its idea of a single

35

Ezrachi (2017), p. 59. Ibid. 37 The model of a social market economy is, arguably, one among different variants of the system of an open market economy, such as, to name other examples a liberal market economy, an ecosocial market economy. Hence, as identified by Luczak, the notion of a social market economy serves as one particular configuration of the notion of an open market economy. See to this effect: Luczak (2009), p. 185 and in particular note 151. 38 Ezrachi (2017), p. 59. 39 Ibid. 40 But not exclusively, as for example, also US antitrust law has for sure had an influence when it comes to the application of competition law based on sound economic principles. 41 Kaffert (2019), p. 138; Kallaugher and Sher (2004) 268; dissenting Akman and Kassim (2010), pp. 111–132; Akman (2009), pp. 267–303. 42 For an extensive analysis of almost 4000 sources of the literature and the decisional practice of the EU institutions on the goals of EU competition law see: Stylianou and Iacovides (2022), pp. 1–29. 43 A term used by Ariel Ezrachi when talking about competition goals and values, see for example, Ezrachi (2017), p. 51 as well as Ezrachi (2018a), p. 3. 36

2.2

Pluralism and the Goals of Competition Law: Their Meaning for the Use of. . .

17

market44 in form of a levelled playing field for competition is an important aspect to be considered.45

2.2.2

Goals, Values and Other Normative Foundations: The Competition Law Mosaic of Diversity

Looking at the objectives of European competition law, some have called them ‘an unresolved puzzle’.46 Such metaphor seems justified when looking at the respective pluralistic conglomerate of terms and notions: economic welfare, consumer welfare, total welfare, efficiency and innovation, market integration, plurality and economic freedom, an effective competition structure. Furthermore, also public health,47 social and consumer protection,48 industrial, environmental49 and employment considerations50 might play a role in the application and development of competition law as well as—so to say—more fundamental values such as individual freedom, equality of opportunity, fairness and democracy.51 Without doubt and shown by an extensive analysis of almost 4000 sources of the literature and the decisional practice of the EU institutions on the goals of EU competition law conducted by Stylianou and Iacovides,52 competition provisions do not only serve economic, but also non-economic goals. This seems inherent to the nature of competition law serving the broader picture and idea of a liberal democracy. Furthermore, the fact that the latter objectives mentioned are multiple ones and located at different levels of a ‘multi-layered’ system, adds further complexity. In this respect stressing that ‘[t]he various goals have not always been clearly outlined’53 makes it—undoubtedly—even more challenging. Against this backdrop, the aims and objectives of EU competition law should be structured by distinguishing between economic and non-economic goals as well

44

Also referred to as internal or common market in former times. A fact that has been stressed by the ECJ, inter alia, in Case C-403/08 Football Association Premier League and Others [2011] ECLI:EU:C:2011:631, para 139; see also Witt (2013), p. 31. 46 Van den Bergh (2016), p. 15. 47 Art 168(1) TFEU; Art 35 Charter of Fundamental Rights of the European Union (2000/C 364/01). 48 Art 12 and Art 9 TFEU; Art 38 Charter of Fundamental Rights of the European Union (2000/C 364/01). 49 Art 11 TFEU; Art 37 Charter of Fundamental Rights of the European Union (2000/C 364/01). 50 Art 3 TEU. 51 The list is influenced by the following authors: Ezrachi (2018a), p. 4, Van den Bergh (2016), pp. 16 and 19, Witt (2016a), pp. 80 and 83. 52 Stylianou and Iacovides (2022). 53 Ezrachi (2018a), p. 3. 45

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

as—arguably—EU-specific objectives.54 Moreover, such categorisation could be further ‘fine-tuned’ by allocating the respective aims to the constitutional or subconstitutional level. The consumer welfare standard (covering the notions of economic welfare and total welfare) as well as competition law as an instrument to ‘preserve the competitive process as such [. . .], guarantee economic freedom of market participants’55 and consequently safeguard plurality, would fall into the category of economic objectives.56 Consequently, the notions of market integration, public health, social and consumer protection, industrial, environmental and employment considerations, as well as individual freedom, equality of opportunity, fairness and democracy, fall into the category of non-economic goals. The latter list in particular demonstrates the multitude of political, social and moral goals EU competition law pursues besides its economic aims. Therefore, in particular the notions of individual freedom, equality of opportunities, fairness and democracy would fall into the category of moral norms or normative values, thereby underpinning the bigger picture, that is, the role of competition law as a means to serve a liberal, democratic society and social market economy. Market integration, however, qualifies as political goal and—in that sense—as peculiarity of the European Union as integration project. Furthermore, consumer protection, industrial, environmental and employment considerations and objectives should be seen as part of the big picture too, and—from a competition law perspective—as aspects to be considered where necessary and appropriate. The pluralism of the goals and normative values of competition law as well as their ‘complementary and interdependent nature’ seem inherent to the law. Nevertheless, they contribute to ‘form a coherent whole’.57 In that sense, competition law—from a broad perspective—is a means to serve a liberal, democratic society by warranting the system of a social market economy as well as the broader European Union’s normative values and unifying (market) integration goals. Thus, the multitude of goals and the difficulties associated therewith are, so to speak, a ‘necessary evil’.

54

Sauter explicitly mentioning those objectives related to the internal market objective, including the structure of the market and the process of competition as such; see Sauter (2016), pp. 61 et seq, 87. 55 Van den Bergh (2016), p. 39. 56 Ibid. 57 Ezrachi (2018a), p. 3.

2.3

2.3

The ‘more Economic Approach’ and the Goals of Competition Law

19

The ‘more Economic Approach’ and the Goals of Competition Law

As mentioned earlier, the most evident effect of the ‘more economic’ or ‘effectbased’ approach is likely to be found at the level of applying the competition law provisions. In that sense, the striving for adequacy in competition law cases and decisions seems to have been a driving force with the aim to apply competition law based on sound economics. Furthermore, also the influence of American antitrust law and the US courts’ decisional practice, which had been pursuing ‘more in-depth economic analysis’58 since the eighties of the last century might have influenced this change of paradigm. However, also alterations at the constitutional level, that is, regarding the respective goals and objectives of the law seem necessarily associated therewith. Therefore, the introduction of the ‘more economic approach’ (at the level of applying the law) was preceded by a change in the focus of the goals of competition law. In that sense, with respect to the objectives of competition law, one could also speak from a shift towards ‘a more economic goal’.59 As illustrated in the foregoing, the goals of EU competition law have always been multiple ones. This multitude and mosaic of various values and aims is somehow inherently linked to the ‘genesis’ and the empirical background of competition law as such, and in particular of EU competition law. Furthermore, there has never been an established hierarchy regarding the multitude of the different objectives EU competition law is pursuing, that is, economic, political, social and moral objectives.60 However, this approach seems to have shifted with the introduction of the ‘more economic approach’ by which the Commission has changed its position— arguably ‘fundamentally’61—and adopted a narrower approach regarding the goals and objectives, thereby mainly focussing on ‘consumer welfare’62 (such approach also being called ‘welfare-based approach’). In former Commissioner Almunia’s words, ‘[a]ll of us here today know very well what our ultimate objective is: Competition policy is a tool at the service of consumers. Consumer welfare is at the heart of our policy and its achievement drives our priorities and guides our decisions’.63 Therefore, ‘the goals of European Competition Law centre around, and are primarily consistent, with consumer welfare, but are not limited to it’.64 Furthermore, especially in light of the specificity of the European Union integrational

58

Witt (2018), p. 5. Witt (2016a), p. 103. 60 Witt (2016a), p. 102; Ezrachi (2018a), p. 4. 61 Witt (2016a), p. 102. 62 Akman (2009), p. 268; Kroes (2005), pp. 593, 596; Monti (2004); Witt (2016a), p. 109; Ezrachi (2018a), p. 4. 63 Almunia (2010). 64 Ezrachi (2018a), p. 4. 59

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

project, also market integration seems to be a main aim and focus of European competition law.65 This shift in the approach of the Commission has been appreciated and welcomed as the approach of the Commission had long been criticised ‘for not being based on sound economic analysis and economic effects’.66 However, it should be recalled that—as stated by Commissioner Vestager67—‘[c]ompetition is not a lonely portfolio’. Put differently, the ‘narrowing down’ of the objectives of competition law and a primary focus on consumer welfare and market integration puts emphasis on the latter mentioned, thereby declaring and qualifying them as the ‘core rationale’ of European competition law. However, all other goals and objectives, namely, all political, social, moral, cultural and other fundamental values of a modern, liberal democracy competition law is serving, that is, all goals not exclusively economic in nature, should and must not entirely be left aside when addressing questions relating to the application of the competition law provisions. Such approach seems to be echoed in the decisional practice of the Commission68 as well as the case law of the ECJ.69 The Commission’s decision in CECED I,70 for example, concerned an agreement between producers of washing machines that was exempted under article 101(3) TFEU, due to lower energy costs for consumers as well as on the basis of lower CO2 emissions. Notwithstanding the fact that the agreement was anticompetitve as participants to the agreement were restricted with respect to their freedom to manufacture specific types of washing machines and import them into the EU.71 Another example provides the ECJ’s ruling in Wouters,72 where professional rules imposed by an association of undertakings (the Bar of the Netherlands) prohibiting multidisciplinary partnerships between lawyers and accountants (liable

65

For the ECJ emphasising that the competitive process itself is worth being protected and harm to consumers is not always necessary to proof a breach of the competition provisions, see for example, Case 6/72 Europemballage Corporation and Continental Can Company Inc v Commission [1973] ECLI:EU:C:1973:22 (Continental Can), para 26; British Airways (Chap.1, n 50), para 106; and Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P GlaxoSmithKline Services Unlimited v Commission [2009] ECLI:EU:C:2009:610 (Glaxo Smith Kline), para 63; Witt (2016a), p. 109; Ezrachi (2018a), p. 7; Witt (2018), p. 15. Furthermore, for a detailed analysis to this effect also considering the administrative practice of the EC and the EU courts case law, see Colomo (2021). 66 Akman (2009), p. 168. 67 Margrethe Vestager, ‘Approval hearing before the Economic and Monetary Affairs Committee of the European Parliament’ (2 October 2014). 68 Commission Decision of 24 January 1999 (Case IV.F.1/36.718) [1999] OJ L187/47 (CECED-I), para 35. See also Commission Decision of 8 September 2001 (Case COMP.F.1/37.893) [2001] OJ C250/4 (CECED II). 69 For example, Case C-309/99 Wouters [2002] ECLI:EU:C:2002:98 (Wouters), para 110. 70 CECED-I (n 68), para 35. See also Commission Decision of 8 September 2001 (Case COMP.F.1/ 37.893) [2001] OJ C250/4 (CECED II). 71 European Commission Press Release, IP/00/148 (11 February 2000). 72 Case C-309/99 Wouters [2002] ECLI:EU:C:2002:98 (Wouters), para 110.

2.4

Conclusions

21

to restrict competition) was not caught by Article 101(1) TFEU due to the prohibition’s necessity to safeguard a proper practice of the legal profession.

2.4

Conclusions

Competition law has ever since been serving a wide range of normative goals and values rooting at the heart of modern liberal democracies. Moreover, different competition law systems are to be understood against their respective jurisdictional context, as differences regarding philosophical, political, policy and enforcement approaches might be the key to understand diverging competition law assessments and outcomes in similar cases. In other words, different jurisdictions might apply different substantive principles.73 Undoubtedly, the pluralism of goals and normative foundations as well as the interdependence of competition law and economics make the application of the law anything but a simple exercise. However, as such pluralism is indispensable, it is a ‘necessary evil’ one has to cope with. In light of the above and the aim to strive for adequacy in competition law cases, in the late nineties of the last century the ‘formalistic’ manner in which competition law had been applied was revised and replaced by the introduction of a more economic or effects-based approach. The aim of the latter was to apply the law based on sound economic principles. Although it has been argued that the more economic approach seems to have had an impact at the sub-constitutional level only,74 the introduction of the ‘more economic approach’ was indeed preceded by a shift towards ‘a more economic goal’.75 Since then, the focus of EU competition law has been on consumer welfare and (considering the European Union integration process) market integration. However, this does not imply that all other goals (political, social and moral objectives) are to be left aside. Rather, such narrowing down leads to economic thinking serving as ‘lowest common denominator’ aiming to warrant adequacy with respect to competition law assessment. Nevertheless, most of the recent developments in the debate about competition law goals stem from a too narrow understanding of the ‘more economic approach’, which must not make our competition law framework unflexible for meeting the various challenges that we are facing today.76 In that sense, the more economic approach was a pioneer to strive for adequacy in competition law cases, while, arguably also aiming to make economic thinking ‘a

73 Ibid. Also see the merger of Boeing/McDonnell Douglas (1997) which was cleared by the FTC, however blocked by the EC (Boeing/McDonnell Douglas (Case IV/M.877) [1997] OJ L336/16). 74 Schmidt and Voigt (2007), p. 47. 75 Witt (2016a), p. 103. 76 Take for example, all issues related to climate change; on the debate concerning the goals of competition law when aiming to apply the competition provisions in a ‘green manner’ and thus to sustainability agreements see: Zelger (2023).

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Competition Law, Economics and the ‘More Economic Approach’: The. . .

constant benchmark which may provide a stabilizing effect and a focal point for antitrust enforcement’.77 With respect to future developments and phenomena too, that is, digitisation and its impact on our economy, effect analysis and the application of competition law based on solid economic theory seems gratifying. Not least because the ‘more economic approach’ and the role an actual analysis of the effects has in the establishment of competition law infringements might be useful tools in testing and/or re-thinking competition law. When considering the impact of new economic phenomena and challenged practices within the latter, the role and meaning of effect-analysis seems—in times of ‘uncertainty’—crucial in order to warrant adequacy in competition law decisions.

77

Ezrachi (2017), p. 59.

Chapter 3

Effects and Article 101 TFEU

This chapter will deal with effects in the establishment of Article 101(1) TFEU infringements, thereby especially focussing on the meaning and role of the latter in the context of by object restrictions.1 Moreover, the respective relevant Article 101 case law with respect to real-world markets, that is, the offline environment will be analysed. In this context, the role and meaning of effects as regards the concept of a context analysis as required for the establishment of by object restrictions as well as its delimitation from a full effect analysis seems crucial. It will be argued that effects should play a more prominent role in general and particularly when it comes to digital markets, also considering the tense notions of legal certainty and adequacy, as the latter should be seen as ‘communicating vessels’ working as ‘reciprocal correctives’. In other words, for the sake of both, adequacy and legal certainty considerations, the Commission would be well advised not to put everything into the ‘object box’, as a case-by-case approach, at first glance acting to the detriment of legal certainty, serves the latter by shaping and forming standards thereby also performing to the benefit of adequacy regarding future decisional outcomes. The idea of ‘communicating vessels’ tries capturing these, methaporically speaking, somehow ‘sine-curve’ and ‘wave-like’ developments echoing the tension of the two concepts of legal certainty and adequacy. Furthermore, it will be argued that a too restrictive approach of both concepts does not necessarily lead to appropriate and valuable outcomes and decisions in competition law cases, as a too strict approach (from both perspectives) would either lead to a too rigid system presumably fostering false positives (in the context of by object restrictions) or end up in a case-by-case jungle rather being chaotic than contributing to a coherent legal certainty standard (in the context of by effect restrictions).

1

As the role of effects in by effect cases seems rather obvious: they need to be proved.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_3

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3.1 3.1.1

3

Effects and Article 101 TFEU

The Concept of Restrictions by ‘Object’ or ‘Effect’ General Remarks

With respect to Article 101(1) TFEU the concept of effects can be found in the Treaty provision itself, because of the clear wording of Article 101(1) TFEU considering the conjunction which stipulates that an infringement can be established by object or by way of its effects.2 Therefore, the structure and wording of the provision simply excludes the notion of object restrictions from a full-analysis of its effects, by mentioning the two concepts as ‘alternatives’.3 For that reason, where an agreement has as its object the restriction of competition, it is not necessary to prove anticompetitive effects.4 This sounds straightforward, however, in practice it is not always clear cut, where to draw the line between the concepts of by object and effect infringements.5 The reasons for this are manifold. Firstly, as mentioned earlier, the intertwining of law and economics plays an important role in this respect. In other words, it is, to a large extent, the underlying economic theory which determines whether a measure falls into the ‘object-box’ or rather qualifies as restriction of competition by effect, as it serves as a means to assess the detrimental nature of a practice. Such assessment is prone to change as ‘currents in economic theory, such as new institutional economics and game theory models, [. . .] contribute[d] to the reassessment of the harmful potential of agreements and other types of coordination’.6 Secondly, also the underlying facts of each specific case7 are crucial for the qualification of a measure as either restrictive by object, by effect or not at all (see Sect. 3.3). A condemnation of a measure only because of its ‘form’, that is, a purely formalistic approach, is therefore not possible. It will be shown, that measures qualifying as object restrictions in one case do not necessarily have to qualify as object infringements in a—maybe only slightly— different set up8; a fact that might speak for the compliance with the ‘more economic approach’ and furthermore proofs the ‘context-specific’9 outcome of competition 2

Apparent from the Treaty provision itself and confirmed by the ECJ in STM (Chap. 1, n 35), para 249; Cases 56 and 58/64 Consten and Grundig [1966] ECLI:EU:C:1966:41, Case C-209/07 Competition Authority v Beef Industry Development Society Ltd [2008] ECLI:EU:C:2008:643 (BIDS), para 16; T-Mobile (Chap. 1, n 36), para 29. 3 Ibid and in particular STM (Chap. 1, n 35), para 249. 4 Case C-67/13P Groupement des Cartes Bancaires [2014] ECLI:EU:C:2014:2204 (Cartes Bancaires), para 49; Case C-286/13 P Dole Food and Dole Fresh Fruit Europe v Commission [2015] ECLI:EU:C:2015:184 (Bananas), para 113; STM (Chap. 1, n 35), p. 249; T-Mobile (Chap. 1, n 36), para 30; Whish and Bailey (2021), p. 125. 5 Peeperkorn (2017), para 3. 6 Gerard (2012), p. 2. 7 Colomo (2018b), p. 8. 8 See Sect. 3.1.1. 9 Colomo (2018b), p. 8; Colomo and Lamadrid (2017), p. 9.

3.1

The Concept of Restrictions by ‘Object’ or ‘Effect’

25

law cases. In other words, the classification of a behaviour in an earlier case does ‘not relieve the Commission or a national competition authority of the obligation of carrying out an individual assessment of an agreement’.10 Such approach, that is, ‘the limits of a [too] formal approach’11 is also exemplified in the Commission’s Guidance on restrictions of competition ‘by object’.12 An ‘absolute’ detrimental nature might only be true for genuine cartel agreements as the benefits of such agreements are considered being relatively rare.13 However, even as regards cartel-like arrangements, economists have not entirely excluded that such agreements might nevertheless be beneficial,14 a fact the European Commission is very much aware of15 and which is mirrored in the case law and administrative practice of the EC.16 Under the old regimen of individual exemptions, before the implementation of Regulation 1/2003,17 for example, the European Commission granted individual exemptions for agreements considered being ‘cartel-like’, that is, restrictive by object.18 Such decisions were made, inter alia, in REIMS II,19 Visa International—Multilateral Interchange Fee20 and in Société Air France/Alitalia Linee Aeree Italiane.21 Thirdly, practices might be treated differently in different competition law systems (for example, the handling of RPM in the European Union as well as under US Antitrust law22). As argued earlier,23 the different handling proves the various influences, which have an impact on competition law and policy, that is, the economic environment, political system, societal structure as well as the influence of economic theory and the latter’s nature of being volatile itself. Therefore, to

10

Case C-439/09 Pierre Fabre Dermo Cosmétique SAS v Président de l’Autorité de la Concurrence and Ministre de l’Économie, de l’Industrie et de l’Emploi [2011] ECLI:EU:C:2011:649 (Pierre Fabre) Opinion of AG Mazák ECLI:EU:C:2011:113, para 27. 11 Colomo and Lamadrid (2017), p. 7. 12 Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the De Minimis Notice SWD (2014) 198 final (Guidance on restrictions of competition ‘by object’). 13 Bailey (2012), p. 567. 14 Scherer and Ross (1990), pp. 335–39. 15 Visa International – Multilateral Interchange Fee (Case No COMP/29.373) Commission Decision 2002/914/EC [2002] OJ L318/17, para 79. 16 Colomo (2018a), p. 90. 17 Council Regulation (EC) 1/2003 on the Implementation of the Rules on Competition Laid Down in Articles 81 [101] and 82 [102] of the Treaty [2003] OJ L001 (Regulation 1/2003). 18 Zelger (2017), p. 362. 19 REIMS II (Case No IV/36.748) Commission Decision 1999/695/EC [1999] OJ L275/17. 20 Visa International – Multilateral Interchange Fee (n 15). 21 Société Air France/Alitalia Linee Aeree Italiane (CASE COMP/A.38284/D2) Commission Decision 2004/841/EC [2000] OJ L362/17; see also British Airways/American Airlines/Iberia (CASE COMP/39.596) Commission Decision of 14 July 2010. 22 See Sect. 3.1.3. 23 See Sect. 2.3, pp. 38–39.

26

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Effects and Article 101 TFEU

understand the global landscape of competition law systems, the existence of different policy approaches against the backdrop of different economies is essential in practice (see Sect. 3.1.3). In this light, it becomes obvious that a clear-cut categorisation of by object and effect infringements without considering the context within which an agreement or practice is operated is not impossible. Moreover, over the years it has constantly been held and stressed by the ECJ24 that the form of a practice only is not sufficient for the establishment of an object restriction. However, how much ‘context analysis’ is actually necessary in order to establish a ‘by object’ restriction not running risk to mingle with the concept of a full-effect analysis as required under the ‘effect heading’ when establishing a restriction of competition by effect? Is the establishment of an object restriction free of any consideration of the effects a measure is likely to have? Regarding the latter question, it is, arguably, not with respect to the effects or the impact a measure might have.25 The underlying idea of object restrictions is that such practices are considered having a ‘sufficiently deleterious effect on competition’,26 or, as put with respect to per se infringements in the US, they are ‘conclusively presumed to unreasonably restrain competition’.27 Related to this consideration of a likely negative impact, a view that such measures justify the presumption of harmful effects was developed.28 However, other voices plead for the notion of object restrictions not entailing a presumption of likely effects29 as a practice might qualify as restrictive by object even ‘if it is not particularly likely to have a significant impact on prices’30 thereby referring to the ECJ’s ruling in Bananas.31 I somehow agree with that line of argument insofar as actual detrimental effects are neither to be proven nor is an actual lack of the latter a suitable defence in case a measure qualifies as restrictive by

24

Joined Cases 96/82 to 102/82, 104/82, 105/82 and 110/82 IAZ International Belgium and Others v Commission [1983] ECLI:EU:C:1983:310 (IAZ International), para 25; Glaxo Smith Kline (Chap. 2, n 65), para 58; BIDS (n 2), paras 16 and 21; Guidance on restrictions of competition ‘by object’ (n 12), p. 4 with further references. 25 Arguing similarily Ioannidou and Nowag (2015), pp. 340–366, section E. 26 STM (Chap. 1, n 35), para 249. 27 Cavanagh (2017), p. 48. 28 See for example inter alia Witt (2018), pp. 3–4, 6 and 7 with further references. 29 Pablo Ibáñez Colomo, ‘The one about bananas and credit cards: exchanges of information as restrictions by object’, Chillin’Competition Blog, available at accessed 6 February 2023. 30 Pablo Ibáñez Colomo, ‘What the Court said, and did not say, in Maxima Latvija?’, Chillin’Competition Blog, available at accessed 6 February 2023. 31 Bananas (n 4), para 126.

3.1

The Concept of Restrictions by ‘Object’ or ‘Effect’

27

object.32 In this context and in light of a ‘literal understanding’ of the notion of a presumption of anticompetitive effects, arguing against such presumption appears plausible. Nevertheless, the term of a presumption of negative effects should better be understood in the sense that an assumption of ‘detrimental effects’ or a ‘negative impact on competition’ being very likely seems reasonable. If the notion of a ‘presumption of anticompetitive effects’ is not understood too literally and restrictively in the sense that actual effects are presumed, but rather broadly in the sense that such practices are likely to have a negative impact, the notion of a presumption of harmful effects seems, in my view, not to be at odds with the concept of by object restrictions of competition. In that sense, the notion should encapsulate the idea that a measure, more likely than not, has the potential to harm competition, that is, it has a negative effect on consumer welfare, the competitive process as such or on market integration (measured against the backdrop of the counterfactual as a benchmark). This idea seems to be captured by the notion of ‘net effects’ or ‘net negative effects’ as developed by Peeperkorn33 (see in this regard Sect. 3.4.1). Furthermore, it is my opinion that voices denying a presumption of anticompetitive effects (in the ‘restrictive’ sense as illustrated above) seem to miss the fact that the Court, in the Bananas case, considered that Article 101 TFEU ‘is designed to protect not only the immediate interests of individual competitors or consumers but also to protect the structure of the market and thus competition as such’.34 Therefore, it was against this backdrop that the ECJ acknowledged that for a concerted practice to be found to have ‘an anticompetitive object, there does not need to be a direct link between that practice and consumer prices’35 (thereby, arguably also echoing the multiple goals of EU competition law). For that reason, detrimental effects of a practice might not be materialised or likely in form of an impact on prices only. Rather, if effects are likely to appear in form of an impact or effect on the competitive structure and process as such, a presumption of a measure detrimentally affecting competition is justified as well. Thus, the term of a presumption of negative effects should better be understood in the sense that an assumption of detrimental effects or a negative impact on competition being very likely seems reasonable. Furthermore, also the claim that an object analysis is rather ‘about the rationale behind the agreement’ than ‘about actual or likely effects’36 does not seem to be at odds with this reasoning, as the underlying rationale of a practice is usually also revealing when it comes to the detrimental nature of a measure, that is, the likelihood of its negative impact or negative effects. As stressed earlier, it is just not legitimate

32

C-199/92 P Hüls v Commission [1999] ECLI:EU:C:1999:358, para 161 to 163; T-Mobile (Chap. 1, n 36), para 51. 33 Peeperkorn (2017), para 64. 34 Bananas (n 4), para 125. 35 Ibid. 36 Colomo (n 29).

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Effects and Article 101 TFEU

to deviate the harmful and detrimental nature of a practice from its form only, without considering the objective in light of the respective legal and economic context. Put differently, a measure, considering the actual circumstances within which it is implemented, that is driven by a purely anticompetitive aim not pursuing any legitimate, pro-competitive purpose that benefits consumers in other ways is very unlikely not to qualify as restrictive by object as it is very likely to be detrimental to competition. In case, however, a practice appears rather ambiguous with respect to its potential or likely impact on competition, such ambiguity might be the reason for a practice to fall foul of the notion of an object restriction. Therefore, in my view (likely) effects, understood as a likely impact on competition,37 do play a role in the establishment of object restrictions. They serve as an ‘ex-ante means’ to qualify whether a measure can be held being detrimental to competition ‘by [its] very nature’,38 that is, being more likely than not harmful to competition. Furthermore, it is apparent that such likelihood is considerably determined and influenced by economic theory, as the latter is decisive with respect to the question whether or not a presumption of the unlawfulness of a measure seems justified; a fact, which seems to be in line with the idea of the ‘more economic approach’. Therefore, the meaning of effects cannot only be categorised by their respective constitutional or sub-constitutional level of appearance (see under Sect. 2.2). Rather, a distinction when actually applying the law is further possible, as, arguably, effects do not only play a role in effect cases,39 but also when determining the likelihood of a detrimental impact, which ultimately decides upon the question whether a measure is presumed to be harmful to competition by object. In other words, economics and potential effects, understood as negative impact on competition, are already crucial and considered before a practice is put into either of the categories, that is, either the ‘object box’ or its treatment under the ‘effect heading’. Without any consideration of the latter, it is just not possible to determine the likelihood of a measure’s detrimental nature. However, the difference lies with the burden and necessity of proving, to the requisite standard or threshold, actual or potential effects. Against this backdrop, also considering a practical perspective, a clear delimitation between the notion of object and effect restrictions seems to be the deepest wish of any undertaking or practitioner concerned, as such question is essential particularly with respect to the burden of proof. As soon as a measure qualifies as object restriction, no actual detrimental effects on the market need to be proven by the European Commission.40 Moreover, according to Article 101(3) TFEU, the burden

37

The likelihood of an impact on competition is determined by economic theory. T-Mobile (Chap. 1, n 36), paras 26–30; Case C-32/11 Allianz Hungária [2013] ECLI:EU:C:2013: 160 (Allianz Hungária), para 33. 39 That is, cases treated under the effects-based approach. Colomo (2020b), p. 5. 40 Cartes Bancaires (n 4), para 49; Bananas (n 4), para 113; STM (Chap. 1, n 35), p. 249; T-Mobile (Chap. 1, n 36), para 30; Whish and Bailey (2021), p. 125. 38

3.1

The Concept of Restrictions by ‘Object’ or ‘Effect’

29

of proof of any potential efficiencies a practice might have lies with the parties of the alleged infringement.41 However, a different picture is drawn with respect to restrictions of competition by effect. In such cases, the burden to actually prove anticompetitive effects lies with the investigating authority. In other words, with respect to effect cases (as antagonists to object cases), the harmfulness of a practice cannot simply be presumed. Rather, it is up to the respective competition authority to show and prove actual or potential anti-competitive effects on the market actually caused by the measure or practice allegedly infringing competition law.42 Extensive procedures in length seem therefore inherent to effect-cases and the proving of effects, as the definition of a relevant market concerned as well as a full effect-analysis needs to be conducted. For that reason, (also) from a procedural and practical perspective, the distinction between object and effect infringements is of great importance and relevance. In light of the ‘more economic approach’ and the aim to embed the application of the competition provisions in sound economics, the crucial question therefore remains, where to draw the line between by object and effect infringements?—An exercise, which is still subject to debate and court proceedings today.43 The subsequent sections shall shed light on the notion of restrictions by object and the delimitation of the latter from effect infringements with the aim to draw a coherent framework suitable to adequately distinguish between the two types and concepts of infringements. In a further step, the means to establish a by object restriction shall be analysed, that is the ‘context analysis’ in object cases and, in particular, the extent to which effects of a measure are considered in this respect.

3.1.2

Object vs. Effect: Pros, Cons, the ‘More Economic Approach’ and Enforcement Priorities

Whereas the notion of object restrictions pursues a ‘form-based’ or ‘conduct-oriented’44 approach by prohibiting practices and measures, which are likely to negatively affect competition on the market, the notion of effect infringements follows an ‘effect-based’ or ‘result-oriented’45 approach by requiring the establishment of

41

Zelger (2017), p. 361 with further references. Ibid. 43 See most recently e.g. Case C-179/16 Hoffmann LaRoche v AGCM [2017] ECLI:EU:C:2018:25; GC Decision ISU (Chap. 1, n 1); Lundbeck (Chap. 1, n 31). 44 Zelger (2017), p. 360. 45 Zelger (2017), p. 359. 42

30

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actual or at least potential anticompetitive effects on the market. Therefore, it is inherent to the nature of the respective concepts, that their proponents are naturally opponents.46 From a procedural perspective, the Commission arguably tends to favour the notion of object restrictions,47 whereas the preference of an undertaking facing the allegation of a competition law infringement is naturally the opposite, that is, the notion of an effect infringement. As illustrated above, one key factor being crucial in this respect is fairly certain the burden of proof, notwithstanding the fact that a practice qualifying as object restriction can theoretically benefit from the exemption according to Article 101(3) TFEU. In other words, as there are no agreements which are, as a matter of law, excluded from the ambit of Article 101(3) TFEU,48 all kinds of restrictions are potentially subject to the latter exemption provision.49 However, such justification rather seems to be a theoretical possibility, as, since the adoption of a ‘welfare-based’ approach to competition law, such exemption has not been issued to date50 and seems to be very unlikely in the near future.51 Therefore, the position and ‘procedural interests’ of competition authorities on the one hand, and those of private undertakings on the other hand, as well as the pros and cons from each of the latters’ perspective are inherently diametrical. Considering the Commission’s adoption of and commitment to a ‘more economic approach’, such approach could arguably indicate anything but a favouring of the Commission of object cases. In other words, one would rather assume an increase in the number of effect cases. However, since the introduction of the ‘more economic approach’ this has paradoxically not been the case52 neither at EU nor the national level.53 Hence, the EC has been using the by object concept predominantly since it has established its more economic approach.54

46 Arguably, the Commission tends to favour the notion of object restrictions, whereas the preference of an undertaking facing the allegation of a competition law infringement is naturally the opposite. 47 Colomo and Lamadrid (2017), p. 18. 48 See eg Case T-185/00 and other, Métropole Télévision SA (M6) [2002] ECLI:EU:T:2002:242 para 85. 49 Case T-17/93 Matra Hachette SA v Commission [1994] ECLI:EU:T:1994:89. 50 Witt (2018), p. 8. 51 Commission Notice, Guidelines on the application of Article 81(3) of the Treaty [2004] OJ C101/ 97, para 46. 52 Witt (2018), p. 30; Pablo Ibáñez Colomo, ‘About the ISU decision: a policy perspective’, Chillin’Competition Blog, available at accessed 6 February 2023; Colomo and Lamadrid (2017), p. 18. 53 Witt (2018), p. 30; Colomo and Lamadrid (2017), p. 19. 54 Witt (2018), p. 1.

3.1

The Concept of Restrictions by ‘Object’ or ‘Effect’

31

Arguably, there might be a ‘two to three decades lag’ between the development and actual impact of economic ideas on competition policy and therefore the application of the law.55 Furthermore, as already indicated above,56 an approach based on sound economics does not necessarily lead to an increase or a more prominent role of effect-cases. Put differently, it is the sound economic principles, which decide upon whether an effect analysis is actually required, or whether a measure can be considered being inherently detrimental to competition and subject to a treatment under the ‘object-rule’.57 Thus, the role of economic theory is undoubtedly important. However, as mentioned earlier, also policy considerations as well as enforcement priorities of competition authorities are crucial in this respect. Nevertheless, the somehow explosive nature of the propagating of an approach to the application of the competition law provisions based on sound economic principles when subsequently and supposedly not adhering to the latter announced, by simply shifting enforcement priorities to measures (allegedly) qualifying as object restriction, that is, for example focussing on cartel investigations, cannot be denied.58 Admittedly a fact though that seems reasonable from a competition authority’s perspective. Furthermore, also the fact that since the adoption of Regulation 1/200359 almost all non-cartel restrictions60 have been treated by the Commission under the ‘object heading’ is further fuelling this argument.61 In fact, since 2004, one single case, that is, the decision in Visa,62 has been issued and treated under the effect-heading only.63 Therefore, provocatively speaking, ‘potential infringements tend to be construed as “by object” violations’.64 Besides, this seems particularly unsatisfactory when considering that ‘restrictions by effect can be just as harmful [. . .] as restrictions by object in terms of negative effects on competition and consumer welfare’.65 Such practice, that is, a lack of effect-case enforcement action, might also threaten the deterrent effect Article

55

Gerard (2012), p. 1. Sections 1.1 and 3.1.1 (i.e. elaborations regarding the various different levels and categories where effects might come into play). 57 Serving as denominator or benchmark. 58 Witt (2018), p. 16. 59 Regulation 1/2003 (n 17). 60 See for example most recently the decision in ISU (n 43). 61 Colomo (n 52). 62 Morgan Stanley/Visa International and Visa Europe (COMP/D1/37860) Commission decision of 3 October 2007. 63 Witt (2018), p. 12. 64 Colomo and Lamadrid (2017), p. 18. 65 Witt (2018), p. 22. 56

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Effects and Article 101 TFEU

101 TFEU has with respect to restrictions of competition by effect66 and furthermore—lacking any guidance on effect-analysis under Article 101(1) TFEU—leave us in the dark how to actually conduct by effect assessments.67 Moreover, from a legal philosophical perspective the balancing of the notions of object and effect restrictions echoes the tension between legal certainty on the one hand, as well as adequacy, fairness or justice considerations on the other hand. The argument in favour of the notion of object restrictions is its functionality to serve legal certainty as well as the predictability of the law. However, the downside of such ‘too’ formalistic approach is its vulnerability to lead to false positives thereby being detrimental to competition not considering actual or potential efficiency gains a ‘prematurely condemned’ practice might have. In this respect, different legal traditions and backgrounds might provide a fertile breeding ground for different approaches and opinions. However, as mentioned, the notions of legal certainty and adequacy should be seen as ‘communicating vessels’ working as ‘reciprocal correctives’ that contribute to an overall consistent but also flexible framework capable of adapting to (societal) changes gradually happening over time,68 as the EU courts are known for their ‘preference for the stability of the law’69 and ‘inclination to follow precedents’.70 Therefore, they do not easily deviate from existing case law. Rather, the reasons to do so, that is, to actually depart from precedents and a developed jurisprudential line, must be truly compelling.

3.1.3

The Role of Economic Theory and Competition Policy

It is owed to the nature of competition law that its reasoning is using economic theory. Therefore, the fact whether a measure qualifies as object restriction or is rather treated under the effect heading depends, on the one hand (and to a large extent), on what economic theory can tell us about the harmfulness of a practice.71 In this respect, some brought up the idea of object restrictions having a ‘net negative impact’72 on competition or ‘net negative effects’.73 In other words, borrowed from Peeperkorn, ‘[r]estrictions can be expected to generally have net negative effects if

66

Witt (2018), p. 22. Colomo (n 52); criticising similarly (as regards reverse payment settlements) Alexiadis and Figueroa (2019), p. 9. 68 Eben (2018), p. 135. 69 Colomo and Lamadrid (2017), p. 19. 70 Ibid. 71 See e.g. Jones and Sufrin (2015), p. 36, emphasizing, that ‘presumptions of illegality should be applied only if empirically grounded in economics [. . .]’ (emphasis added). 72 Colomo and Lamadrid (2017), p. 21 referring to Luc Peeperkorn in note 89: Peeperkorn (2017). 73 Peeperkorn (2017) in particular paras 8, 61, 64. 67

3.1

The Concept of Restrictions by ‘Object’ or ‘Effect’

33

they are (highly) unlikely to be used to create efficiencies’.74 Hence, object restrictions must ‘generally lead to net negative effects’.75 As economic theory itself is somehow ‘kaleidic’,76 that is, anything but a stable discipline, there is consequently leeway for policy decisions. Such margin is of particular extent in cases where economists have not as commonly agreed upon the harmfulness of a measure or where mainstream economic theory has changed or shifted over the years77 (which might again serve as proof of the discipline’s volatile nature). The treatment of RPM in the US (since 200778) serves as good example for illustration in this respect. From an economic perspective RPM tends to be a controversial topic. Neoclassical economic theory, for example, allows different efficiency justifications since RPM can be a solution to problems, such as, for example, the so-called ‘free rider problem’.79 As a consequence of the disagreement as regards the detrimental nature and impact of RPM, that is, inherent to the debated nature of the latter measure, there is room for discretion and policy decisions. Thus, there are arguments on both sides, that is, some speaking in favour of RPM qualifying as object restriction, as well as others speaking for a treatment of the latter according to its effects on competition. A shift from being presumed to be illegal per se towards an assessment of RPM weighing the pro-competitive features against its anticompetitive effects has happened in US antitrust law. Since 200780 the latter practice is reviewed under the so-called ‘rule of reason’.81 Therefore, the courts are required to weigh all the relevant facts and circumstances of a case against each other in order to assess whether a practice unreasonably restraints trade. Put differently, all pro and anticompetitive effects are to be considered and weighed against each other as such practice might have ambivalent (rather than unambiguously detrimental) effects on competition as economists have in principle not as commonly agreed upon the harmfulness of RPM to competition.

74

Peeperkorn (2017), para 61. Peeperkorn (2017), para 64. 76 Kaleidic (by George L. S. Shackle) describes ‘a society in which sooner or later unexpected change is bound to upset existing patterns’ (Lachmann (1976), p. 54), that is, ‘a kaleidic society, interspersing its moments or intervals of order, assurance and beauty with sudden disintegration and a cascade into a new pattern’ (Shackle (1972), p. 76). Therefore, kaleidic shall denote uncertainty describing an ever-changing shape and status of an economy, that is, anything but stable. 77 For example, did the so-called Chicago School in the late 70ies bring out a new approach to antitrust harm which is based on neoclassical microeconomic theory (see Gerard (2012), p. 2). 78 United States Supreme Court, Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007) (Leegin). 79 Zelger (2017), p. 369 with further references. 80 Leegin (n 78). 81 Whish and Bailey (2021), p. 132. 75

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Effects and Article 101 TFEU

Although there are voices pleading for a change in the approach regarding RPM82 in the EU, tendencies to actually shift this view and align it with the US approach seem rather unlikely83 as the Commission, in its Guidelines on Vertical Restraints,84 echoes the concerns as raised by the dissenting judges in the US landmark decision.85 Against this backdrop, particularly taking into account the ECJ’s ruling in Cartes Bancaires,86 where the imposition of a restrictive means to address a genuine free-rider concern did not amount to a by object infringement of competition87 (for details of the ECJ’s decision in Cartes Bancaires, see below under Sect. 3.6.5), such rigid policy approach to RPM seems—provocatively speaking—rather inappropriate and ‘disruptive’. However, as recognised by Colomo, such rigid approach might be owed to the particular aim of European competition law to foster market integration and thus the creation of a single market with a levelled playing field for competition.88 Hence, to this effect, the ban on certain behaviour and measures cannot be explained by economic reasoning only.89 Nonetheless, the case concerning the International Skating Union (‘ISU’)90 proves, the Commission seems to stick to its approach not considering the freerider concern as a legitimate or leveraging aim.91 The case concerned (vertical) agreements between ISU, the sole body recognised by the International Olympic Committee to administer the sports of figure skating and speed skating on ice92 and the latter’s athletes. The rules of ISU contained non-compete obligations. Notwithstanding the free-rider concern, the Commission decided to qualify the agreement as restrictive by object. Therefore, the latter concern ‘[did] not seem to be given the relevance it deserves in the decision’.93 The General Court upheld the Commission’s

82

Arguing in this respect for example Ioannidou & Nowag (2015); Velez (2011), p. 302; Jones (2009), p. 479; Gippini-Fournier (2009), p. 515. 83 Zelger (2018), p. 451. 84 European Commission, Guidelines on Vertical Restraints [2022] OJ C248/1 (Vertical Guidelines). 85 Leegin (n 78). 86 Cartes Bancaires (n 4). 87 Pablo Ibáñez Colomo, ‘Restrictions by object in ISU: why has the Commission not drawn the lessons from Cartes Bancaires and Maxima Latvija?’, Chillin’Competition Blog, available at

accessed 6 February 2023. 88 Colomo (2021). 89 Ibid, 1. 90 International Skating Union’s Eligibility rules (Case AT.40208) Commission Decision of 8 December 2017 notified under document number C (2017) 8240 final (Decision Summary published 2018 OJ C148/9) (Commission Decision ISU). 91 Ibid, para 224. 92 European Commission Press Release, IP/17/5184 (8 December 2017). 93 Colomo (n 87).

3.2

Object Restrictions: General Principles

35

decision,94 in particular also as regards the qualification of the ISU rules as restrictive by object. However, as the case is currently pending at the ECJ, it will be interesting to see how the the latter will approach and cope with the issue at hand.95 Another example, where the European institutions have adopted an arguably strict96 by object path opposed to the rule-of-reason approach as chosen by the US Supreme Court in its decision in Actavis97 provides the assessment of pay for delay clauses in patent settlement agreements (reverse payment settlements or pay-fordelay deals) in the pharmaceutical sector.98 For a more detailed analysis of reverse payment settlement agreements see below Sect. 3.7.4. In light of the above there is, undoubtedly, a certain degree of flexibility regarding controversial practices as regards their assessment. To this effect, it is basically economic theory that brings light into the dark when it comes to the likelihood of a measure being detrimental to or restrictive of competition. However, as with respect to some practices, a clear and unambiguous position is not possible to be drawn from opinions of economists or economic schools of thought. Consequently, there is room for discretion and policy decisions. As emphasised above,99 such ‘elasticity’ and ‘volatility’ is anything but new100 and seems necessary for competition law to be capable of providing the general framework necessary to safeguard the functioning of a free market economy thereby serving society. Furthermore, such ‘flexibility’ is owed in particular to economics being themselves a discipline built on theoretical models, as they can only be measured against the backdrop of an ever-changing reality considering the respective social developments and societal change.

3.2

Object Restrictions: General Principles

Against the backdrop of the general meaning and influence of policy considerations and economic theory as illustrated in the preceding section, the following shall provide an overview of those principles and concepts, which are relevant in the context of the establishment of object restrictions pursuant to Article 101(1) TFEU. In principle, already in the very early years of competition law, the ECJ clarified that all types of agreements, that is, horizontal as well vertical in nature may constitute a restriction of competition by object.101 Notwithstanding the fact that—

94

GC Decision ISU (n 43). Case C-124/21 P International Skating Union v Commission, pending. 96 Killick et al. (2019), p. 5. 97 FTC v. Actavis, 570 U.S._133 S. Ct. 2223 (2013). 98 See the decisions of the GC in Lundbeck (Chap. 1, n 31), Servier (Chap. 1, n 31) confirming the Commission’s approach; Killick et al. (2019), p. 5. 99 See Sect. 1.1, p. 7. 100 Gerber (1992), p. 435. 101 Consten and Grundig (n 2). 95

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Effects and Article 101 TFEU

from an economic perspective—the assessment of vertical restraints differs from the one of horizontal agreements, it is generally agreed that object restrictions are usually so obviously detrimental and harmful in the sense that they are considered being ‘by their very nature [. . .] injurious to the proper functioning of normal competition’.102 In the words of the ECJ, such agreements or practices must have a ‘sufficiently deleterious effect on competition’103 or ‘reveal sufficient degree of harm to competition’.104 As emphasised by the General Court in European Night Services, for example, an effect analysis is only necessary in case an agreement does not contain ‘obvious restrictions of competition’.105 In this context, the GC named ‘price-fixing, market-sharing or the control of outlets’ as examples. Hence, in sum, object restrictions are considered being very likely to harm competition. Therefore, a rebuttable presumption of their illegality exists106 in order not to waste resources of the enforcement body.107 In this respect, the parties’ intention to restrict competition may also be revealing. However, it is not a required prerequisite for a measure to qualify as restriction of competition by object.108 According to the Commission’s decisional practice, object restrictions ‘include, in particular, price fixing, output limitation and sharing markets and customers’ as well as, considering vertical agreements, ‘fixing (minimum) resale prices and restrictions, which limit sales into particular territories or to particular customer groups.’109 These broad terms in principle, echo the existing case law. The following practices are very likely to qualify as object restrictions110: a. Horizontal agreements containing provisions regarding price fixing, market sharing, output restrictions111 (including the removal of excess capacity as condemned in BIDS112) collective boycott.

102

T-Mobile (Chap. 1, n 36), paras 26–30; Allianz Hungária (n 38), para 33. STM (Chap. 1, n 35), para 249. 104 Glaxo Smith Kline (Chap. 2, n 65), para 55. 105 Cases T-374, 375, 384 and 388/94 European Night Services v Commission [1998] ECLI:EU: T:1998:198, para 136 (European Night Services) referring to Case T-148/89 Tréfilunion ν Commission [1995] ECLI:EU:T:1995:68, para 109. 106 Zelger (2017), p. 364. 107 Witt (2016b), p. 439. 108 Cases 29/83 and 80/93 Compagnie Royale Asturienne des Mines SA and Rheinzinc GmbH v Commission [1984] ECLI:EU:C:1984:130, paras 25–26. 109 Guidance on restrictions of competition ‘by object’ (n 12), p. 4. 110 A predecessor version of this list was developed for a previous publication, see in this respect Zelger (2017), p. 367. 111 E.g. European Night Services (n 105), para 136. Also see Communication from the Commission, Guidelines on the application of Article 81(3) of the Treaty, OJ [2004] C 101/97 (Art 101(3) Guidelines), para 21. 112 BIDS (n 2). 103

3.2

Object Restrictions: General Principles

37

b. Exchange of information capable of removing uncertainty regarding future pricing behaviour.113 c. Vertical agreements upon fixed or minimum RPM.114 d. Vertical agreements leading to absolute territorial protection115 (including restrictions on passive sales116). e. Prohibition or limiting of parallel imports117 and export bans.118 f. Selective distribution agreements absent objective justification according to the CJEU in Pierre Fabre.119 g. Reverse payment settlements in the pharmaceutical sector (provided certain criteria are met).120 The above categories of restrictions, which are deemed to likely qualify as restrictive by object, provide an orientation and useful guidance in order to assess whether an agreement constitutes a restriction of competition by object. In addition, further guidance is provided by the wording of Article 101 TFEU itself, listing practices which are considerably likely to qualify as prima facie unlawful. Furthermore, the various Commission’s guidance papers contain blacklists of so-called ‘hardcore restrictions’ that are very probably per se infringements of competition law as the qualification of the latter as object infringements has been confirmed by the EU courts in all those cases that have actually been subject to litigation.121 However, in light of the above it becomes apparent that looking at the individual facts and circumstances of each single case is indispensable. Thus, arguably, there are no naked per se restrictions of competition in the context of Article 101(1) TFEU. As will be shown in the following a—what I call—‘context analysis’ when establishing a restriction of competition by object, that is, the consideration of

113

T-Mobile (Chap. 1, n 36); also see Art 101(3) Guidelines (n 111), Sect. 2. Case 243/83 SA Binon & Cie v SA Agence et Messageries de la Presse [1985] ECLI:EU:C:1985: 284, para 44. 115 For example, Consten and Grundig (n 2). 116 Case C-279/87 Tipp-Ex v Commission [1990] ECR I-261 (Tipp-Ex); Case T-62/89 Volkswagen v Commission [2000] ECR II-2707, para 178; also see Art 101(3) Guidelines (n 111), para 23. 117 Glaxo Smith Kline (Chap. 2, n 65), para 58. 118 Case 19/77 Miller v Commission [1978] ECLI:EU:C:1978:19, paras 7 and 18. 119 Pierre Fabre (n 10). 120 General Court decisions in Lundbeck (Chap. 1, n 31) and Servier (Chap. 1, n 31), both pending at and to be approved by the ECJ. The following three criteria, which are to be assessed in order for a patent settlement agreement to qualify as restrictive by object, were established by the Commission and approved by the General Court: (i) whether there is at least potential competition between originator and the generic manufacturer; (ii) whether the respective agreement contains a non-challenge and non-commercialisation clause; and (iii) whether ‘the agreement was related to a transfer of value from the originator undertaking as a significant inducement which substantially reduced the incentives of the generic undertaking to independently pursue its efforts to enter one or more EU markets with the generic product’ (Servier para 217). 121 Zelger (2017), p. 364; Peeperkorn (2017). 114

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Effects and Article 101 TFEU

‘the content of [an agreement’s] provisions, the objectives it seeks to attain and the economic and legal context within which it forms a part’122 is essential as ‘restrictions of the same nature may be treated as either “by object” or “by effect”, depending on the wider context’.123 Needless to say that a context analysis in object cases is not to be equated with a full-effect analysis as required in effect cases.124

3.3

Object Cases: ‘Context Analysis’ and the ‘Context-Specific’ Outcome

As mentioned earlier, the ‘detrimental nature’ of genuine cartels, such as, for example, horizontal price-fixing or market sharing agreements seems to be straightforward. However, even ‘practices that formally look like an obvious restriction of competition may fall outside the scope of the prohibition because of the peculiarities of the context within which they are implemented’.125 Argumentum e contrario, ‘there are practices that do not seem problematic from a formal standpoint but [. . .], upon closer scrutiny, may be found to restrict competition by their very nature’.126 Therefore, as has constantly been stressed by the ECJ, the need to consider the nature and the relevant economic and legal context is indispensable for the establishment of a restriction of competition by object.127 Hence, a context-specific analysis is a must in the context of the establishment of an object restriction. However, what role do (likely) effects have in such context analysis and what discerns the latter from a full-effect analysis as conducted and required in order to establish a by effect restriction of competition? This section shall demonstrate the context-specific outcome of by object cases and illustrate it by way of examples. Yet, it does not claim to be exhaustive, but uses the examples to shed light on the concept of a ‘context analysis’ in order to create a better understanding of the overall meaning of the latter in the context of object restrictions of competition. Vertical practices, to name just one example, are recognised to ambiguously affect competition, that is, they are considered being less harmful than horizontal restraints and may provide substantial scope for

122

Glaxo Smith Kline (Chap. 2, n 65), para 58; BIDS (n 2), paras 16 and 21. Brankin (2016), p. 378. 124 For details in this respect see Sects. 3.3.3, 3.4, 3.6 et seq. 125 Colomo and Lamadrid (2017), p. 6. 126 Ibid. 127 See for example the following more recent cases concerning market-sharing agreements or, respectively, agreements aimed at partitioning the internal market: Case C-373/14 P Toshiba Corporation v European Commission [2016] ECLI:EU:C:2016:26; and Joined Cases C-403/08 and C-429/08 Football Association Premier League Ltd and Others v QC Leisure and Others and Karen Murphy v Media Protection Services Ltd [2011] ECLI:EU:C:2011:631 (Murphy), para 136. 123

3.3 Object Cases: ‘Context Analysis’ and the ‘Context-Specific’ Outcome

39

efficiencies.128 This explains why, due to different policy approaches129 RPM, for example, are treated differently in the US and the EU.130 However, notwithstanding the differences rooting in competition policy, this section shall deal with a different phenomenon, that is, the fact that (slightly) different circumstances might lead to a different outcome of a case, that is, a different assessment of a measure. In other words, a practice, which has at first glance appeared to be identical with one that has previously been held restrictive of competition by object, might in a similar case fall foul of such qualification. Loosely speaking, a tiny little difference in the facts of a case might kick a measure out of the object box and render it eventually restrictive by effect or not detrimental to competition at all.131 This exercise of a ‘context analysis’ underlines that the form of a practice alone is not sufficient to establish a restriction of competition by object. Especially with respect to vertical agreements, the ECJ’s approach ‘has been [. . .] specifically tailored to individual categories of agreements [by creating] a number of specific tests for assessing different types of contractual clauses.’132 However, also regarding horizontal agreements the respective context and an in-depth analysis of the underlying circumstances is crucial when it comes to the assessment of the harmfulness of an agreement.

3.3.1

Horizontal Agreements

3.3.1.1

Price Fixing and Market Sharing Agreements

Undoubtedly, price fixing as well as market sharing agreements are textbook examples of object restrictions of competition. However, in IHT Internationale Heiztechnick GmbH,133 for example, market sharing was held not to restrict competition, as it stemmed from a trademark assignment. Furthermore, price fixing arrangements in joint purchasing agreements, where the parties agree ‘on the purchasing price that their “joint purchasing agreement” may pay to its suppliers’,134 do not have the object of restricting competition within the meaning of Article

128

Vertical Guidelines (n 84), para 10; Witt (2016b), p. 441. The stricter approach in the EU system, for example, can be explained by the European Union political and integrational goal to constitute an internal or single market. 130 See above Sect. 3.1.3. 131 Arguing similarily in the context of intellectual property right stressing that ‘legal outcomes may vary when such rights are involved’, Colomo (2019a), p. 3. 132 Witt (2016b), p. 439. 133 Case C-9/93 IHT Internationale Heiztechnick GmbH et others [1994] ECLI:EU:C:1994:261 (IHT). 134 Guidance on restrictions of competition ‘by object’ (n 12), p. 7. 129

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101(1).135 A similar example provide R&D as well as specialisation agreements opposed to naked market sharing or collective boycott agreements, as the former are generally considered being more likely to create efficiencies. The latter however, ‘are unlikely to be concluded to produce economic efficiencies as their negative effects and/or restrictions are superior and “hindering” the creation of pro economic effects’.136 Hence, these examples indicate the meaningfulness of the actual legal and economic context within which a respective practice or agreement is operated when it comes to the qualification of a measure as restrictive of competition by object. By means of example, considering the ECJ’ decision in IHT Internationale Heiztechnick GmbH, the trademark rights provided the respective legal context within which the restriction of competition was assessed. As a consequence of the respective legal context within which the allegedly by object restriction occurred, that is the fact that the market sharing stemmed from the trademark, the Court came to the conclusion that the respective measure concerned did, considering the specifics of the legal context of the case, not qualify as object restriction.

3.3.1.2

Information Exchange

Another example in the area of horizontal agreements or practices provides information exchange between actual or potential competitors. Such exchange only qualifies as restrictive of competition by object, given it is capable of removing uncertainty as regards future (pricing) behaviour of competitors on the market137 ‘with the result that competition between undertakings is restricted’.138 The underlying idea of such reasoning is the deemed necessity of economic operators to determine independently the policy, which they intend to adopt on the market.139 Therefore, ‘the nature and purpose of the exchange [and] the context in which it is implemented’140 are crucial for the qualification of information exchange as restrictive by object. In Bananas,141 for example, a case concerning pre-pricing communication between competitors active in the ‘banana business’,142 the exchange of price sensitive information and factors relevant for future price-setting was held to qualify

135

Joined Cases T-217/03 and T-245/03 French Beef [2006] ECLI:EU:T:2006:391, para 83 et seq; T-Mobile (Chap. 1, n 36), para 37. 136 Zelger (2017), p. 368, with further references. 137 T-Mobile (Chap. 1, n 36), para 35; also see Art 101(3) Guidelines (n 111), Sect. 2. 138 Case C-238/05 Asnef-Equifax and Administración del Estado [2006] ECLI:EU:C:2006:734 (Asnef-Equifax), para 51. 139 T-Mobile (Chap. 1, n 36), para 32 and the case law cited. 140 Colomo (n 29). 141 Bananas (n 4). 142 Bananas (n 4), para 9.

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as restrictive of competition by object, as it was capable to reduce the degree of certainty as to the undertakings’ operation and behaviour on the market in question. Consequently, a removal of uncertainty between competitors with respect to the ‘timing, extent and details of the modifications to be adopted by the undertakings concerned in their conduct on the market must be regarded as pursuing an anticompetitive object’.143 In other words, in Bananas, there was no other legitimate reason or explanation for the operation of such an agreement than the aim to eliminate or restrict competition, as the information exchange led to competitive conditions on the market, which did not correspond to the normal conditions144 and therefore gave rise to a restriction of competition by object.145 The case was, however, different in the Court’s ruling in Asnef-Equifax.146 The decision concerned a register for credit institutions, which served as platform to indirectly exchange credit information about existing or potential future borrowers.147 Particularly, information regarding ‘the way in which they [had] previously honoured their debts’148 was provided. The Court held that ‘such registers [were] in principle capable of reducing the rate of borrower default and thus of improving the functioning of the supply of credit’.149 Therefore, due to the increase of borrower information being made available to credit institutions via the credit register, a reduction in disparity between creditor and debtor to foresee the likelihood of repayment was associated therewith. For that reason, the aim of the information exchange was held not to be anticompetitive by its very nature, that is, restrictive of competition by object.150

3.3.2

Vertical Agreements

3.3.2.1

Exclusive Distribution

The ECJ clarified in its ruling in STM151 that exclusive distribution agreements do not by their very nature fall within Article 101(1) TFEU. In case the agreements lead to a partitioning of the internal market by the conferral of absolute territorial protection, they might however do so.152 In Consten and Grundig,153 for example,

143

Bananas (n 4), para 122. Considering the counterfactual. 145 Bananas (n 4), para 134. 146 Asnef-Equifax (n 138). 147 Asnef-Equifax (n 138), paras 30 and 46. 148 Asnef-Equifax (n 138), para 46. 149 Ibid. 150 Asnef-Equifax (n 138), para 48. 151 STM (Chap. 1, n 35). 152 Zelger (2018) with further references. 153 Consten and Grundig (n 2). 144

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there was absolute territorial protection granted by the isolation of the French market thereby shielding French distributors from all effective competition. Therefore, the exclusive distribution agreements were held to restrict competition by object. In STM, however, the underlying facts of the case were different insofar as parallel imports from distributors into other EU Member States were still allowed. Consequently, there was no absolute territorial protection conferred and the agreements did not lead to a partitioning of the internal market. Hence, the latter agreements were not considered qualifying as object restriction.

3.3.2.2

Selective Distribution

Following the ECJ in Pierre Fabre,154 selective distribution agreements are, absent an objective justification, considered being restrictive by object.155 This is, where the ECJ’s ruling in Metro156 and its developed criteria for the assessment of the legality of a selective distribution system come into play.157 According to the latter, the organisation of a selective distribution network is considered to fall outside the ambit of Article 101(1) TFEU altogether, provided the following criteria are met: First, the products concerned necessitate a selective distribution system. Second, resellers are chosen on the basis of objective criteria of a qualitative nature determined uniformly for all potential resellers and not applied in a discriminatory manner. Third, the restrictions do not go beyond what is necessary.158 Furthermore, from a practical perspective, the Commissions Vertical Block Exemption Regulation (VBER)159 provides ‘a safe harbour for a wide range of selective distribution systems, also covering quantitative distribution systems’.160 By complying with the conditions as set out in the VBER, there exists the presumption that such agreements actually meet the criteria as set out under Article 101(3) TFEU. Therefore, according to the VBER, selective distribution systems are presumed not to infringe Article 101(1) TFEU as long as the market shares of both, the supplier and the distributor do not exceed 30% on the respective relevant markets on which the products are sold and purchased.161 Such broad ‘safe harbour’ leads to the fact that the vast majority of selective distribution systems is rendered lawful in

154

Pierre Fabre (n 10). Zelger (2018), p. 453. 156 Case 26/76 Metro v Commission [1977] ECLI:EU:C:1977:167 (Metro). 157 Witt (2016b), p. 440; Zelger (2018), p. 453. 158 Metro (n 156), para 20; Case C-230/16 Coty Germany GmbH v Parfümerie Akzente GmbH [2017] ECLI:EU:C:2017:941 (Coty), paras 24 and 29; Witt (2016b), pp. 440–441. 159 Commission Regulation (EU) No 220/720 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices [2022] OJ L134/4 (Vertical Block Exemption Regulation). 160 Zelger (2018), p. 453. 161 Article 3 of the Vertical Block Exemption Regulation (n 159). 155

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practice, no matter whether the nature and type of the respective products, that is, their luxury brand or their complexity, indeed merit selective distribution according to the criteria as developed in Metro.162 Consequently, selective distribution systems have been implemented with respect to a variety of products, of which, upon a closer look, ‘it seems very likely that not each and every single of the products being distributed via a selective distribution system might actually meet the criteria as set out in Metro, and therefore fall outside Article 101(1) TFEU altogether’.163 For the sake of completeness, it shall be emphasised that the Commission has recently updated the former VBER (330/2010)164 (Vertical Block Exemption Regulation 2010) as well as the Vertical Guidelines 2010.165 This revision is, on the one hand, owed to the latter’s expiry date (31 May 2022). On the other hand, as put by Commissioner Vestager: [t]he proposed revised rules aim to keep up with market developments that have transformed the way businesses around the world operate, including the growth of e-commerce and online platforms, during the last decade.166

3.3.2.3

Export Bans

Another example proving the requirement of a context-specific analysis of a measure presumably being at odds with Article 101(1) TFEU provide export bans. In principle, the latter are considered being object restrictions.167 Moreover, even practices supporting an export ban have been qualified as restrictive by object. Supporting practices are, for example, systematic reporting and the investigation of parallel imports by marking the products to identify their origin and the suspension of supply to prevent parallel imports168 as well as the buying back of exported products.169 However, a case where the ECJ had to assess export bans within a distribution agreement and where it deviated from its view that such bans were restrictive by

162

Zelger (2018), p. 453. Ibid. 164 Commission Regulation (EU) No 330/2010 on the application of Article 101(3) of the Treaty of the Funsctioning of the European Union to categories of vertical agreements and concerned practices [2010] OJ L102/1 (Vertical Block Exemption Regulation 2010). 165 European Commission, Guidelines on Vertical Restraints [2010] OJ C131/1 (Vertical Guidelines 2010). 166 European Commission Press Release, IP/21/3561 (9 July 2021). 167 E.g. Case 19/77 Miller v Commission [1978] ECLI:EU:C:1978:19 para 7; Tipp-Ex (n 116), para 22 (summary publication). 168 Tretorn (Case No IV/32.948–IV/34.590) Commission Decision 94/987/EG [1994] OJ L378/45; Zelger (2017), p. 370. 169 Case T-43/92 Dunlop Slazenger [1994] ECLI:EU:T:1994:79. 163

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object as established in earlier cases170 is Javico.171 The case concerned a clause in the distribution agreement between Yves Saint Laurent and its distributor, Javico, prohibiting the latter to export Yves Saint Laurent goods outside the territory attributed to Javico. However, the latter was not part of Yves Saint Laurent’s selective distribution network operated to sell its luxury products within the EU. Rather, Javico was appointed to sell in countries located outside the EU, namely Russia, Ukraine and—back then—Slovenia.172 Therefore, the bans to export as imposed on Javico actually banned and prevented the latter from re-importing goods into the EU. In its ruling the ECJ acknowledged that ‘an agreement which requires a reseller not to resell contractual products outside the contractual territory has as its object the exclusion of parallel imports within the Community and consequently restriction of competition in the common market’.173 Furthermore, it also held that ‘an agreement intended to deprive a reseller of his commercial freedom to choose his customers by requiring him to sell only to customers established in the contractual territory is restrictive of competition within the meaning of Article [101(1)] of the Treaty’.174 However, in the same paragraph, it also emphasised that the latter applies ‘[a]s far as agreements intended to apply within the Community are concerned’175 (emphasis added). Given the specific circumstances176 in Javico, however, that is, in light of ‘agreements [. . .] which are intended to apply in a territory outside the Community’177 (emphasis added), the ECJ concluded that it considered the respective restrictions at hand not to ‘constitute agreements which, by their very nature, are prohibited by [Article 101(1)] of the Treaty’.178 According to the ECJ ‘[i]n the case of agreements of this kind, stipulations of the type mentioned in the question must be construed not as being intended to exclude parallel imports and marketing of the contractual product within the Community but as being designed to enable the producer to penetrate a market outside the Community by supplying a sufficient quantity of contractual products to that market’ (emphasis added). Moreover, such conclusion was supported by the fact that the prohibition of selling outside the contractual territory also covered all other non-member States.179 For that reason, the Court held that considering (i) the structure of competition, (ii) the difference of the prices charged in and outside the EU, and (iii) the proportion

170

Miller v Commission (n 167), para 7; Tipp-Ex (n 116), para 22 (summary publication). Case C-306/96 Javico International v Yves Saint Laurent [1998] ECLI:EU:C:1998:173 (Javico). 172 The contract’s term lasted from 1992 to 1998. 173 Javico (n 171), para 14. 174 Javico (n 171), para 13. 175 Ibid. 176 That is, the respective legal and economic context. 177 Javico (n 171), para 18. 178 Javico (n 171), para 21. 179 Javico (n 171), para 19. 171

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of non-EU sales compared to EU sales,180 an actual proof of the agreement’s anticompetitive effects was necessary in order to successfully establish an infringement of the competition law provisions.181

3.3.3

Making Sense of the Case Law?

So, what conclusions can be drawn from the illustrated examples? Firstly, the above exemplifies the context-specific outcome of the assessment when establishing an object infringement. Therefore, the significance and importance of a case-by-case analysis when it comes to the determination of the nature and the purpose of an agreement cannot be denied.182 Put differently, there are no naked restraints or naked per se restrictions that can be deviated from the form of a practice only. Hence, the respective legal and economic context within which a certain measure occurs is always crucial for the assessment of the latter through the competition law lense. Therefore, although actual effects, understood in the sense of effects that have actually materialised when conducting a full effect-analysis of a measure on the respective relevant market, do not play a role in the context of object restrictions, a context analysis which is somehow guided by the likelihood of detrimental effects a measure might have considering its respective legal and economic context is, nevertheless, necessary. Moreover, inherent to the determination of the likelihood of effects, the latter is determined using economic theory. Secondly, it highlights the relevance of the underlying circumstances and facts of each specific case and their being crucial in this respect. In other words, the latter seem essential for the likelihood of anticompetitive effects, that is, the likelihood as determined and assessed by economic principles and theory. Hence, as stressed initially, considering the pure form of a practice only, that is, a too formalistic approach is therefore not possible as regards the establishment of a restriction of competition by object.183 For that reason, the role of effects in the establishment of object restrictions is not one considering actual effects, but the likelihood of the latter measured and assessed using economics as well as considering the content, purpose and context of the respective practice concerned. Arguably and in a certain way, effects do therefore play a role in object cases. However, not in the sense that they actually need to be proved. Rather, they are determined using economic theory in order to measure the likelihood of detrimental effects considering the context-specific underlying facts and circumstances. Put differently, as indicated by AG Wahl in its Opinion in Cartes

180

Javico (n 171), paras 23–27. Javico (n 171), para 21. 182 Colomo (n 29). 183 Colomo and Lamadrid (2017), p. 6. 181

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Bancaires,184 ‘economic analysis, [understood as economic analysis of actual cases], can be necessary to evaluate the experience gained’.185 Therefore, ‘a classification as a by object restriction should not be driven by what is theoretically conceivable, but by what effects (most likely) result in most cases’186 (emphasis added). In other words, likely effects serve as a means to an end. In a nutshell, the notion of likely effects in the context of by object restrictions is therefore, first determined by economic theory being indicative about the potential impact of a measure on competition. Second, the likely effects of a measure are furthermore to be assessed in light of the purpose and object of the individual agreement also considering the given legal and economic context. Hence, in case of the absence of any plausible or credible ‘pro-competitive motivation’,187 a practice seems very likely to qualify as by object restriction of competition. In that sense, the respective likelihood of anticompetitive or detrimental effects is shaped by economic theory and how the latter assesses the potential of a measure to negatively affect competition (using economic theory as a benchmark). However, it is also determined by (arguably ‘non-economic’188) considerations as regards the object of the agreement in light of the respective context (context analysis).

3.4

The Notion of ‘Context Analysis’: The Relevant Test

But how to actually conduct a ‘context analysis’, particularly without running risk to mingle with the concept of a full-effect analysis as required in effect-cases? It will be shown in the following that there is a two-step test necessary for the establishment of an object restriction of competition, which has been established by Peeperkorn189 but also by AG Bobek in Budapest Bank.190 Arguably, the two tests of Peeperkorn and AG Bobek seem in essence to be equivalent.

184

Cartes Bancaires (n 4), paras 55–66. Peeperkorn (2017), para 23. 186 Ibid. 187 Colomo (2018a), p. 90. 188 ‘Non-economic’ in the sense that such considerations are not guided by economic theory or economic models in order to provide insights as regards the nature of the respective measure concerned and its potential effects on competition. 189 Peeperkorn (2017). 190 Case C-228/18 Budapest Bank and Others [2020] ECLI:EU:C:2020:265 Opinion of AG Bobek ECLI:EU:C:2019:678 (AG Bobek in Budapest Bank). 185

3.4

The Notion of ‘Context Analysis’: The Relevant Test

3.4.1

47

Peeperkorn

Peeperkorn distinguishes two levels when determining an object restriction of competition191 stressing that the case law ‘does not distinguish clearly between these two levels of analysis’.192 According to him, such two-step analysis is, even if implicitly, also followed by the Commission in its Guidance on restrictions of competition ‘by object’.193 According to Peeperkorn’s two-step analysis firstly, it must be clarified whether a restriction can be held restrictive by its very nature. In other words, it must be analysed whether the respective measure at hand will generally lead to negative effects,194 which is why it is—loosely speaking—suitable to qualify as restriction of competition by object (level I). It is this level, where experience (inter alia gained by economic analysis195) is crucial in order to determine whether or not a measure ‘will normally have an overall negative effect on competition and consumers’.196 Secondly, it is then necessary to ask whether such restraint still constitutes an object infringement of competition when considering the particular circumstances, that is, the content, objective as well as the legal and economic context (level II).197 In order for a measure to actually fall into the object box (notwithstanding what was determined at level I) the answer to the question at level II, however, must be affirmative. Therefore, at level I it is determined whether the practice concerned is considered, in general, to negatively affect competition. At level II, however, light is shed on the individual agreement’s likelihood to actually do so taking into consideration the content, the object as well as the legal and economic context within which it is operated. Therefore, it is at the second level, where circumstances, such as, for example, trademark or other regulatory issues (legal context) as well as, for example, the free-rider concern or the aim of competitors to cooperate by means of specialisation agreements198 (legitimate objectives, economic context) are taken into consideration.

191

Peeperkorn (2017), para 18. Peeperkorn (2017), para 19. 193 Guidance on restrictions of competition ‘by object’ (n 12), Sect. 1. 194 Peeperkorn (2017), para 18. 195 Peeperkorn (2017), para 22. 196 Ibid. 197 Peeperkorn (2017), para 19. 198 See to this effect, for example, Commission Regulation (EU) No 1218/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of specialisation agreements [2010] OJ L335/43 (Block Exemption Regulation for Specialisation Agreements). 192

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3.4.2

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Effects and Article 101 TFEU

AG Bobek in Budapest Bank199

The test as inferred by AG Bobek from the case law in its opinion in Budapest Bank200 also stipulates a two-step analysis in order to find an agreement anticompetitive by object. The wording of what to conduct on the different levels of assessment however, differs slightly from the test as developed by Peeperkorn. According to AG Bobek ‘[in] the first step, the authority focuses mainly on the content of the provisions of the agreement and its objectives’.201 The second step to follow then requires the authority ‘to verify that the presumed anticompetitive nature of the agreement, determined on the basis of a merely formal assessment of it, is not called into question by considerations relating to the legal and economic context in which the agreement was implemented’.202 Therefore, unlike Peeperkorn, content and objective of an agreement are already considered at the first level of the assessment. However, it becomes clear from AG Bobek’s arguing that the authority needs to ascertain in the first step whether the agreement falls within a category, which— considering past experience—justifies to presume a harmful nature of the agreement or practice at hand. Arguably, such first step is of rather general nature. The second step then focusses on the respective legal and economic context and whether such context is capable of questioning the presumed anticompetitive nature. Hence, in the second step it is to be ascertained individually (as regards the respective agreement or practice given) whether there are circumstances rendering the effects of a practice rather ambiguous.

3.4.3

The Compatibility of the Two Tests of Peeperkorn and AG Bobek

It appears from the foregoing that although content and objective of an agreement and the respective legal and economic context within which the latter occurs are to be ascertained at different levels of the assessment, the two tests of Peeperkorn and AG Bobek seem in essence to be equivalent. In other words, although—when considering the different wording—it seems that there is a systematic difference as regards the respective tests of Peeperkorn and AG Bobek it appears that the required analyses according to both are actually identical in terms of substance. Both of the latter have a level of general assessment, where it is to be ascertained whether the respective practice can be held detrimental to competition by its very

199

AG Bobek in Budapest Bank (n 190). AG Bobek in Budapest Bank (n 190), paras 41–43. 201 AG Bobek in Budapest Bank (n 190), para 42. 202 AG Bobek in Budapest Bank (n 190), para 43. 200

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49

nature, which is determined by means of experience inter alia gained by economic analysis and theory. Furthermore, they both suggest a level of individual assessment where it needs to be ascertained whether the presumed anticompetitive nature can be called into question by considerations related to the specific circumstances of the case. The fact that in AG Bobek’s test content and objectives of an agreement are listed at level one of the assessments, which is however, literally not the case as regards Peeperkorn’s analysis, does not preclude the latter from being equivalent as regards the subject matter of the analysis. Put differently, the aim of the first step of both tests is about the general and presumed nature of a practice (notwithstanding the way in which such assessment has been formulated by the respective authors). Consequently, the slight difference in the wording does not preclude their consistency. However, in this author’s view, preference should be given to AG Bobek’s wording. This is owed to the fact that it seems inherent to the process of determining the ‘general nature of an agreement’ and also to the evaluation of its likeliness to detrimentally affect competition that at least the content but also the objective of an agreement should be considered at level one of the two step test.

3.4.4

Content, (Legitimate) Objectives and the Legal and Economic Context: ‘Context Analysis’ and Pro-Competitive Aspects under Article 101(1) TFEU

The following section aims to illustrate the two-step analysis by way of examples. Take for example, agreements that confer absolute territorial protection (‘ATP’), which are typically, and prima facie considered harmful to competition by their very nature. In light of the specific circumstances in Coditel II,203 however, the grant of ATP to a copyright licensee was held not to qualify as object restriction. The Court inter alia stressed that ‘[t]he characteristics of the cinematographic industry and of its markets in the Community [. . .] serve to show that an exclusive exhibition licence is not, in itself, such as to prevent, restrict or distort competition.’204 (Thereby considering the legal and economic context). Another example in this respect is the ECJ’s ruling in Erauw-Jacquery,205 where the Court declared a ban imposed on the holder of a licence ‘for propagating basic seed’206 to sell, export or assign the latter compatible with Article 101(1) TFEU.

203

Case 262/81 Coditel SA, Compagnie générale pour la diffusion de la télévision, and others v Ciné-Vog Films SA and others [1982] ECLI:EU:C:1982:334 (Coditel II). 204 Coditel II (n 203), para 16. 205 Case 27/87 Erauw-Jacquery v La Hesbignonne [1988] ECLI:EU:C:1988:183 (ErauwJacquery). 206 Coditel II (n 203), para 8.

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Furthermore, also trademark rights serve as example for a legal context within which an allegedly prima facie prohibition falls foul the qualification of an object restriction. Take for example, the already mentioned207 ECJ’s ruling in IHT Internationale Heiztechnick GmbH,208 where market sharing was held not to restrict competition. Considering the trademark framework (legal context) within which the market sharing agreement was ‘embedded’, the Court held that ‘[b]efore a trademark assignment can be treated as giving effect to an agreement prohibited under Article [101], it is necessary to analyse the context, the commitments underlying the assignment, the intention of the parties and the consideration for the assignment.’209 Hence, in IHT Internationale Heiztechnick GmbH the fact that the market sharing stemmed from a trademark assignment, rendered it—ultimately—lawful. Moreover, also in case a practice pursues a legitimate objective that plausibly serves a pro-competitive aim, such as, for example, measures, which address freeriding concerns, or agreements that can otherwise be plausibly explained by a pro-competitive motive,210 are, considering their economic context, not by their very nature restrictive of competition.211 Hence, as stressed, for example, by Colomo, it is a persistent myth in competition law, that ‘the pro-competitive aspect of an agreement can only be considered under Article 101(3) TFEU.’212 Rather, they are and have always been crucial in the context of Article 101(1) TFEU. In Colomo’s words, ‘pro-competitive aspects of an agreement play, and have always played, a central role under 101(1) TFEU.’213 Specialisation agreements, for example, provide another example. For sure, such agreements between competitors can be used to limit competition.214 However, they are also a valuable and plausible source of efficiencies, as ‘[a]greements on specialisation in production are most likely to contribute to improving the production or distribution of goods if the parties have complementary skills, assets or activities [. . .].’215 As recognised by the Commission ‘[g]iven effective competition, it is likely that consumers will receive a fair share of the resulting benefits’216 of

207

See under Sects. 3.3.1 and 3.3.1.1. IHT (n 133). 209 IHT (n 133), para 59. 210 I have already mentioned the examples of specialisation, cooperation or R&D agreements in this respect. 211 See in this respect, for example, the ECJ most recently in Case C-307/18 Generics (UK) and Others [2020] ECLI:EU:C:2020:52 (Generics), paras 103 et seq. 212 Pablo Ibáñez Colomo, ‘Persistent myths in competition law (I): the pro-competitive aspect of an agreement can only be considered under Article 101(3) TFEU’, Chillin’Competition Blog, available at accessed 6 February 2023. 213 Colomo (n 212). 214 Peeperkorn (2017), p. 42. 215 Block Exemption Regulation for Specialisation Agreements (n 198), para 6. 216 Ibid. 208

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The Notion of ‘Context Analysis’: The Relevant Test

51

Fig. 3.1 By object vs by effect restrictions Content, Objective, Legal & Economic Context

ECONOMICS

Hardcore restrictions (see above) considering the tests and criteria as developed by the Courts (STM, Metro, Javico, Lundbeck, etc)

ambiguous

non-ambiguous

effect-analysis

by object

specialisation agreements. In other words, agreements falling foul of the notion of object infringements must, one way or another, serve to the benefit of the consumer. Therefore, a legitimate, reasonable explanation for the operation of a measure renders the latter ambiguous from an antitrust harm perspective, that ambiguity being the reason for a measure to drop out of the object-box (see Fig. 3.1). This seems very well echoed in the case law of the ECJ, namely, for example, in its rulings in Maxima Latvija,217 Cartes Bancaires,218 Budapest Bank,219 Generics220 and Lundbeck.221 In Maxima Latvija, for example, the practice concerned was held not to have as its object to restrict competition, notwithstanding the fact that the ‘veto right’ as regards potential new tenants, granted to the anchor tenant, seems—at first glance—anything but rich of pro-competitive attributes (or legitimate objectives). However, the agreement was held legitimately free from the allegation of having a harmful and anti-competitive object or purpose. Rather an ambiguous effect on competition was attributed to the latter requiring an analysis of the effects the measure has on the respective relevant market concerned.222 What is reprehensible though, is the fact that the ECJ did not elaborate on why it considered

217

Case C-345/14 Maxima Latvija [2015] ECLI:EU:C:2015:784 (Maxima Latvija). Cartes Bancaires (n 4). 219 Case C-228/18 Budapest Bank and Others [2020] ECLI:EU:C:2020:265 (Budapest Bank). 220 Generics (n 211). 221 Lundbeck (Chap. 1, n 31). 222 Maxima Latvija (n 217), paras 25 et seq. 218

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the clause ambiguous and consequently not restrictive by object. For more details regarding Maxima Latvija223 see Sect. 3.7.1. Moreover, in Cartes Bancaires the measure did not qualify as restrictive by object as it was considered being a capable means to countervail the free-rider concern. For the sake of completeness, it should be mentioned though that in Cartes Bancaires it was not the free-rider argument only, which convinced the Court not to qualify the respective practice as restrictive of competition by object. For more details regarding Cartes Bancaires224 see Sect. 3.6.5. Furthermore, without anticipating any substance of Chap. 5 (Particularities of the Digital Economy) et seq, also in Coty225 the freerider concern might, albeit not explicitly, but arguably implicitly have had an influence on the decisional outcome not qualifying a ban on online sales via thirdparty platforms as restrictive of competition by object.226 For details of the ECJ’s decision in Coty, see below under Sect. 6.2.4. Furthermore, the line of argument in cases such as Budapest Bank227 and Generics228 also runs in the same vein. In Generics, for example, the ECJ stressed that pro-competitive effects are indeed to ‘be duly taken into account for the purpose of [an agreement’s] characterisation as a “restriction by object” [. . .]’.229 In Budapest Bank, however, it did so rather implicitly, recognising that ‘the content of the agreement does not, however, necessarily point to a restriction “by object”, in the absence of proven harmfulness of the provisions of [the latter] to competition.’230 For details of the ECJ’s decision in Generics and Budapest Bank, see below under Sects. 3.7.3 and 3.7.4. In other words, ‘[b]oth rulings clarify that the pro-competitive apsects of an agreement can be considered when evaluating its object.’231 Hence, in a nutshell and borrowed from Colomo, a measure ‘does not qualify as object restriction if it has redeeming virtues [that are in the interest of both parties to an agreement and of consumers] that compensate for the expected negative effects’.232

223

Maxima Latvija (n 217). Cartes Bancaires (n 4). 225 Coty (n 158). 226 Zelger (2018), p. 451. 227 Budapest Bank (n 219). 228 Generics (n 211). 229 Generics (n 211), para 103. 230 Budapest Bank (n 219), para 65. 231 Colomo (2020c), p. 15. 232 Colomo (n 30). 224

3.5 ‘Context Analysis’ vs Pro-Competitive Aspects under Article 101(3) TFEU

3.5

53

‘Context Analysis’ vs Pro-Competitive Aspects under Article 101(3) TFEU

As illustrated above, pro-competitive aspects do play a significant role under Article 101(1) TFEU. However, it is important to emphasise that the level where pro-competitive effects are actually balanced against anti-competitive effects lies with Article 101(3) TFEU, as it it is clear that there is no such thing as a US ‘rule of reason’ approach under 101(1) TFEU.233 This seems gratifying as EU competition law follows a different structure than US antitrust law does. Whereas there is a two-tier system as regards EU competition law, that is, Article 101(1) and Article 101(3) TFEU, there is no equivalent of Article 101(3) TFEU in US antitrust law. Against this backdrop, however, it becomes obvious why a rule of reason approach, that is, a case-by-case approach weighing all the pro and anticompetitive aspects of an agreement against each other, was introduced by the US Supreme Court234 in addition to the per se approach as conducted under Sect. 1 of the US Sherman Act. In light of the above, it cannot be overstated that the consideration of pro-competitive aspects in the establishment of a by object restriction under Article 101(1) TFEU, that is, within the scope of a ‘context analysis’ as defined above, differs from the consideration of the latter aspects under Article 101(3) TFEU. Firstly, the difference lies (not only but) in particular with the extent of the analysis and consideration of the pro-competitive aspects.235 In the context of Article 101(1) TFEU, pro-competitive aspects are considered to determine whether a practice can be deemed to be—after a rather cursory glance only236—restrictive by object, that is, restrictive by their very nature as to their potential detrimental effect on competition and consumer welfare. Therefore, in case of doubts as regards the detrimental nature of an agreement, such agreement should not qualify as object restriction of competition. Put differently, if an agreement constitutes a plausible source of pro-competitive gains its effects cannot be deemed to be unambiguously detrimental to competition. Rather, they appear to be ambiguous. Consequently, they should be treated under the category of effect infringements. With respect to Article 101(3) TFEU, however, pro-competitive aspects are subject to an in-depth scrutiny. Therefore, the latter analysis is ‘much deeper under Article 101(3) TFEU.’237 As put by the General Court when differentiating the extent of consideration of pro-competitive or efficiency aspects as regards paragraph 1 and 3 of Article 101 TFEU an ‘examination of the objective necessity 233 Case T-112/99 Metropole Television (M6) and others v Commission [2001] ECLI:EU:T:2001: 215, para 76; Case T-328/03 O2 (Germany) GmbH & Co. OHG v Commission [2006] ECLI:EU: T:2006:116, para 69; Case T-111/08 MasterCard [2012] ECLI:EU:T:2012:260 (MasterCard), para 80. 234 Continental TV Inc v GTE Sylvania 433 US 36 (1977). 235 Colomo (n 212). 236 Colomo (n 212). 237 Colomo (n 212).

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of a restriction in relation to the main operation cannot but be relatively abstract’238 in the context of Article 101(1) TFEU. Under Article 101(3) TFEU, however, positive effects a measure might have are actually weighed against potential anticompetitive effects. An exercise, which is not conducted under Article 101(1) TFEU. Secondly, the respective frameworks under which efficiencies or pro-competitive aspects come into play differ significantly as regards the status of an agreement from a competition law perspective. Whereas under Article 101(1) TFEU the qualification of an agreement is still unclear, that is, it has not yet been decided whether or not an agreement constitutes a restriction of competition by object or effect. This is different under Article 101(3) TFEU, as it is clear that one way or another, that is, by object or effect, the agreement constitutes an infringement of Article 101(1) TFEU. Against this backdrop, it appears to me that Colomo got to the heart of the issue noticing that the two paragraphs do not only ‘fulfil a different role [but also] the intensity of the analysis is [. . .] very different.’239

3.6

‘Context Analysis’: From T-Mobile to Cartes Bancaires

The following shall illustrate the respective relevant case law of the ECJ on the delimitation of object from effect restrictions of competition up to its landmark decision in Cartes Bancaires,240 that is, the genesis from T-Mobile,241 Allianz Hungária242 and Slovak Banks.243 Moreover, the subsequent section (Sect. 3.7) shall shed light on the age post-Cartes Bancaires as regards the ECJ’s further rulings regarding the notion of restrictions to competition (Maxima Latvija,244 HoffmannLaRoche v AGCM,245 Budapest Bank246) also considering the recent decisions of the ECJ (Generics,247 Lundbeck248) and the General Court in the pharmaceutical sector (Servier249).

238

MasterCard (n 233), para 80. Colomo (n 212). 240 Cartes Bancaires (n 4). 241 T-Mobile (Chap. 1, n 36). 242 Allianz Hungária (n 38). 243 Case C-68/12 Protimonopolný Úrad Slovenskej Republiky v Slovenská Sporiteľňa a.s. [2013] ECLI:EU:C:2013:71 (Slovak Banks). 244 Maxima Latvija (n 217). 245 Hoffmann-LaRoche v AGCM (Chap. 1, n 37). 246 Budapest Bank (n 219). 247 Generics (n 211). 248 Lundbeck (Chap. 1, n 31). 249 Servier (Chap. 1, n 31). 239

3.6 ‘Context Analysis’: From T-Mobile to Cartes Bancaires

3.6.1

55

General Remarks

When looking at the case law of the ECJ, the concept of a ‘context analysis’ as required for the establishment of an object restriction has not been uncontroversial, in particular as regards its delimitation from a full analysis of the effects in effect cases. However, since its ruling in STM,250 it has been consistently held by the ECJ that in order for a restriction to qualify as restrictive by object, it is necessary to consider the nature as well as the economic and legal context within which it is operated. As exemplified above, a ‘context analysis’ is necessary as the mere ‘form of the practice, alone, is insufficient to establish a restriction of competition’,251 because a prima facie prohibition irrespective of the legal and economic context appears to be at odds with the case law.252 However, there has been criticism with respect to the relevant case law concerning object restrictions, as the ECJ seemed to have brought (or even mingled253) the concepts of object restrictions and the one of an actual effect analysis too close together. In AG Wahl’s words, the case law has ‘to some extent, [. . .] contributed to blurring the boundary between the concepts of restriction by object or restriction by effect.’254

3.6.2

T-Mobile255

T-Mobile concerned the exchange of confidential information and the coordination of market conduct between T-Mobile and four of its competitors active in the mobile network sector. The question to be answered by the ECJ in its preliminary ruling was whether the respective exchange of information amounted to a restriction of competition by object, as the Dutch competition authority had qualified the latter as such and imposed fines. The Court was criticised to have broadened the approach to infringements by object256 as it stated that [w]ith regard to the assessment as to whether a concerted practice, such as that at issue in the main proceedings, pursues an anti-competitive object, it should be noted, first, as pointed out by the Advocate General at point 46 of her Opinion, that in order for a concerted practice to be regarded as having an anti-competitive object, it is sufficient that it has the potential to have a negative impact on competition. In other words, the concerted practice must simply be capable in an individual case, having regard to the specific legal and economic context, of

250

STM (Chap. 1, n 35. Colomo and Lamadrid (2017), p. 5. 252 Colomo and Lamadrid (2017), pp. 5–6. 253 T-Mobile (Chap. 1, n 36) Opinion of AG Kokott ECLI:EU:C:2009:110, para 45. 254 Cartes Bancaires (n 4) Opinion of AG Wahl ECLI:EU:C:2014:1958, para 52. 255 T-Mobile (Chap. 1, n 36). 256 Meyring (2010), p. 31; also see Bailey (2012), p. 589. 251

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resulting in the prevention, restriction or distortion of competition within the common market.257 (emphasis added)

As I argued elsewhere,258 the wording of the ECJ in T-Mobile has, in my view, not necessarily added further confusion to the concepts of object and effect infringements. Rather, the wording as used by the ECJ in T-Mobile can be seamlessly and coherently included in the concept of object restrictions according to which an agreement must be sufficiently deleterious,259 harmful, obvious or injurious by its very nature260 in order to qualify as object restriction, especially in light of an overall notion of possible ‘net effects’.261 Therefore, the ‘potential’ and ‘capability’ of a practice to negatively affect competition within the common market does not seem diametrical to what has been stated in the earlier case law. Rather it arguably seems complementary to it. Furthermore, from a holistic angle considering the legal and economic context of the case as a whole, that is, namely, the oligopolistic nature of the market concerned and the exchange of confidential information capable of removing uncertainty regarding future pricing, the Court’s conclusion qualifying the practice as restrictive by object seems anything but surprising. Furthermore, although the Commission’s guidance on information exchanges dates from 2011,262 at the time of the decision in T-Mobile, it has already been established case law, that the exchange of market information may lead to restrictions of competition in particular in situations where it is liable to enable undertakings to be aware of market strategies of their competitors, and especially in highly concentrated oligopolistic markets.263

3.6.3

Allianz Hungária264

The case concerned vertical agreements between Hungarian insurance companies and authorised dealers operating repair shops. The agreements contained clauses agreeing upon (i) the rates applicable to repair services (payable by the insurance companies) and (ii) the dealers acting as intermediaries for the insurers (offering insurances to their customers). Furthermore, the charge for the repair services was

257

T-Mobile (Chap. 1, n 36), para 31. Zelger (2017), pp. 375 et seq. 259 STM (Chap. 1, n 35), para 249. 260 T-Mobile (Chap. 1, n 36), paras 26–30. 261 For an exhaustive and more detailed reasoning of this argument see Zelger (2017), pp. 375–376. Regarding the notion of ‘net effects’ see Sect. 3.1.3 et seq. 262 European Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements [2011] OJ C11/01 (Horizontal Guidelines). 263 See for example, Case C-7/95 P John Deere [1998] ECLI:EU:C:1998:256, para 88. 264 Allianz Hungária (n 38). 258

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linked to the number of insurance policies signed. In its preliminary ruling the ECJ (referring to BIDS265 and T-Mobile266) stressed the need to analyse the content, objectives and context of agreements to determine whether they contain by object restrictions of competition. However, the Court stressed that it is also appropriate to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question267 (emphasis added).

It then further elaborated that those agreements would also amount to a restriction of competition by object in the event that the referring court found that it is likely that, having regard to the economic context, competition on that market would be eliminated or seriously weakened following the conclusion of those agreements. In order to determine the likelihood of such a result, that court should in particular take into consideration the structure of that market, the existence of alternative distribution channels and their respective importance and the market power of the companies concerned.268

The Court’s ruling was heavily criticised as, arguably, it contributed to further confusion regarding the concepts of by object and by effect infringements of competition. Put in Ezrachi’s words, the ruling contained ‘a hybrid analysis which results in de facto widening of the object category and blurring of the dividing line between object and effect analysis’,269 as some factors mentioned by the Court, such as, for example, the structure of the market, the existence of alternative channels and their respective importance as well as the market power reminded of the language used in effect cases.270 Moreover, the Court can also be criticised for having cited misleadingly, as in its reasoning of factors being relevant when establishing an object restriction, it referred to its judgement in Expedia,271 which dealt, however, with the de minimis doctrine. For more details regarding Expedia272 see Sect. 3.8. Hence, Expedia is arguably inappropriate to be mentioned when ruling on the framework of object analysis,273 as the question referred to the Court in Expedia was about the necessity of a

265

BIDS (n 2). T-Mobile (Chap. 1, n 36). 267 Allianz Hungária (n 38), para 36. 268 Allianz Hungária (n 38), para 48. 269 Ezrachi (2018a), p. 108. 270 For example, the wording in European Night Services (n 105), para 136, Case C-250/92 Gottrup-Klim ν Dansk Landbrugs Grovvareselskab [1994] ECLI:EU:C:1994:413 (Gottrup-Klim), para 31, or Case C-234/89 Delimitis ν Henninger Bräu [1991] ECLI:EU:C:1991:91 (Delimitis), stating that when conducting a full effect-analysis ‘the economic context in which the undertakings operate, the products and services covered by the agreement and the actual structure of the market concerned’ must be considered. 271 Case C-226/11 Expedia [2012] ECLI:EU:C:2012:795 (Expedia). 272 Ibid. 273 Ezrachi (2018a), p. 111. 266

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competition restriction having an appreciable effect in order to fall within the ambit of Article 101(1) TFEU, not however, about the concept of restrictions of competition by object as such.274 Therefore, any reference to the latter judgement ‘seems misplaced as the concept of an object restriction and the concept of the necessity of a competition restriction having an appreciable effect come into play at different levels of the assessment’.275

3.6.4

Slovak Banks276

Another case concerned the conduct of three Slovak banks, which had entered into an agreement to terminate—in a coordinated manner277—all their existing contracts with Akcenta CZ a.s. (‘Akcenta’), a non-bank financial company active in the market for cashless foreign-exchange transactions. The termination of the account contracts was existential to Akcenta as it needed accounts to offer its services and operate its business. The ECJ qualified the refusal to contract as restrictive by object, notwithstanding the fact that Akcenta had operated and offered its services illegally, that is, lacking the required licence necessary in order to carry out the respective services on the cashless foreign-exchange market.278 The argument that such agreement was concluded to counteract the fact that Akcenta had operated without the respective permit necessary was condemned by the Court stressing that ‘it were for public authorities and not private undertakings [. . .] to ensure compliance with statutory requirements.’279 Therefore, the alleged aim and objective of the agreement concerned was held not to legitimate the conclusion of such agreement. In other words, the agreement was held unambiguously restrictive by its very nature not pursuing any other legitimate, pro-competitive objective that could render the latter ambiguous from a competition law perspective. This argument is similar to the one the Court made in Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato280 (see Sect. 3.7.2), where it held that a concerted practice by which Novartis and Roche communicated that the off-label use of a product was less safe than the on-label use of a competitive product may be regarded as object restriction of competition. The Court considered such practice being detrimental to competition by its very nature not recognising ‘safety concerns’ claimed by the parties to be an appropriate objective, as the responsibility

274

Zelger (2017), p. 377; Ezrachi (2018a), p. 111. Zelger (2017), p. 377. 276 Slovak Banks (n 243). 277 Making the termination subject to the termination of the respective agreements by each of the other banks. See in this respect Slovak Banks (n 243), para 4. 278 Slovak Banks (n 243), para 19. 279 Slovak Banks (n 243), para 20. 280 Hoffmann-LaRoche v AGCM (Chap. 1, n 37). 275

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for reporting risks ‘associated with the off-label use of a medicinal product [. . .] rest [s] [. . .] solely with the holder of the [Market Authorisation] for that medicinal product and not with another undertaking marketing a competing medicinal product covered by a separate MA.’281

3.6.5

Cartes Bancaires282

The case concerned an economic interest consortium of French banks, which agreed upon price measures to avoid free-riding283 and achieve interoperability of payment systems and account withdrawals using bankcards.284 The system managed by the consortium, that is, the Cartes Bancaires card payment system in France, accounted for over 70% of card payments in France.285 The price measures agreed upon were, for example, membership fees and charges for payment cards. However, the amount of the fees and charges paid by the banks varied according to a formula (named ‘MERFA’—Mécanisme de Régulateur de la Fonction Acquéreur) determining the fee to be paid by the banks for each bank card issued. The developed formula took account of the so-called free-rider problem. Therefore, the fact that free-riding banks issued their cards but were not actively engaged (i) in acquiring and contracting with new merchants (which accepted their cards for payment) as well as (ii) in the installation of ATMs, was considered and echoed in the mechanism of MERFA. Ultimately, the practice was held not to qualify as object restriction. Cartes Bancaires was welcomed mainly for two reasons. Firstly, as a ‘reaction to an often-discussed trend on the excessive use and abuse of the “object shortcut”‘,286 as the ECJ emphasised the need of a ‘restrictive’ interpretation of the concept of object restrictions. Secondly, the decision acknowledged that the measure’s object was not anticompetitive only, but also a means to react to a legitimate concern, namely, the free-riding problem in a two-sided market. Therefore, the practice at hand rather had ambiguous effects than unambiguous, detrimental and harmful ones on competition (in this respect, see the figure under Sect. 3.4.4).

281

Hoffmann-LaRoche v AGCM (Chap. 1, n 37), para 91. Cartes Bancaires (n 4). 283 That is, free-riding by banks, which issue their own cards but do not contribute any work to ensure that their cards were actually accepted by merchants. 284 Killick and Jordan (2014). 285 Eduardo Martínez Rivero and Guillaume Schwall, ‘Decision against the Groupement des Cartes Bancaires (CB)’, Competition Policy Newsletter, available at accessed 6 February 2023. 286 Alfonso Lamadrid, ‘10 Comments on the ECJ’s Judgment in Case C-67/13 P, Groupement des Cartes Bancaires’, Chillin’Competition Blog, available at accessed 6 February 2023. 282

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Consequently, in Cartes Bancaires the imposition of a restrictive means to address a genuine free-rider concern did not amount to a restriction of competition by object.287 Rather, ‘the essential legal criterion for ascertaining whether coordination between undertakings involves a restriction of competition “by object”, [that] is, the finding that such coordination reveals in itself a sufficient degree of harm to competition’ (emphasis added) could not be found. Arguably, the free rider concern seemed to legitimately free the agreement from all allegations of having a harmful and anti-competitive object and purpose only. Rather an ambiguous effect on competition was attributed to the latter. Hence, with its judgement in Cartes Bancaires, the ECJ narrowed the approach to the scope of restrictions by object previously expanded by its decisions in Allianz Hungária and arguably also T-Mobile.288 As a final remark it should be emphasised that, interestingly, the ECJ has explicitly mentioned and considered the two-sidedness of the respective relevant market, a fact that especially gains in importance as regards effect analysis and economic theory in online markets (see below Chap. 5 et seq).

3.7

The Age after Cartes Bancaires

This section shall analyse the relevant decisions of the ECJ regarding the notion of object restrictions to competition in the post-Cartes Bancaires era. Hence, light shall be shed particularly on the rulings in Maxima Latvija,289 Hoffmann-LaRoche v AGCM,290 Budapest Bank,291 Generics292 and Lundbeck.293

3.7.1

Maxima Latvija294

After Cartes Bancaires, it was in the preliminary ruling in Maxima Latvija where the ECJ had to answer questions concerning the notion of a restriction of competition. The case concerned a clause within a commercial lease agreement concluded between the shopping centre operator and Maxima Latvija, a supermarket chain

287

Colomo (n 87). Critical regarding the wording in T-Mobile (Chap. 1, n 36), for example, Meyring (2010), p. 31, Bailey (2012), p. 589; arguing differently Zelger (2017), pp. 375–376. 289 Maxima Latvija (n 217). 290 Hoffmann-LaRoche v AGCM (Chap. 1, n 37). 291 Budapest Bank (n 219). 292 Generics (n 211). 293 Lundbeck (Chap. 1, n 31). 294 Maxima Latvija (n 317). 288

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The Age after Cartes Bancaires

61

and so-called ‘anchor tenant’, according to which the tenant was granted the right to veto ‘the letting by the lessor, in that centre, of commercial premises to other tenants’.295 Arguably, the purpose of such clause is obviously to restrict competition and protect one’s own commercial interests.296 However, the Court ruled that such practice was not restrictive of competition by object, but—unfortunately—did not explain in detail why it decided to do so. Hence, the ‘subtly wrapped’ criticism to be found in the question whether the ECJ has revisited a ‘Rule of Reason and Article 101 par. 1 of TFEU’297 in its ruling on the anchor tenant’s veto clause seems legitimate. However, as the case concerned an exclusivity clause in favour of Maxima Latvija, taking into consideration the respective relevant case law298 concerning— in its broadest term—single branding agreements (as for example, exclusive purchasing or non-compete obligations299), the decision of the Court appears anything but at odds with the established principles as such agreements ‘do not have the object of restricting competition’300 (emphasis added). Furthermore, trying to fill the gap left by the Court lacking an explanation as regards why it chose the effect route, from a shopping centre operator’s perspective, an indirect grant of exclusivity to a lessor as regards the trade undertaken by the latter is a plausible source to warrant product variety in the shopping centre.301 Consequently, different customer target groups might be attracted and pleased by a wide range of trades. Furthermore, also potential lessees are ‘much more likely to be willing to take the leases.’302 Moreover, there are further explanations why the Court might have decided to take the effect-route in the case at hand. Firstly, the case concerned vertical agreements concluded between shopping centre operators and Maxima Latvija, an undertaking active in the operating of huge shops and markets in the food retail sector. As stressed by the Court, inter alia, in Allianz Hungária, and acknowledged by the

295

Maxima Latvija (n 317), para 15. Colomo (n 87). 297 Vassilis Karayiannis and Tasos Kollas, ‘CJEU’s ruling on the anchor tenant’s veto right clause: Rule of Reason and article 101 par. 1 of TFEU revisited?’, Competition & Regulation Report Commentaries/No. 3, available at accessed 1 August 2019. 298 Case C-23/67 Brasserie de Haecht v Wilkin [1967] ECLI:EU:C:1967:54; Delimitis (n 269); Case T-65/89 BPB Industries v Commission [1993] ECLI:EU:T:1993:31 (BPB Industries), para 66. 299 Whish and Bailey (2018), p. 651. 300 Whish and Bailey (2018), p. 652, referring to the General Court’s ruling in T-65/98 Van den Bergh Foods Ltd v Commission [2003] ECLI:EU:T:2003:281, para 80 (Van den Bergh Foods). 301 Who would want to shop in centre with ‘supermarkets’ or grocery stores only? 302 As argued in the UK case Williams v Kiley (t/a) CK Supermarkets Ltd [2002] EWCA Civ 1645, para 45, which did however not deal with the competition law concern as the issue of illegality had not been raised before the Court. 296

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Commission,303 vertical agreements are ‘often less damaging to competition than horizontal agreements’.304 In this light, also considering the controversial debate as regards the European institutions’ arguably overly rigorous approach to verticals,305 the latter criticism and debate could presumably have had an impact on the Court’s decision to treat the clause according to its effects. That the Court explicitly refers306 to the fact that Maxima Latvija and the shopping centres were not in a competitive situation with each other might also speak in favour of such argument. Secondly, it should also be kept in mind, that there is a UK judgement307 also concerning exclusivity or non-compete clauses in commercial lease agreements in shopping centres pre-dating308 the respective decision of the ECJ in Maxima Latvija. However, for the sake of completeness it should be mentioned that the contested clauses prohibited the lessees from selling a wider range of goods than agreed upon with the lessor in the commercial lease agreement for business premises in a shopping centre. Therefore, the clause did not act in favour but rather to the detriment of the lessee aiming to expand its product range. Insofar, the facts and circumstances differed from those in Maxima Latvija. The agreements were part of a ‘letting scheme’ though, which was underpinned by legitimate interests of the shopping centre operator. As a consequence, the disputed agreements were treated according to their effects, however, ultimately declared unenforceable for infringing the respective competition law provisions.309

3.7.2

Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato310

In this case the ECJ had to decide upon a practice by which Novartis and Roche communicated that the off-label use of a product was less safe than the on-label use of a competitive product and held that such communication strategy may be regarded as a by object restriction of competition. Thus, the Court did not acknowledge the safety concerns claimed by the parties to be the legitimate aim and reason for the communication of the risks of the off-label use of the therapeutic equivalent. Thus, the latter argument did not convince the ECJ emphasising that the responsibility for 303

Vertical Guidelines (n 84), para 10. Allianz Hungária (n 38), para 43. 305 For example, Ioannidou and Nowag (2015); Whish and Bailey (2021), p. 658. 306 Maxima Latvija (n 217), para 21. 307 Martin Retail Group Ltd v Crawley Borough Council [2013] CLCC WL 7090797. 308 Decision dated 24 December 2013. 309 Ibid. 310 Hoffmann-LaRoche v AGCM (Chap. 1, n 37). 304

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reporting risks ‘associated with the off-label use of a medicinal product [. . .] rest [s] [. . .] solely with the holder of the [Market Authorisation] for that medicinal product and not with another undertaking marketing a competing medicinal product covered by a separate MA.’311 Therefore, the Court considered the practice harmful by its very nature, that is, unambiguously detrimental to competition. As stressed in a preceding section,312 the reasoning of the ECJ in Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato is similar to the one in Slovak Banks (see Sect. 3.6.4) where the ECJ held that ‘it were for public authorities and not private undertakings [. . .] to ensure compliance with statutory requirements’.313 Therefore, ‘private police’ (like in Slovak Banks314) or ‘private safety officer’ ambitions (like in the Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato case) are not considered to be appropriate objectives or reasons that render a prima facie infringement ambiguous from a competition law perspective. Rather, they seem to be conceived as ‘shabby excuse’ trying to reasonably justify per se infringements of competition law. For that reason, the alleged aim and objective of the agreement concerned as put forward by the parties did not legitimise an agreement of such restrictive nature. Put differently, the agreement was held unambiguously restrictive of competition not pursuing any other legitimate, pro-competitive objective that could render the latter agreement ambiguous from a competition law perspective consequently requiring an assessment of its effects.

3.7.3

Budapest Bank315

Another case where the ECJ had to deal with the notion of object restrictions is a request for preliminary ruling from the Hungarian Supreme Court concerning a decision of the Hungarian competition authority by which the latter found an anticompetitive agreement relating to interchange fees in an agreement concluded between seven banks, Visa Europe Ltd. and MasterCard Europe SA. One question to be answered by the Court was, inter alia, whether the agreement regarding interchange fees amounted to a restriction of competition by object as ‘it had an indirect effect on the determination of the amount of the [merchant service charge]’.316 Interchange fees, in principle, are a cost component of the merchant service charge (‘MSC’) being the fee which is levied on merchants by acquiring banks. Notwithstanding the fact that it was ‘ultimately for the referring court to

311

Hoffmann-LaRoche v AGCM (Chap. 1, n 37), para 91. See Sect. 3.6.4. 313 Slovak Banks (n 243), para 20. 314 See above Sect. 3.6.4. 315 Budapest Bank (n 219). For a discussion of by object restrictions in the decisions in Budapest Bank but also Generics and Lundbeck, also see Enchelmaier (2022). 316 Budapest Bank (n 219), para 7. 312

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determine whether that agreement had as its object the restriction of competition’,317 the ECJ provided detailed guidance as regards how to determine whether a restriction qualified as restrictive of competition by object. Thereby, the Court explicitly followed AG Bobek stressing that in order for an agreement to qualify as restrictive by object, sufficiently reliable and robust experience underpinning such view must be available.318 Moreover, as held in Cartes Bancaires, it highlighted the necessity to interpret by object restrictions ‘restrictively’319 and acknowledged that ‘the content of the agreement does not, however, necessarily point to a restriction “by object”, in the absence of proven harmfulness of the provisions of [the latter] to competition.’320 The Court finally concluded that [i]n the light of all the foregoing considerations, the answer to the second question is that Article 101(1) TFEU must be interpreted as meaning that an interbank agreement which fixes at the same amount the interchange fee payable, where a payment transaction by card takes place, to the banks issuing such cards offered by card payment services companies operating on the national market concerned cannot be classified as an agreement which has "as [its] object" the prevention, restriction or distortion of competition, within the meaning of that provision, unless that agreement, in the light of its wording, its objectives and its context, can be regarded as posing a sufficient degree of harm to competition to be classified thus, a matter which is for the referring court to determine.321 (emphasis added)

Against this backdrop it seems that with its decision in Budapest Bank the ECJ continues the trend as initiated in Cartes Bancaires.322 Arguably, the guiding principle which can be deviated from the case law of the Court could—in simple terms—be summed up as follows: ‘in dubio pro effect analysis’.323 In other words and as argued above, as long as there is no experience based on solid economic theory justifying the presumption of harmful effects of a measure, such effects should not be presumed but rather be proved by establishing anticompetitive effects under the ‘effect heading’. Furthermore, as in its decision in Cartes Bancaires,324 the Court also acknowledged the necessity to consider the two-sidedness of a market, that is, the two-sided card payment system.325 This seems particularly important as regards the digital economy and online markets, as, as will be shown in Chap. 5 below, the internet is prone to the concept of two-sided markets. Hence, the ECJ’s ruling in Budapest Bank is, in principle, a welcomed one. However, one aspect I have already criticised above and a fact which the decision at hand has—unfortunately—in common with

317

Budapest Bank (n 219), para 59. Budapest Bank (n 219), para 75. 319 Budapest Bank (n 219), para 54. 320 Budapest Bank (n 219), para 65. 321 Budapest Bank (n 219), para 86. 322 Cartes Bancaires (n 4). 323 So correspondingly Wünschmann and Brock-Wenzek (2020), p. 268. 324 See Sect. 3.6.5, page 59–60. 325 Budapest Bank (n 219), para 66. 318

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The Age after Cartes Bancaires

65

the landmark ruling in Cartes Bancaires, is the Court’s reiterating of the disputed wording used in Allianz Hungariá.326

3.7.4

The Pharma Cases (Generics and Lundbeck)

3.7.4.1

Generics

Generics327 is the first case where the ECJ had to decide if reverse payment settlement agreements qualify as object restriction of competition. In the pharmaceutical sector, settlement agreements are concluded to settle or avoid a patent dispute. To this effect, market entry of a generic product, which is possible after expiration of a valid patent, is usually postponed in exchange for a benefit transferred from the originator to the generic company in order to settle a dispute as regards patent validity. Hence, the concern from a competition law perspective are so-called pay-for-delay clauses, which are usually contained in reverse payment settlement agreements. In other words, notwithstanding the fact that settlement agreements are a recognised means to settle a patent dispute, ‘patent settlements in the pharmaceutical sector may prove to be problematic from an antitrust harm perspective; however, they do not necessarily have to’.328 The case in Generics329 reached the Court by request for preliminary ruling from the UK Competition Appeal Tribunal, and concerned an appeal against a decision of the UK Competition and Markets Authority (‘CMA’), by which the latter had imposed fines of in total £ 45 million upon GlaxoSmithKline and five manufacturers of generic medicines. According to the CMA, the respective settlement agreements concluded between the former companies mentioned ‘reveal, in and of themselves, a sufficient degree of harm to competition and therefore had the object of restricting competition’330.331 The ECJ, in principle, recognised that reverse payment settlement agreements have the potential to qualify as object restriction of competition, but they ‘cannot, however, be considered, in all cases, to be a “restriction by object” within the meaning of Article 101(1) TFEU’.332 Moreover, the ECJ provided vague parameters to be taken into account when assessing the potential by object nature of reverse

326

Allianz Hungária (n 38), paras 33 and 36; see Sect. 3.6.3. Generics (n 211). For a discussion of by object restrictions in the decisions in Generics but also Budapest Bank and Lundbeck, also see Enchelmaier (2022). 328 Zelger (2020b), p. 275. 329 Generics (n 211). 330 Paroxetine (Case CE-9531/11) Decision of the Competition and Markets Authority dated 12 February 2016, para 6.3. 331 Zelger (2020b), p. 281. 332 Generics (n 211), para 84. 327

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payment settlement agreements from a competition law perspective.333 A fact, which might be owed to the way the case reached the ECJ, that is, by means of a request for preliminary ruling as ‘the analysis cannot be expected to go beyond providing the relevant factors that the national court would need to apply to the facts of the case’.334 Decisive to this effect is the respective benefit granted by the originator to the generic company, that is, the transfer of value, pecuniary or non-pecuniary, (for example, in form of a licence granted). Moreover, such transfer of value alone is not sufficient in and of itself to qualify a patent settlement agreement as object restriction of competition, as the latter can be justified being ‘appropriate and strictly necessary having regard to the legitimate objectives of the parties of the agreement’335.336 Hence, only ‘in case there is no explanation other than the commercial interest of both parties not to engage in competition on the merits, such agreement characterises as object restriction of competition’.337

3.7.4.2

Lundbeck

The most recent case concerning reverse payment settlement agreements is the ECJ’s decision in Lundbeck.338 In principle, the Court’s decision is in line with the principles developed in Generics. However, it is important to stress that the fact that the case in Generics reached the Court by means of a request for preliminary ruling, makes it different in substance from the case in Lundbeck339 (and also from the one in Servier,340 which is, at the time of writing this monograph, pending at the ECJ),341 as, regarding the fromer, the ECJ is ‘limited by the facts as identified by the national courts as well as the specific questions raised by the latter’.342 In other words, whereas in Generics the Court had to answer abstract questions, a fact that is inherent to questions referred to the Court by means of a request for preliminary ruling, the decision in Lundbeck was one of substance. The case concerned patent settlement agreements between the originator of Citalopram (anti-depressant), Lundbeck, and four companies with generic

333

Argued similarily in Zelger (2020b), p. 282. Colomo (2020b), pp. 3 et seq. 335 Generics (n 211), para 85. 336 Zelger (2020b), p. 281. 337 Ibid. 338 Lundbeck (Chap. 1 , n 31). For a discussion of by object restrictions in the decisions in Lundbeck but also Budapest Bank and Generics, also see Enchelmaier (2022). 339 Lundbeck (Chap. 1, n 31); Case T-472/13 Lundbeck v Commission [2016] ECLI:EU:T:2016:449 (Lundbeck GC). 340 Servier (Chap. 1, n 31). 341 Zelger (2020b), p. 281. 342 Zelger (2020b), p. 282; regarding the nature of preliminary ruling requests and their limitation with respect to clarifying matters, see Colomo arguing similarily: Colomo (2020b), pp. 3 et seq. 334

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The Age after Cartes Bancaires

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products.343 In exchange for an arguably significantly high344 financial compensation, the generic companies and Lundbeck agreed to settle the disputes regarding Lundbeck’s patent of Citalopram. Moreover, Lundbeck also bought all of the generic companies’ stock of Citalopram and offered them the conclusion of distribution agreements. Hence, the result of the settlement agreements arguably was a commitment of the generic companies not to enter the market for Citalopram. Upon appeal, the General Court rejected all of Lundbeck’s arguments in their entirety.345 Moreover, also the ECJ upheld the Commission’s decision and, in particular, confirmed the qualification of the settlement agreements at hand as restrictive of competition by object,346 notwithstanding the acknowlegdement however that, as already emphasised in Generics,347 settlement agreements ‘cannot be considered to be “restrictions by object” in all cases for the purpose of Article 101(1) TFEU’348 (emphasis added). Hence, the Court has been pretty clear that the characterisation of a reverse payment settlement agreement as restrictive by object must be adopted when it is plain from the examination of the settlement agreement concerned that the transfers of value provided for by it cannot have any explanation other than the commercial interest of both the holder of the patent at issue and the party allegedly infringing the patent not to engage in competition on the merits, since agreements whereby competitors deliberately substitute practical cooperation between them for the risks of competition can clearly be characterised as “restrictions by object”349 (emphasis added).

Hence, with respect to the facts in Lundbeck and the respective evidence provided, the Court considered the aforementioned to be the case and qualified the settlement agreements as object restrictions of competition.350 In other words, borrowed from Colomo, ‘as no plausible pro-competitive rationales had been advanced’,351 the qualification of the agreements as restrictive by object does, arguably and also considering AG Kokott’s Opinion,352 not come as a surprise. Hence, whether or not a settlement agreement qualifies as object restriction depends a lot on the specific facts of a case and the evidence provided. Put differently, ‘[i]n the context of pay-for343

Zelger (2020b), p. 275. Alexiadis and Figueroa (2019), p. 4; The value transferred to the generic company Merck amounted to, indicatively, EUR 41.3 mio (see to this effect Zelger (2020b), p. 3 with further references particularly in note 28). 345 Lundbeck GC (n 338). 346 Lundbeck (Chap. 1, n 31), para 118. 347 Generics (Chap. 1, n 341), para 84. 348 Lundbeck (Chap. 1, n 31), para 113. 349 Lundbeck (Chap. 1, n 31), para 114. 350 Lundbeck (Chap. 1, n 31), para 118. 351 Pablo Ibáñez Colomo, ‘Thoughts on today’s judgements in Lundbeck and Slovak Telekom: expected and valuable clarifications for the future’, Chillin’Competition Blog, available at accessed 6 February 2023. 352 Case C-591/16 Lundbeck v Commission [2021] ECLI:EU:C:2021:243 Opinion of AG Kokott ECLI:EU:C:2020:428 (Opinion of AG Kokott). 344

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delay agreements, the analysis would [particularly] revolve around the size of the payment’.353 For that reason, notwithstanding my criticism as regards the treatment of reverse payment settlement agreements (as illustrated below and more extensively elsewhere354), the ECJ’s decision in Lundbeck is sound insofar as there is nothing to counter the law that settlement agreements, which have no explanation other than the buying-out of a potential competitor, are considered being restrictive of competition by object. Hence, considering the findings of the Court, its conclusion in Lundbeck is anything but a surprise. Therefore, it is not a question of law, but however, rather a question regarding facts and the consideration of evidence. Therefore, as will be illustrated in the subsequent section, my criticism is not directed against the law that a measure lacking any explanation other than to restrict competition, but rather surrounds the issue of whether it is really always and ever possible to easily conclude that a settlement agreement is a ‘mere sham’ rather than a genuine agreement to settle a patent dispute. Put differently, my criticism mainly concerns borderline cases as determining whether an agreement is a genuine or rather a non-genuine patent settlement agreement appears anything but a straightforward exercise in practice.355

3.7.4.3

Reverse Payment Settlement Agreements from a Competition Law Perspective: A Critical Analysis

In principle and as argued extensively elsewhere,356 the question whether or not reverse payment settlement agreements should qualify as object or effect restriction of competition ‘has been subject to controversy among commentators in the literature’.357 Whereas some argue that reverse payment settlement agreements should qualify as restrictive by object if, after having conducted a context analysis, the conclusion were that the unambiguous object of the latter was not to settle a genuine patent dispute, but rather to buy out a competitor; others opine that ‘where a fairly detailed analysis of the economic context is necessary in order for a measure to allocate it to the object box, such approach “could undermine the very purpose of the object-effect distinction in the first place, which is to eliminate effect analysis in the case of object restrictions [. . .]”.’358 Arguably, the assessment of the genuine or non-genuine nature of a reverse payment settlement agreements is, considering the parameters as developed by the

353

Ibid, in particular referring to Lundbeck (Chap. 1, n 31), para 115. Zelger (2020b). 355 Zelger (2020b), p. 282. 356 See to this effect Zelger (2020b). 357 Ibid, 1 with further references. 358 Zelger (2020b), p. 274. 354

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GC and the ECJ in their decisions in Lundbeck359 and Servier360 (the latter now pending at the ECJ), anything but a straightforward and clear-cut exercise. The parameters required to be considered in order to render a patent settlement agreement anticompetitve by object are the following: ‘(i) the originator and the generic companies were at least potential competitors, (ii) the agreement contains non-challenge or non-marketing clauses, as well as given (iii) there is a commitment of the generic company to accept the clauses as stipulated under (ii) in return to the value transferred (and not due to the generic company’s acceptance of the validity of the patent)’.361 Hence, it appears from the foregoing that the parameters to be taken into consideration when conducting an analysis of the legal and economic context are rather vague. Therefore, it is, arguably, indeed not that easy in practice ‘to allocate a patent settlement agreement to the object box’,362 as to assess whether it is detrimental by its very nature, due to its being a ‘sham’ rather than a genuine settlement agreement, requires an in-depth analysis of various difficult-to-assess factors and parameters. To name one example, the assessment whether or not a transferred value (be it in form of money or a licence granted) is considered being proportionate or disproportionate is anything but easy to determine.363 Rather, the latter is subject to uncertainties which are inherent to the discretion immanent to the application of the arm’s-length principle.364 Hence, although the harmful nature of object restrictions must be ‘easily identifiable’,365 the actual establishment of such nature in the context of reverse payment settlement agreements seems to be rather difficult in practice. Consequently, the treatment of the latter as object restrictions seems, in my view, inappropriate. However, this is only one among several arguments, which speaks for a treatment of reverse payment settlement agreements according to their effects.366 Other reasons lie with the IP law context within which the latter occur,367 the ambiguous nature of reverse payment settlement agreements as such, the difficulties as regards the latter’s assessment as well as the exceptional substantial assessment of the measure as conducted by the EC,368 which seems to be ‘at odds with the underlying reason justifying the two distinct concepts of Article 101 TFEU, that is, the management of enforcement resources’.369 The Commission’s analysis in

359

Lundbeck (Chap. 1, n 31); Lundbeck GC (n 338). Servier (Chap. 1, n 31). 361 Zelger (2020b), p. 275. 362 Zelger (2020b), p. 282. 363 Ibid. 364 Zelger (2020b), p. 280. 365 Cartes Bancaires (n 4) Opinion of AG Wahl ECLI:EU:C:2014:1958, para 30. 366 For further reasons to this effect, see the paper: Zelger (2020b). 367 For a detailed presentation to this effect see the paper: Zelger (2020b), pp. 5 et seq. 368 Zelger (2020b), p. 282. 369 Zelger (2020b), p. 280. 360

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Lundbeck, for example, amounted to 527 pages.370 Moreover, the fact that the Commission in, inter alia,371 its decision in Servier372 pursued a—what I call—‘Janus-face approach’,373 that is, it proved both, the anticompetitive object and effect of the respective settlement agreements concerned, provides a rather pragmatic argument speaking for the ambiguous nature of reverse payment settlement agreements.374 A last point worth mentioning is the US Supreme Court’s ruling in Actavis,375 as the GC in its decision in Lundbeck376 seems to have followed the US Supreme Court’s reasoning. However, this is arguably odd as the US Supreme Court chose a rule-of-reason approach, that is, the US equivalent of by effect restrictions of competition.377 Hence, it is against this backdrop that I am of the opinion that reverse payment settlement agreements would provide for a perfect candidate to ‘shed light on effect analysis and fill the legal vacuum by offering guidance for effect cases, instead of construing (arguably again) another object case’.378 For that reason, upcoming decisions of the ECJ, such as, for example, the pending case in Servier,379 ‘might deliver [actual] guidance with respect to a substantial assessment of reverse payment settlement agreements’. As put elsewhere,380 the Court might take the chance and shed light on when exactly reverse payment settlements are restrictive of competition by object not by merely reiterating general principles, but however, by applying the latter to the specific facts of the case, thereby developing a suitable test in order to detect the dividing line between a context analysis as required in the context of an object restriction and the full-effect analysis as conducted in effect cases. By way of [. . .] example, when exactly is the size of [a] payment "excessive enough" in order to justify the finding that an agreement goes beyond settling a [genuine] patent dispute?

370

Zelger (2020b), p. 280 with reference to Lundbeck (AT.39226) Commission decision of 19 June 2013 (EC Decision in Lundbeck), paras 647–1174. 371 The Commission also did so in its decisions in Groupement des cartes bancaires (COMP/D1/ 38606) Commission decision of 17 October 2007 (Cartes Bancaires Commission Decision), CISAC (COMP/C2/38.698) Commission decision of 16 July 2008 (CISAC Commission Decision) and ISU (n 43); see to this effect Zelger (2020b), p. 8. 372 Servier (AT.39612) Commission decision of 9 July 2014 (EC Decision in Servier). 373 Zelger (2020b), p. 280. 374 Zelger (2020b), p. 280. 375 Actavis (n 97). 376 Lundbeck (Chap. 1, n 31). 377 Zelger (2020b), p. 281. 378 Zelger (2020b), p. 274. 379 Servier (Chap. 1, n 31). 380 Zelger (2020b), p. 282.

3.8

The ‘Appreciable Effect’

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The ‘Appreciable Effect’

In the context of by object restrictions and Article 101(1) TFEU, namely the criterion of a restriction of competition, effects do also occur to be essential when it comes to the concept of appreciability. Although this is not the focus of this monograph, it would, however, be incomplete leaving the interplay of effects and the concept of appreciability completely aside when analysing the role of effects as regards object restrictions of competition. Therefore, the aim of the following section is to illustrate the role of effects with respect to this concept as developed by the case law of the ECJ. Furthermore, it is aimed to highlight the importance to clearly distinguish between effects in the context of the concept of an appreciable restriction of competition on the one hand, from effects necessary in the context of the notion of an appreciable effect on trade, on the other hand. Undoubtedly, both are crucial in the establishment of a restriction of competition according to Article 101(1) TFEU. However, although intertwined and prone to mingling, the two notions are clearly distinct.

3.8.1

The Concept of Appreciability

In the context of by object restrictions and Article 101(1) TFEU, namely the criterion of a restriction of competition, effects do also occur to be essential when it comes to the concept of appreciability as developed by the case law of the ECJ. By its judgement in Völk,381 the ECJ made clear that an agreement may fall outside the ambit of Article 101(1) TFEU ‘where [it] has only an insignificant effect on the market’.382 Therefore, by the concept of appreciability, the ECJ ensured that only agreements, which ‘affect trade between Member States and the free play of competition to an appreciable extent’383 (emphasis added) are actually caught by Article 101(1) TFEU. Völk concerned an exclusive agreement between Mr. Völk and Vervaecke. Whereas the former was the owner of a company manufacturing washing machines (Erd & Co), Vervaecke was a Belgian distributor for household electrical appliances. The relevant market was defined to be the market for the production of washing machines on which Erd & Co was considered to hold considerably low market shares, that is, shares of approximately 0.08% at EU level, 0.2% on the German market and 0.6% on the market in Belgium and Luxembourg. Against this backdrop,

381

Case C-5/69 Völk v Vervaecke [1969] ECLI:EU:C:1969:35 (Völk). Völk (n 380), p. 302. 383 Case C-22/71 Béguelin Import v G.L. Import Export [1971] ECLI:EU:C:1971:113 (Béguelin Import), para 16. 382

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the ECJ clarified that an agreement,384 even if conferring absolute territorial protection, may escape the prohibition as laid down in Article 101(1) TFEU ‘having regard to the weak position of the persons concerned on the market in the products in question in the area covered by the absolute territorial protection’.385 It is essential, however, that the concept of appreciability also occurs in the context of the requirement of an effect on trade between Member States. Therefore, it is necessary for a measure to appreciably affect trade between Member States in order to fall within the ambit of Article 101(1) TFEU. However, an appreciable restriction of competition clearly needs to be distinguished therefrom. Hence, since Völk it is clear that a practice must have both, an appreciable effect on trade between Member States, as well as an appreciable effect on competition itself. Put differently, a measure must have the object or effect of ‘perceptibly restricting competition’.386 Hence, as Whish and Bailey put it, in order for Article 101(1) TFEU to be triggered, a ‘double appreciability’387 is required. Such distinction is of relevance also considering the various guidance papers of the Commission, that is, on the one hand, the Commission’s De Minimis Notice,388 relevant in our context here, as the purpose of this section is to shed light on the concept of appreciability as regards the notion of a restriction of competition. On the other hand, there exist Commission Guidelines providing guidance on the effect on trade concept.389

3.8.2

The De Minimis Notice

Since Völk, the necessity for a measure to appreciably restrict competition has been constantly repeated by the Courts.390 Agreements lacking such appreciable effect, that is, so-called ‘agreements of minor importance’ are dealt with by the Commission in its De Minimis Notice,391 thereby providing a safe harbour for agreements it considers very likely not to appreciably restrict competition. According to the latter, horizontal agreements, that are, agreements between actual and/or potential competitors are presumed not to appreciably restrict competition within the meaning of 384

That was, in Völk, an exclusive dealing agreement. Völk (n 380), p. 302. 386 Case C-70/93 BMW v ALD [1995] ECLI:EU:C:1995:344, para 18; Javico (n 171), para 12; Case C-260/07 Pedro IV Servicios [2009] ECLI:EU:C:2009:215, para 68; Expedia (n 270), para 17. 387 Whish and Bailey (2021), p. 145. 388 De Minimis Notice (Chap. 1, n 4). 389 Commission Notice, Guidelines on the effect on trade concept in Article 81 and 82 of the Treaty [2004] OJ C101/07. 390 For example, Béguelin Import (n 382), para 1; Case C-7/95P John Deere v Commission [1998] ECLI:EU:C:1998:256, para 77; Joined Cases C-215/96 and C-216/96 Bagnasco and Others [1999] ECLI:EU:C:1999:12, para 34; Asnef-Equifax (n 138), para 50; Expedia (n 270), para 16. 391 De Minimis Notice (Chap. 1, n 4). 385

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The ‘Appreciable Effect’

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Article 101(1) if the aggregate market share of the parties to the agreement does not exceed 10% on any of the relevant markets.392 Vertical Agreements benefit from this presumption if the market share held by each of the parties to the agreement does not exceed 15% on any of the relevant markets.393 Since the issuance of the De Minimis Notice in 1997 it has been revised twice.394 Most recently to clarify that object restrictions do not benefit from the presumption not to appreciably restrict competition as set out in the Notice.395 A result that is owed to the ECJ’s landmark judgement in Expedia.396 However, in my view, the exclusion of object restrictions to benefit from the safe harbour of the De Minimis Notice does seem to contribute to an overall consistent framework of the notion of restrictions to competition by object397 (see Sect. 3.8.3 immediately below).

3.8.3

Object Restrictions and Appreciable Effects

When writing about object restrictions and the concept of appreciability, it is merely impossible not to mention the ECJ’s landmark judgement in Expedia.398 The latter preliminary reference dealt with an agreement between Expedia, a specialist in the sale of travels via internet and the French train operator SNCF. The questions referred by the French Cour de cassation concerned the role of the De Minimis Notice as regards national proceedings. Therefore, the reference made did not directly relate to ‘the concept of appreciability and its relation to object restrictions’.399 However, the Court inter alia held, that ‘an agreement that may affect trade between Member States and that has an anti-competitive object constitutes, by its nature and independently of any concrete effect it might have, an appreciable restriction on competition.’400 As argued elsewhere,401 the criticism raised by some authors that the approach as taken by the Court in Expedia is not ‘in line with a modern economic approach’402 392

De Minimis Notice (Chap. 1, n 4), Sect. II point 8(a). De Minimis Notice (Chap. 1, n 4), Sect. II point 8(b). 394 Zelger (2017), p. 381. 395 De Minimis Notice (Chap. 1, n 4). Sect. I point 2. 396 Expedia (n 270). 397 Ibid. 398 Expedia (n 270). 399 Zelger (2017), pp. 381 and 383. 400 Expedia (n 270), para 37. 401 See for a more extensive elaboration on this argument in Zelger (2017), pp. 385 et seq. 402 Pinar Akman, ‘The Court of Justice’s Expedia ruling undermines the economic approach by eliminating the “de mimimis” defence in object agreements’, Competition Policy Blog, available at

accessed 6 February 2023. 393

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seems to miss the fact that the ruling does not exclude object restrictions actually lacking an appreciable effect from a case-by-case exemption. Rather, it clarified that such practices should not benefit from the beneficial presumption the De Minimis Notice determines. Such approach seems consistent with the overall concept of object restrictions and the presumption of the latter having a detrimental effect on competition. In light of the latter presumption of object restrictions detrimentally affecting competition, the possibility, in a second step, to benefit from the positive presumption of the De Minimis Notice presuming that such ‘presumed’ restriction or anticompetitive effect was not appreciable, would be at odds with the ‘logic’ behind object restrictions. In other words, as object restrictions are presumed to be harmful without the necessity of proving anticompetitive effects, it would be peculiar, after having established a by object restriction, to let it benefit from the de minimis presumption. However, this does not exclude the possibility of object restrictions actually lacking an appreciable effect, as was the case with respect to the exclusive dealing agreements conferring absolute territorial protection in Völk.403 Therefore, Völk as well as the GC’s judgement in Ziegler v Commission404 prove that the lack of an appreciable effect is indeed possible. However, arguably, such cases might rather be the exception than the rule, as is the case with respect to object restrictions and exemptions pursuant to Article 101(3) TFEU.

3.9

Conclusions

It appears from the foregoing that there is no thinking in ‘black-and-white’ terms possible405 when talking about by object and effect infringements. Put differently, it seems quite obvious that the establishment of object restrictions is anything but a straightforward and simple exercise. Moreover, it is also clear from the case law that in order for an object restriction to be established, a case-by-case analysis is indispensible. Hence, a by object restriction of competition cannot be inferred from the form of a measure only. Moreover, there exists a sound legal framework within which object restrictions are to be established.406 Necessarily, such framework seems flexible, a fact that is owed, on the one hand, to the nature of competition law being a hybrid as regards the balancing of diverging interests as well as, on the other hand, the fact that the law and, in the case at hand, competition law cannot be applied in the abstract. Consequently, the establishment of ‘by object’ restrictions cannot be free of any context analysis as it is considered being necessary ‘to assess the agreement’s

403

Völk (n 380). Case T-199/08 Ziegler v Commission [2011] ECLI:EU:T:2011:285, para 44. 405 As in most cases as regards our world and reality. 406 Zelger (2017), p. 388. 404

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Conclusions

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purpose and the context in which it functions’.407 Therefore, an analysis of the individual facts and circumstances of a case, that is, the content, objective as well as legal and economic context, is essential. The two-step tests as developed by Peeperkorn or AG Bobek provide a suitable framework for assessment. Moreover, the existing case law as well as the Commission’s policy papers are useful guidance to this effect.408 When looking at the case law as regards the concept of a ‘context analysis’ and its demarcation of a full-effect analysis as required in the context of effect infringements, the controversies as established by the Court in Allianz Hungária409 (and arguably T-Mobile410) were eliminated by the ECJ with its ruling in Cartes Bancaires.411 Notwithstanding its reference to the disputed wording as used in Allianz Hungária,412 it put an end to the trend of an overly extensive scope of object restrictions. Furthermore, the subsequent case law in Maxima Latvija,413 Hoffmann-La Roche v Autorità Garante della Concorrenza e del Mercato,414 Budapest Bank415 Generics416 and Lundbeck417 indicates that the ECJ sticks to its developed principles and a coherent framework, notwithstanding the fact that in the Hoffmann-La Roche case of 2018418 as well as in Budapest Bank419 in 2020 the ECJ unfortunately again referred to and cited the controversial wording used in Allianz Hungária. However, it has not done so in the preceding ruling concerning the notion of a restriction of competition in Maxima Latvija in 2014.420 Hence, it can, in this regard, only be called on the Court to clarify and stop using and referring to the controversial language in the future. Nevertheless, the recent case law of the ECJ is coherent providing for a uniform approach to object restrictions. Moreover, notwithstanding the Court’s uniform and coherent approach as regards object restrictions of competition, it is my view that its decisions in the pharma cases421 and, in particular, its decision in Lundbeck can be criticised for extending the notion of a ‘context analysis’, that is, the consideration of the legal and economic 407

Cited in, for example, T-Mobile (Chap. 1, n 36) as well as various other judgements. As I have argued similarily in Zelger (2017), p. 389. 409 Allianz Hungária (n 38). 410 T-Mobile (Chap. 1, n 36). 411 Cartes Bancaires (n 4). 412 Allianz Hungária (n 38), p. 36. 413 Maxima Latvija (n 217). 414 Hoffmann-LaRoche v AGCM (Chap. 1, n 37). 415 Budapest Bank (n 219). 416 Generics (n 211). 417 Lundbeck (Chap. 1, n 31). 418 Ibid. 419 Budapest Bank (n 219). 420 Maxima Latvija (n 217). 421 Generics (n 211); Lundbeck (Chap. 1, n 31). 408

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context within which settlement agreements occur to an extent, ‘which is prone to get mingled with effect analysis’,422 as, so the argument goes, where a fairly detailed analysis of the economic context is necessary in order for a measure to allocate it to the object box, such approach "could undermine the very purpose of the objecteffect distinction in the first place, which is to eliminate effect analysis in the case of object restrictions [. . .]".423

However, as mentioned, there is nothing wrong about the law applied in Lundbeck. No doubt, a measure lacking any explanation other than to restrict competition should qualify as object restriction of competition. In the context of reverse payment settlement agreements, however, one could doubt that it is really always possible to easily conclude that a settlement agreement is a ‘mere sham’ rather than a genuine agreement to settle a patent dispute. Nevertheless, the findings of the ECJ in Lundbeck were, apparently, convincing it to qualify the respective settlement agreements concerned as restrictive by object. Therefore, it is rather a question of facts and evidence provided. Against this backdrop, it will be interesting how the Court will deal with boarderline cases in the future and thus how and by the use of which parameters it will draw the line between genuine patent settlement agreements and non-genuine patent settlement agreements which are rather a ‘sham’. A fact which is crucial for the distinction between a full effect analysis on the one hand, as well as a context analysis on the other hand. Moreover, as regards the Commission’s handling of by object restrictions in the context of Article 101 TFEU, the latter cannot only be criticised for favouring the by object route, but also for mingling the two concepts of by object and by effect restrictions due to their practice of qualifying a measure as object restriction of competition, while also proving anti-competitive effects. Examples for the application of such ‘Janus-face’ approach provide the cases in Servier,424 Cartes Bancaires,425 CISAC426 and ISU.427

422

Zelger (2020b), p. 274. Ibid. 424 Servier (n 249). 425 Cartes Bancaires Commission Decision (n 370). 426 CISAC Commission Decision (n 370). 427 Commission Decision ISU (n 90). 423

Chapter 4

Effects and Article 102 TFEU

This chapter will deal with effects in the establishment of Article 102 TFEU infringements. In this respect it is worth recognising that a differentiation of a form-based as well as an effect-based approach also exists regarding Article 102 TFEU, notwithstanding the fact, however, that there is no such formal distinction of object and effect infringements within the Treaty provision itself. However, as will be shown in the following, considering the case law of the ECJ and the GC, there are indeed practices that are considered prima facie or per se abusive, that is arguably abuses ‘by object’, and other practices where a proof of anticompetitive effects is required. Moreover, as regards prima facie abusive measures, there is indeed a need to take all the relevant circumstances into account when assessing the detrimental nature of a practice. Hence, similar to the context analysis, that is, a consideration of the legal and economic context within which a measure occurs, as required in the context of object restrictions according to Article 101 TFEU, such consideration appears necessary also under Article 102 TFEU. Hence, the latter, as well as the extent to which a consideration of all the circumstances is necessary in the context of Article 102 TFEU will be analysed and benchmarked with the principles established with respect to the concept of a context analysis and Article 101 TFEU. As a result, it shall be demonstrated that the existing framework is indeed a uniform one across both Treaty competition provisions.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_4

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4.1 4.1.1

4

Effects and Article 102 TFEU

The Notion of Abuse: Are There by Object and by Effect Abuses? General Remarks, Principles and Competition Policy

As shown in the preceding chapter, the distinction of the concepts of object and effect infringements can be found in the Treaty provision, namely Article 101 (1) TFEU, itself. This is not the case, however, regarding Article 102 TFEU. Nevertheless, in light of the given case law, the fact that an abuse can indeed restrict competition by object or effect seems also true with respect to Article 102 TFEU,1 as a so called ‘form-based’ approach with respect to some practices such as, for example, exclusive dealing and loyalty rebates, has ever since been used regarding the application of Article 102 TFEU.2 Furthermore, according to the ECJ’s case law, also predatory pricing,3 given specific circumstances,4 as well as tying5 qualify as per se abusive. Moreover, a practice which has recently been condemned as abusive by object provides the dismantling of a railway track.6 Hence, some practices have indeed been declared prima facie abusive or, in other words, ‘presumptively unlawful’7 or abusive by their very nature,8 unless objectively justified. Moreover, also the Commission has introduced the concept of a ‘naked restraint’,9 which boils down to a practice being ‘so pernicious as to not require any assessment of its effects on competition.’10 Furthermore, also the language used in Article 102 decisions concerning prima facie abusive behaviour is very similar if not compliant with the one used in by object cases and Article 101(1) TFEU.11 Take, for example, the ECJ’s judgement in Generics,12 where the Court emphasised that if conduct is to be characterised as abusive ‘that presupposes that that conduct was capable of restricting competition and, in particular, producing the alleged

1

Generics (Chap. 3, n 221); see also Colomo (2016), pp. 713 and 721; O’Donoghue and Padilla (2013), p. 226; Colomo and Lamadrid (2017), p. 17; Colomo (2020b), p. 17. 2 Hoffmann LaRoche (Chap. 1, n 40) paras 89, 90. 3 AKZO (Chap. 1, n 40) paras 70, 71. 4 That is, in case a dominant firm sells below average variable costs; see AKZO (Chap. 1, n 40) paras 70, 71. 5 Case T-30/89 Hilti AG v Commission [1991] ECLI:EU:T:1991:70 (Hilti); Tetra Pak II (Chap. 1, n 27). 6 Lithuanian Railways (Chap. 11, n 42). 7 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788 para 80. 8 Colomo and Lamadrid (2017), p. 17. 9 Intel (Case COMP/C-3/37.990) Commission Decision of 13 May 2009, D(2009) 3726final (Decision Summary published 2009 OJ C227/13), 472 et seq (Intel Commission Decision). 10 O’Donoghue and Padilla (2013), p. 83. 11 Colomo (2019b), p. 430. 12 Generics (Chap. 3, n 221).

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exclusionary effects’.13 Hence, and borrowed from Colomo, ‘a practice is not abusive within the meaning of Article 102 TFEU if it is incapable of having restrictive effects’.14 Therefore, as regards the general distinction of the two concepts of object and effect infringements and the meaning economics play in the context of such assessment, reference is made to my (more detailed) remarks made in the context of Article 101(1) TFEU in Chap. 3.15 However, what about the framework for the assessment of a practice as either qualifying as per se, that is, an ‘object abuse’ or not? Are, and if so to what extent, effects to be considered in the establishment of an ‘object abuse’? Is the given framework for assessment as regards Article 102 TFEU compliant with the one under Article 101(1) TFEU? Put differently, do the concepts of object or per se restrictions under Article 101(1) TFEU comply with the notions and principles as developed in the context of Article 102 TFEU? Is there an equivalent to the ‘context analysis’ of Article 101(1) TFEU to be found in the context of Article 102 TFEU? This is, what the following sections shall shed light on. For the sake of clarity, it shall be mentioned here that I predominantly use the notion of an ‘object abuse’ in the following sections for those measures and practices which are treated as prima facie or per se abusive, that is, according to a ‘formbased’ approach. The reasons for this favouring of the idea of an ‘object abuse’ over the notion of per se abuses lies with the fact that a strict understanding of per se abuses, in the sense as understood in US antitrust law, excludes per se infringements from objective justification. However, such exclusion does not exist in the European context. Hence, per se abuses shall be understood as equivalent to the notion of object restrictions of competition in the context of Article 101 TFEU. Therefore, while there is an increase of reference to the notion of an ‘object abuse’ visible in the literature too16 the term of an ‘object abuse’ shall capture and echoe the aforementioned.

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Generics (Chap. 3, n 221). Pablo Ibáñez Colomo, ‘Case C-307/18 Generics (UK) and others v CMA (Paroxetine), a major landmark in the case law (II): pay-for-delay’, Chillin’Competition Blog, available at accessed 6 February 2023. 15 See Sect. 3.1.1. 16 As far as I am concerned, Whish and Bailey as well as Colomo and Lamadrid refer to the notion of ‘object abuses’. See, for example, Whish and Bailey (2021), p. 205; Colomo (2016), p. 721; Colomo and Lamadrid (2017), p. 16; Pablo Ibáñez Colomo, ‘Persistent myths in competition law (V): there is no such thing as an abuse by object (or by effect) under Article 102 TFEU’ Chillin’Competition Blog, available at accessed 6 February 2023. ‘GC Judgment in Case T‑814/17, Lithuanian Railways – Part I: object and indispensability’, Chillin’Competition Blog, available at accessed 6 February 2023. Jones and Suffrin refer to ‘form- and effects-based analysis’, see Jones et al. (2019), p. 375. 14

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In principle, as already mentioned with respect to Article 101(1) TFEU, it is not a simple, straightforward exercise to draw a concise line between the two concepts of object and effect infringements of competition at all. Consequently, the same is true in the context of Article 102 TFEU and practices being presumed to be illegal per se (‘object abuses’ conducted under a form-based approach) opposed to those measures where such presumption does not exist and an assessment of a measure is rather guided by its effects and not its form only (‘effect abuses’ conducted under an effectbased approach). The reasons for such exercise being a complex task are the same in the context of both, Article 101(1) and 102 TFEU. Thus, reference is hereby made to my (more detailed) remarks made in the context of Article 101(1) TFEU in Chap. 3. However, in a nutshell, what makes a clear-cut rather difficult can be summed up as follows: Firstly, it is the intertwining of the law and economics, as economic theory and models determining the detrimental or positive nature of a measure from a competition law perspective are themselves volatile disciplines prone to change and reaction to socio-political and societal developments and alterations over time. This seems particularly true as regards current developments in the digital economy and markets which challenge our understanding of (traditional) market mechanisms.17 Secondly, the underlying facts in the context of such assessment play an important role, as slightly different circumstances might lead to different outcomes, that is, a different categorisation when it comes to the qualification of a practice qualifying as per se abuse or not. Take for example the practice of predatory prices (such as in cases like AKZO18 and Wanadoo19) and the importance of the cost composition underlying a respective price in order for a presumption of illegality to apply. In case a dominant firm sells below average variable cost (‘AVC’), its acting being abusive is merely presumed (unless rebutted and objectively justified).20 If the firm’s prices however, are below average total costs (‘ATC’), but above AVC, such pricing practice must be part of a higher plan to eliminate a competitor in order to qualify as abusive.21 Moreover, selling above ATC is presumed to be lawful.22 Examples mentioned in the context of Article 101(1) TFEU were information exchange or selective distribution. The former in principle qualifies as object restrictions, however only if it is capable of removing uncertainty regarding the competitors’ future (pricing) behaviour on the market.23 The latter qualifies as restrictive by object only if it does not meet the Metro-criteria,24 as developed by the ECJ, and therefore lacks

17

See below Chap. 5 and in particular Sects. 5.1 and 5.2. Wanadoo Interactive (COMP/38.233) Commission Decision 16 July 2003 (Wanadoo). 19 AKZO (Chap. 1, n 40). 20 AKZO (Chap. 1, n 40) paras 70, 71; Whish and Bailey (2021), p. 782. 21 Ibid. 22 Colomo (2016), p. 717. 23 See Sects. 3.3.1 and 3.3.1.2. 24 See Sects. 3.3.2 and 3.3.2.2. 18

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objective justification. Put differently, if the conditions as developed in Metro25 are met, a measure is considered falling outside Article 101(1) TFEU altogethter. More examples as regards the context-specific outcome of competition law cases in the context of Article 102 TFEU, will be analysed under Sect. 4.4 below. Thirdly, the impact of competition policy considerations cannot be overstated, as similar practices might be treated differently in different competition law systems. In the context of Article 102 TFEU tying provides a good example. According to EU law the latter practice is subject to a per se rule.26 In the US, however, the approach towards tying has changed over the years as the Supreme Court in its Kodak27 case in 1992 ‘rejected a per se legal approach to tying in aftermarkets’28 and decided upon a rule-of-reason approach. Consequently, tying under US antitrust law is nowadays subject to a full-effect analysis.29 The example illustrated in the context of Article 101(1) TFEU in this respect was RPM.30 Furthermore, in the context of object or per se abuses, similar to Article 101 (1) TFEU,31 the argument that such ‘object abuse’ did not have any negative effects on competition, is not a valid defence.32 The same is true as regards the parties’ subjective intention. Hence, subjective intention is, also in the context of Article 102 TFEU ‘not a necessary requirement for a finding of abuse, [but] can be a relevant factor’.33 Moreover, the fact that effects are not appreciable is a legitimate reason to fall outside the scope of Article 101(1) TFEU,34 but, however, it is not with respect to Article 102 TFEU. Hence, in the context of abuse of dominance cases, the non-appreciability of effects does not provide for a valid argument rendering Article 102 TFEU inapplicable.35 Another fundamental difference of the two provisions worth mentioning in this respect lies with the fact that the addressees of Article 102 TFEU differ from those who are targeted by Article 101(1) TFEU. Whereas the former applies to undertakings holding a dominant position on the respective relevant market only, the latter addresses all undertakings with no need of their having market power, that is, the holding of a dominant position. Consequently, the different treatment of certain practices might arguably have its roots in the market position of the respective

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Metro (Chap. 3, 156). Hilti (n 5); Tetra Pak II (Chap. 1, n 27). 27 Eastman Kodak Co v Image Technical Serv. Inc, 504 US 451 (1992), 490 et seq. 28 O’Donoghue and Padilla (2013), p. 223. 29 Whish and Bailey (2021), p. 724. 30 See Sect. 3.1.3. 31 Case C-199/92 P Hüls v Commission [1999] ECLI:EU:C:1999:358 para 161 to 163; T-Mobile (Chap. 1, n 36) para 51; also see Sect. 3.1.1. 32 Colomo and Lamadrid (2017), p. 17; Colomo (2016), p. 709. 33 Gormsen (2013), p. 228. 34 As the concept of appreciability (see Sects. 3.8 and 3.8.1) being enshrined and echoed in the De Minimis Notice of the Commission (see Sect. 3.8 and 3.8.2) is a very-well recognised one. 35 Post Danmark II (n 80) paras 72–73. 26

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undertaking concerned. This may be the reason why, for example, exclusive dealing agreements under Article 101(1) TFEU are not considered being object restrictions, but however object abuses under Article 102 TFEU. Put differently and borrowed from Wils, ‘by providing for Article 102 TFEU in addition to Article 101 TFEU, the EU Treaties have chosen to treat dominant undertakings differently from non-dominant undertakings.’36 Another aspect contributing to further complexity in this respect has its roots in the necessity to define the respective relevant market in order for a dominant position to be established, as defining a market itself is subject to a flexible system with many factors being decisive and relevant. Put differently, there are a couple of steps necessary before a practice can be analysed under Article 102 TFEU, namely, market definition and the establishment of a dominant position of the respective undertaking concerned. A last point to be raised here are the fundamental difficulties related to the fact that it is, in principle, hard to differentiate between practices that happen within the limits set by fair, healthy and fierce competition, where it is also possible that a competitor due to inefficiency, has to ‘naturally’ leave the market on the one hand, from circumstances which are, for example, created by artificially low (and thus abusive) prices of a dominant undertaking aiming to urge a rival to exit the market, on the other hand.37 The difficulties in the assessment of a dominant undertaking’s behaviour under Article 102 TFEU thus perfectly mirror the complexity of applying economic models (i.e. for example the notion of ‘perfect competition’) and the law to (economic) reality.

4.1.2

The ‘More Economic Approach’ and Enforcement Priorities

With respect to the pros and cons of the so-called ‘form-based’ and ‘effect-based’ approach in general, reference shall be made to Chap. 338 dealing with the latter topics in the context of Article 101(1) TFEU. The following section will therefore focus on the development of the so-called ‘more economic approach’ as well as the Commission’s enforcement priorities in the context of Article 102 TFEU. As stated in Chap. 2, the idea of a ‘more economic approach’ and the abandonment of a too formalistic approach as regards the application of the competition provisions arose at the beginning of the 1990s of the last century.39 However, the focus of the Commission was first on Article 101(1) TFEU (as well as on merger

36

Wils (2014), p. 24. Arguing similarily, Colomo (2016), p. 709. 38 See in particular Sect. 3.1.2. 39 See Chap. 2, in particular Sect. 2.1. 37

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control40) and only later affected Article 102 TFEU.41 Arguably, the report of the Commission’s Economist Advisory Group on Competition Policy (‘EAGCP’)42 in 2005 set the ball rolling for the more economic approach to reach Article 102 TFEU. Moreover, many issues raised by the report of the EAGCP can be found in the Commission’s subsequently published Communication providing guidance on its enforcement priorities in applying Article 102 to abusive exclusionary conduct of dominant undertakings (Guidance on Article 102 Enforcement Priorities)43 in 2009, by which, arguably, the Commission introduced the adaption of the effects-based approach in the context of Article 102 TFEU and exclusionary conduct.44 However, as argued in the context of Article 101(1) TFEU,45 the commitment to an approach based on sound economics does not necessarily lead to an increase or a more prominent role of effect-cases, as it is the sound economic principles, which decide upon whether an effect analysis is actually required, or whether a measure qualifies as inherently detrimental to competition and subject to a treatment under the ‘objectrule’.46 Undoubtedly, also policy considerations and enforcement decisions are decisive in this respect. Therefore, a similar picture as regards the cases pursued under Article 101(1) TFEU can be drawn also in the context of Article 102 TFEU. In other words, there seems to be a tendency of the Commission to favour object cases. When looking at Article 102 cases since 1998, most measures triggering the imposition of a fine by the Commission qualified as ‘serious infringements’ or ‘infringements of extreme’ or ‘particular gravity’47 and concerned categories which are treated as object abuses.48 Moreover, such trend also seems to be echoed in more recent Commission cases, as although the Commission actually sought to provide evidence regarding actual anticompetitive-effects in various cases (such as, for example, Microsoft,49 Intel,50 Tomra51 as well as in Google Shopping52) ‘it 40 Report by the Commission’s Economic Advisory Group on Competition Policy, An Economic Approach to Article 82 (2005) (‘Report by the EAGCP’) 2. 41 Zalewska-Glogogwska (2017), p. 37. 42 Report by the EAGCP (n 40). 43 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38). 44 Zalewska-Glogogwska (2017), p. 81; Dethmers and Engelen (2011), p. 86; Sauter (2016), p. 45. 45 See Sect. 3.1.2. 46 Serving as denominator or benchmark. 47 Dethmers and Engelen (2011), p. 89. 48 See table 2 in Dethmers and Engelen (2011). Apart from the cases in Deutsche Telekom AG (Case COMP/C-1/37.451, 37.578, 37.579) and Wanadoo (Case COMP/38.784) (concerning a margin squeeze), all Commission decisions listed constituted ‘object abuses’. 49 Microsoft (Case COMP/C-3/37.792) Commission Decision 24 May 2004 notified under document number C(2004) 900 (Microsoft COMP), para 835–954. 50 Intel Commission Decision (n 9) paras 1597–1616. 51 Prokent/Tomra (Case COMP/E-1/38.113) Commission Decision of 29 March 2006 (Decision Summary published 2008 OJ C219/11), para 20 (Tomra Commission Decision). 52 Google Search (Shopping) (Case AT.39740) Commission Decision of 27 June 2017 notified under document number C(2017) 4444 final (Google Shopping) paras 606–607.

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considered that it was not legally obliged to do so’.53 Such arguing seems familiar as it has also occurred in the context of Article 101(1) TFEU and cases such as Servier,54 Cartes Bancaires,55 CISAC56 and ISU.57 As regards the notion of an abuse, it is important to stress that the ECJ held that Article 102 TFEU does not only apply to practices that may cause damage to consumers directly (i.e. exploitative abuse), but also to measures which are detrimental to the competitive process as such (by, for example, foreclosing competitors) and thus, consequently, also to the final consumer.58 Therefore, since the ECJ’s ruling in Continental Can59 it is clear that Article 102 TFEU is applicable to both, exclusionary as well as exploitative abuses. Nevertheless, it is important to stress that the Commission, by means of its Guidance on Article 102 TFEU, expressed an enforcement focus on exclusionary conduct of dominant undertakings. Consequently, the vast majority of abuse of dominance cases conducted under Article 102 TFEU by the Commission undoubtedly concerned exclusionary behaviour.60 The reason for such an enforcement priority lies ‘on safeguarding the competitive process in the internal market and ensuring that undertakings which hold a dominant position do not exclude their competitors by other means than competing on the merits of the products or services they provide’.61 Thus, exploitative practices, that is, as Article 102(2)a TFEU stipulates it by way of example, ‘unfair purchase or selling prices’ (known under the terminus technicus ‘excessive pricing’) as well as ‘other unfair trading conditions’ are not ranked in the top tier when it comes to the Commission’s enforcement priorities.62 However, ‘the Commission may decide to intervene in relation to such conduct, in particular where the protection of consumers and the proper functioning of the internal market cannot otherwise be ensured’.63 Consequently, and in compliance with what was stated in the Guidance on Article 102 TFEU Enforcement Priorities, Article 102 has most frequently been applied to exclusionary practices,64 that is, ‘behaviour by a dominant firm designed to, or which might have the effect of, preventing the development of competition’.65 However, needless to mention in

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Whish and Bailey (2018), p. 206. Servier (Chap. 3, n 249). 55 Cartes Bancaires Commission Decision (Chap. 3, n 370). 56 CISAC Commission Decision (Chap. 3, n 370). 57 Commission Decision ISU (Chap. 3, n 90). 58 Continental Can (Chap. 2, n 65) para 242. 59 Continental Can (Chap. 2, n 65). 60 Whish and Bailey (2021), p. 211. 61 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 6. 62 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 7. 63 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 7. 64 Whish and Bailey (2021), p. 211. 65 Ibid. 54

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this respect that within the category of exclusionary abuses ‘EU courts do not apply a single substantive test’.66 That is, where controversies as regards the latter treatment start. For the sake of completeness, it shall be mentioned here that the Commission has recently collected evidence for the adoption Guidelines on exclusionary abuses of dominance.67 Moreover, until the Guidelines adoption the Guidance on Article 102 TFEU Enforcement Priorities were recently amended by a Commission Communication.68

4.2

Different Types of Abuse: An Overview

It follows from the above that with respect to the notion of an abuse69 there does not exist an ‘all-encompassing definition’70 as regards what the latter should actually mean.71 Furthermore, it shall be emphasised that lacking a statutory definition,72 the notion of abuse is not a straightforward concept73 (as well as its ‘sibling’, that is, the notion of a restriction of competition under Article 101(1) TFEU is not either). As stressed initially,74 the provision of Article 102 TFEU contains no conclusive definition of what constitutes an abuse. Rather, it provides a non-exhaustive75 catalogue listing measures, themselves being open and vague legal terms76 (as, for example, no hint of what might constitute an unfair purchase or selling price is given) thereby exemplifying what, in principle, could constitute an abuse. Unsurprisingly, ‘the interpretation made of the Article 102 [is] significantly broader than its strict wording’.77 However, the claim that the latter fact ‘does not make it openended’78 seems more than reasonable.

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Colomo (2016), p. 713. European Commission Press Release, IP/23/1911 (27 March 2023). 68 Amendments to the Communication from the Commission—Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2023] OJ C116/01. 69 The notion of abuse in Article 102 TFEU basically being the equivalent as regards a restriction of competition, either by object or by effect, in the context of Article 101(1) TFEU. 70 O’Donoghue and Padilla (2013), p. 67. 71 O’Donoghue and Padilla (2013), p. 216. 72 O’Donoghue and Padilla (2013), p. 237. 73 O’Donoghue and Padilla (2013), p. 216 et seq. 74 See Sect. 1.3.1. 75 See for example Case T-83/91 Tetra Pak II [1994] ECLI:EU:T:1994:246 para 37; O’Donoghue and Padilla (2013), p. 256 et seq. 76 Wils (2014), p. 13; Eben (2018), pp. 131 and 135. 77 Marty (2014), p. 17. 78 O’Donoghue and Padilla (2013), p. 257. 67

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Therefore, the notion of an abuse has ever since been a controversial topic; an issue that has not yet been solved until today79 and which might be owed to the lack of extensive case law and Article 102 decisions.80 As identified by O’Donoghue and Padilla within over 50 years of enforcement, there are only around 70 decisions concerning 102 TFEU at the EU level.81 Nevertheless, there is no doubt that different types of abuse have been developed by the case law covering the following practices: (a) Exclusive dealing covering practices such as exclusive purchasing as well as conditional rebates.82 (b) Tying and bundling83 (c) Refusal to supply84 (d) Predatory pricing85 (e) Margin squeeze86

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Take, for example, the self-preferencing practices of Google in, for example, Google Shopping (n 52); a practice that has not occurred before and does not fit in any of the developed categories of the concept of an abuse (i.e. tying, bundling, essential facility). Put differently, there is no precedent for characterising the conduct as an abuse. On the concept of abuse, see in particular: Akman (2015). See also Whish and Bailey (2021), p. 194 arguing that ‘[it] is not controversial to say that the meaning of abuse of dominance is controversial’. 80 O’Donoghue and Padilla (2013), p. 68. 81 Ibid. 82 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 32 et seq, as well as the respective relevant case law regarding rebates starting with the ECJ’s landmark judgement in Case Hoffmann La-Roche (Chap. 1, n 40), Case 322/81 Michelin I [1983] ECLI:EU:C:1983:313 (Michelin I); Michelin II (Chap. 1, n 49); British Airways GC (Chap. 1, n 50); British Airways (Chap. 1, n 50); Case C-549/10 P Tomra Systems and Others v Commission [2012] ECLI:EU: C:2012:221 (Tomra); Case C-23/14 Post Danmark A/S vs Konkurrencerådet [2015] ECLI:EU: C:2015:651 (Post Danmark II), Intel (Chap. 1, n 52); INTEL (Chap. 1, n 43). 83 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 47 et seq, as well as the respective relevant case law as, for example: Case C-333/94 P Tetra Pak International v Commission [1996] ECLI:EU:C:1996:436 (Tetra Pak); Case T-201/04 Microsoft Corp v Commission [2007] ECLI:EU:T:2007:289 (Microsoft); Hilti (n 5). 84 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 75 et seq, as well as the respective relevant case law as, for example: Case C-241/91 P Radio Telefis Eireann (RTE) and Independent Television Publications Ltd (ITP) v Commission [1995] ECLI:EU:C:1995:98 (Magill); Case C-7/97 Bronner [1998] ECLI:EU:C:1998:569 (Oscar Bronner); Case C-418/01 IMS Health GmbH & Co. OHG v NDC Health GmbH KG [2004] ECLI:EU:C:2004:257 (IMS Health). 85 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 63 et seq, as well as the respective relevant case law as, for example: AKZO (Chap. 1, n 40); Tetra Pak (n 81); Case C-209/ 10 Post Danmark A/S gegen Konkurrencerådet [2012] ECLI:EU:C:2012:172 (Post Danmark I); Case C-202/07 P France Telekom SA v Commission [2009] ECLI:EU:C:2009:214 (France Telekom). 86 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 75 et seq, as well as the respective relevant case law as, for example: Case C-280/08 P Deutsche Telekom AG v Commission [2010] ECLI:EU:C:2010:603 (Deutsche Telekom).

4.2

(f) (g) (h) (i) (j)

Different Types of Abuse: An Overview

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Price discrimination87 Excessive pricing88 Access on less favourable terms89 Removal of a railway track90 Other forms of abuse not fitting into one of the above ‘categories’, such as measures (i) harming the competitive structure of the market91 (e.g. pay-fordelay of market entry,92 or compensation payments for braching contracts with competitors like, besides other practices, in Intel93), (ii) aiming to prevent parallel trade94 or impeding import and exports95 as well as (iii) misusing regulatory96 or court proceedings.97

Thus, undoubtedly, there is a variety of different practices which are capable of constituting an abuse under the EU competition provisions. However, when looking at them from a broader perspective, it seems that the measures leading to concerns effectively echo the values and goals of the European competition provisions, as analysed and specified in Chap. 2. Put differently, they mirror the aim to primarily serve consumer welfare and (considering the European Union integration process) market integration, in part however, indirectly by ensuring effective competition.98 In this respect, the special responsibility99 a dominant undertaking has in the context of Article 102 TFEU, that is, namely to ensure that its conduct does not distort the competitive process, arguably provides an ordoliberal element firmly established in EU competition law. The fact that ordoliberalism acknowledged that competition itself, that is, the competitive process, was key to the functioning of a liberal and

87 Case 27/76 United Brands v Commission [1978] ECLI:EU:C:1978:22 (United Brands); Case C-395/96 P Companie Maritime Belge Transport and Others v Commission [2000] ECLI:EU: C:2000:132 (Companie Maritime Belge); Case T-228/97 Irish Sugar v Commission [1999] ECLI: EU:T:1999:246 (Irish Sugar); Case C-82/01 P Aéroports de Paris v Commission [2002] ECLI:EU: C:2002:617. 88 United Brand (n 85), Deutsche Post AG (COMP/C-1/36.915) Commission Decision of 25 July 2001 notified under document number C(2001) 1934; also see the currently pending proceedings at the Commission in Case AT.40394 – Aspen concerning supposedly excessive pricing practices of Aspen in the pharma sector. 89 Containers v. Stena Sealink (IV/34.689 – Interim measures) Commission Decision 94/19/EC [1993] OJ L015/8; Google Shopping (n 52). 90 Lithuanian Railways (Chap. 1, n 42). 91 Whish and Bailey (2021), p. 748. 92 Generics (Chap. 3, n 221). 93 Intel (Chap. 1, n 52). 94 Whish and Bailey (2021), p. 747 and 805 with reference to the respective relevant case law. 95 Ibid. 96 Whish and Bailey (2021), p. 751 referring to Case C-457/10 P AstraZeneca v Commission [2012] ECLI:EU:C:2012:770. 97 Whish and Bailey (2021), p. 751. 98 Post Danmark I (n 83) para 20 and the further case law cited. 99 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38) para 1.

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democratic society, made it relevant enough to be protected as evolving economic power could turn out to be dangerous and a threat to the functioning of an economic system and ultimately also to democracy itself. Furthermore, as already stressed in the preceding section,100 the different forms of abuse listed can in principle be divided and grouped into different categories. Looking at the Treaty provision of Article 102 TFEU there are exploitative abuses,101 exclusionary abuses,102 discriminatory abuses103 and tying abuses.104 Categorisations found in the literature consist of exploitative abuse, exclusionary abuse, as well as single market105 and discriminatory or reprisal abuses.106 Whereas some authors distinguish between exclusionary, exploitative and single market abuses,107 others divide abuses into exclusionary, exploitative and discriminatory or reprisal abuses.108 Furthermore, abuses can also be divided by means of their having a ‘pricing’ or ‘non-pricing’ component.109 However, for the purpose of this monograph a categorisation of abuses is not necessary as the focus of the following sections lies with behaviour and practices qualifying as object abuses, regardless of their allocation to either of the aforementioned categories.

4.3

Object Abuses: An Overview and Analogies to Object Restrictions Pursuant to Article 101(1) TFEU

As mentioned, the notion of an ‘object abuse’ is not found within the Treaty provision itself. However, there are reasons implying that there is indeed a distinction between object and effect infringements also in the context of Article 102 TFEU. Firstly, there are good arguments from a coherence perspective, that is, the aim to design an overall consistent legal framework for the application of the competition provisions, as both provisions ‘serve to achieve the same aim’110 and thus ‘cannot be interpreted in such a way that they contradict each other’.111 Put differently and in

100

See Sect. 4.1.2. See Article 102(a) TFEU. 102 See Article 102(b) TFEU. 103 See Article 102(c) TFEU. 104 See Article 102(d) TFEU. 105 Whish and Bailey (2021), p. 209. 106 O’Donoghue and Padilla (2013), p. 214. 107 Whish and Bailey (2021), p. 209 et seq. 108 O’Donoghue and Padilla (2013), p. 214 et seq. 109 Whish and Bailey (2021) chapter 17 (concerning abuse of dominance non-pricing practices) and chapter 18 (concerning abuse of dominance pricing-practices). 110 Continental Can (Chap. 2, n 65) para 25. 111 Ibid. 101

4.3 Object Abuses: An Overview and Analogies to Object. . .

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Colomo and Lamadrid’s words ‘it would be natural to argue that what is true in the context of Article 101 TFEU and merger control should also [be] true in relation to abusive practices’.112 Moreover, it would indeed be difficult to comprehend, why, provided both Articles, that is, Article 101 and 102 TFEU, are applied to a certain practice,113 effects should not play a role in the context of Article 101 TFEU (as the latter qualifies as object restriction of competition), but, however in the assessment under Article 102 TFEU.114 Secondly, also the case law of the ECJ provides proof in this respect, as there are practices in the context of Article 102 TFEU that have been held abusive by their nature,115 as well as other conduct, such as for example, margin squeeze, where the Court explicitely held that such practice only amounts to an abuse when there is an ‘anti-competitive effect on the market’.116 Thus, the framework underlying the assessment of a measure seems to be aligned with respect to both Treaty competition provisions. Furthermore, the notion of an object abuse also seems consistent with the notion of an object restriction in the context of Article 101 TFEU in the sense that ‘for the purpose of applying [Article 102 TFEU], showing an anti-competitive object and an anti-competitive effect may, in some cases, be one and the same thing’.117 In other words, borrowed from the GC in Michelin II, ‘[i]f it is shown that the object pursued by the conduct of an undertaking in a dominant position is to limit competition, that conduct will also be liable to have such an effect.’118 This seems to be very much in line with the principles established in the context of the notion of object restrictions and Article 101(1) TFEU.119 If a measure qualifies as restrictive of competition by object (considering the respective legal and economic context), it is very likely to have a harmful effect on the market. Argumentum e contrario, only if a measure is very likely to produce anticompetitive effects on the market, a qualification of the latter as object restriction seems justified.120 Furthermore, it should be mentioned here that, as pointed out by AG Colomer, Article 102 ‘is not appropriate to govern conduct branded as abusive per se’121 in the sense that there is no room for objective justification on the part of the dominant 112

Colomo and Lamadrid (2017), p. 15. See to this effect, for example, the ECJ’s judgement in Generics (Chap. 3, n 221). 114 Pablo Ibáñez Colomo, ‘GC Judgment in Case T‑814/17, Lithuanian Railways – Part I: object and indispensability’, Chillin’Competition Blog, available at accessed 6 February 2023. 115 See above Sects. 4.1.1 and 4.4 below. 116 Case C-52/09 TeliaSonera Sverige [2011] ECLI:EU:C:2011:83, para 64. 117 Case T-340/03 France Télécom v Commission [2007] ECLI:EU:T:2007:22, para 195. 118 Michelin II (Chap. 1, n 49), para 241. 119 Gormsen (2013), p. 227. 120 See above under Sect. 3.1 et seq. 121 Joined Cases C-468 to C-478/06 Sot. Lélos kai Sia and Others [2008] ECLI:EU:C:2008:504 (Sot. Lélos kai Sia) Opinion of AG Colomer ECLI:EU:C:2008:180, para 62. 113

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undertaking. Rather, corresponding to Article 101(3) TFEU, the case law122 made clear that an objective justification is possible for behaviour that is caught by the prohibition of Article 102 TFEU.123 This is important as it provides further proof as regards the existence of a consistent underlying system for the assessment of potentially restrictive practices under Article 101(1) as well as abusive ones in the context of Article 102 TFEU. In light of the above, there is little doubt that the notion of a restriction of competition has the same meaning in the context of both provisions, that is, Article 101(1) and 102 TFEU. Rather, it seems that in principle the notion is indeed a unified one across all areas (i.e. Articles 101(1), 102 TFEU and also merger control124) of European antitrust law.125 Put differently, and borrowed from the ECJ in Continental Can,126 ‘[i]n any case Articles [101] and [102] cannot be interpreted in such a way that they contradict each other, because they serve to achieve the same aim’.127 However, the abovementioned, that is, the fact that the underlying system for the assessment of potentially restrictive practices under Article 101(1) TFEU as well as abusive ones in the context of Article 102 TFEU is aligned, does not say anything about whether such sound assessment framework is applied in a consistent way thereby actually contributing to an overall coherent framework for the application of the law. That is, where the role of effects in the context of prima facie abusive practices comes into play. The question thus remains whether effects are used or necessary to the same extent with respect to object restrictions pursuant to Article 101 (1) TFEU and object abuses under Article 102 TFEU. There are voices in the literature arguing that, in contrast to what has been illustrated in the context of Article 101 TFEU, that is, the fact that—from the early days onwards—the EU courts have considered effects also in the context of object restrictions pursuant to Article 101(1) TFEU in the sense that likely, potential etc. effects are considered when conducting a context analysis, the meaning of effects in the context of object abuses and Article 102 TFEU has been subject to a gradual shift in the case law over the years.128 According to the latter, the ECJ and the GC pursued an arguably rather strict per se approach as regards prima facie abusive practices in earlier case law; however, so the argument goes, it seems that such approach has now softened and been subject to alteration over time. Arguably, such shift has brought the concepts and principles of object abuses and Article 102 TFEU closer to the

122

For example, United Brands (n 85), para 184; British Airways (Chap. 1, n 50), para 69; Post Danmark I (n 83), para 40 and the respective case law cited. Most recently see INTEL (Chap. 1, n 43), para 140. 123 Ibid. 124 Colomo and Lamadrid (2017), p. 15. 125 Ibid. 126 Continental Can (Chap. 2, n 65). 127 Continental Can (Chap. 2, n 65), para 25. 128 O’Donoghue and Padilla (2013), p. 226, 429 et seq.

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principles established in the context of Article 101(1) TFEU, namely, the notion of a context analysis when establishing by object restrictions of competition.129 However, it is my opinion that although not explicitely referred to in earlier case law, a context analysis has ever since been necessary also in the context of most categories of object abuses and Article 102 TFEU.130 In this respect, only tying provides an exemption. Notwithstanding the above views, it seems widely accepted today that with respect to abusive practices, anticompetitve effects of a measure must not be ‘purely hypothetical’131 in the sense that practices can be condemned from a competition law perspective without consideration of the legal and economic circumstances within which they occur. Rather, it is necessary to examine all the relevant circumstances.132 Therefore, as will be shown in the subsequent section, an analysis resembling the context analysis as conducted under Article 101(1) TFEU133 seems necessary also in the context of Article 102 TFEU.

4.4

Object Abuses: Case Law, Context Analysis and Context-Specific Outcomes

The following section shall first provide an overview of abusive practices which are considered prima facie abusive and therefore qualify as ‘object’ or per se abuses. This is illustrated by an analysis of the relevant case law and categories of behaviour that have been qualified as abusive by object. Second, similar to the analysis in the context of Article 101(1) TFEU in Sects. 3.3 to 3.7, the case law, the context-specific outcome of measures qualifying as per se abuses, as well as the extent to which effects in the sense of a consideration of the respective relevant circumstances of a case are considered in the establishment of prima facie abusive behaviour shall be illustrated. Hence, this section aims to shed light on the extent to which a consideration of all the circumstances, that is, a context analysis which is somehow guided by the likelihood of a measure’s detrimental effects considering its respective legal and economic context, is necessary for the establishment of an abuse under Article 102 TFEU. Put differently, as a presumption of harmfulness shall only apply to conduct which is ‘presumed to serve an anticompetitive purpose, that is, it has no plausible explanation other than the desire to eliminate competition’,134 a

129

Ibid, 431 (as regards exclusive dealing). Arguing similarily, AG Wahl in its Opinion Intel: INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75. 131 Post Danmark II (n 80), para 65. 132 Michelin I (n 80), para 73; Tomra (n 80), para 71; Post Danmark II (n 80), para 29 et seq. 133 See above Sect. 3.4 et seq. 134 Colomo (2014), p. 14. 130

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consideration of all the circumstances is, however, indispensable in any case. A principle that equally applies in the context of Article 101 TFEU.135 Furthermore, it will be shown that although argued that there was a pretty rigid and strict per se approach as regards object abuses in the early case law of the ECJ and the GC, which has shifted towards a concept which seems pretty much in line with the context analysis as developed in the context of Article 101(1) TFEU,136 a consideration of the legal and economic context of a case, that is, a considerstion of the facts and all circumstances has, in the context of the majority of categories of object abuses (i.e. except tying practices), ever since been necessary also in object abuse cases and Article 102 TFEU.137 The fact that the EU courts have not explicitely referred to such exercise being essential cannot alter the finding that they actually did so. Consequently, what holds to be true as regards effects in the establishment of object restrictions in the context of Article 101(1) TFEU does also play a role in the qualification of a prima facie abusive practice and has done so, arguably, ever since. Hence, it is not just as of recently that the assessment seems to arguably follow a more effects-based approach.138 Therefore, similar to what is true in the context of Article 101(1) TFEU, the necessity to consider all the circumstances in the assessment of a measure, that is, to conduct a context analysis, is essential also in the context of Article 102 TFEU. Moreover, it might furthermore explain the context-specific outcomes in Article 102 cases, that is, a different outcome in arguably similar cases which can be explained by the difference as regards the respective legal and economic context within which a measure occurs. However, it will be shown that the ECJ has, with respect to most potentially abusive practices, developed tools and tests which help to identify the dividing line between abuses by object and effect thereby arguably providing for legal certainty.139 The above will be done by benchmarking the concepts and principles that have been developed with respect to Article 102 case law with those established in the context of Article 101(1) TFEU. Chap. 3 and in particular Sects. 3.3 to 3.7 shall therefore be seen as corresponding to this chapter at hand and cross-references are made where considered appropriate.

135

See Chap. 3. O’Donoghue and Padilla (2013), p. 431 (as regards exclusive dealing). 137 Arguing similarily, AG Wahl in its Opinion Intel: INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75. 138 Dissenting O’Donoghue and Padilla (2013), p. 432 (arguing that such approach has shifted and only exists nowadays). 139 Wils (2014), p. 26 et seq. 136

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4.4.1

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Exclusive Dealing and Practices Leading to De Facto Exclusivity

Practices labelled as exclusive dealing or purchasing agreements,140 single branding,141 requirement contracts,142 or non-compete obligations143 (all of the former uniformly referred to in the following as ‘exclusive dealing agreements’) are contracts whereby a buyer commits ‘not to make any purchase from another seller competing with the supplier it had entered into the exclusive agreement with’.144 The concern, which is inherent to exclusive dealing agreements, provided one party to the agreement is an undertaking holding significant market power, is market foreclosure. By way of example, if undertakings were hindered from, for example, selling their products to customers on the downstream market because of the latter’s commitment to buy all or most of their requirements from the dominant undertaking on the upstream market by means of an exclusivity agreement or commitment, such agreement would not only constitute an unsurmountable barrier to entry for any potential competitor, but also has the potential to drive actual competitors out of the upstream market. Consequently, such measure would very likely, if not most likely, lead to foreclosure. Hence, a treatment of naked exclusivity agreements in the context of Article 102 TFEU as prima facie abusive appears anything but surprising. Furthermore, naked exclusive dealing agreements do not appear to be controversial in economics literature either.145 Put differently, the likely anticompetitive effects of such agreements, when there is a dominant undertaking involved, are widely recognised.146 However, there are other practices, which are not naked exclusivity agreements in the sense specified above. Nevertheless, they de facto have the same effect or respectively have the potential to have the same effect. To be mentioned in this respect: stocking obligations147 as well as conditional rebate schemes (loyalty, exclusivity or fidelity inducing rebates).148 The problem with the latter practices mentioned, and in particular with loyalty rebate systems is that whether or not such

The Commission uses the terminology ‘exclusive purchasing agreement’ in its Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 33 et seq. Exclusive dealing, however, is used as umbrella term encompassing both, exclusive purchasing agreements as well as conditional rebates (as regards the latter, see Guidance on Article 102 Enforcement Priorities [Chap. 1, n 38], para 37 et seq). 141 Whish and Bailey (2021), p. 717. 142 Ibid. 143 Whish and Bailey (2021), p. 717. 144 Fumagalli et al. (2018), p. 239. 145 Ibid. 146 Fumagalli et al. (2018), p. 239. 147 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 33. 148 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 37 et seq. 140

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kind of rebates are detrimental to competition is anything but clear cut. Hence, it is not a simple and straightforward exercise to determine the harmfulness of a rebate system to competition. However, their potential to have an anticompetitive effect on competition cannot be determined by means of the practice’s form only. Rather, an analysis of all the circumstances,149 that is, the legal and economic context within which the latter occur seems indispensable. Put differently and borrowed from the Court in Intel, the Commission is [. . .] required to analyse, first, the extent of the undertaking’s dominant position on the relevant market and, secondly, the share of the market covered by the challenged practice, as well as the conditions and arrangements for granting the rebates in question, their duration and their amount [. . .].150 (emphasis added)

However, from an economics perspective, rebates and their impact on competition in the context of Article 102 TFEU, that is, their welfare effects, appear to be ambiguous.151 Thus, whether or not they indeed have or have the potential to have an anticompetitive effect depends on various different facts and circumstances. Consequently, from a competition law perspective, there has been an ongoing and controversial debate as regards the treatment of rebates according to their effects, that is, the application of an effects-approach, on the one hand, as well as a treatment of the latter as prima facie abuse, that is, a per se or object abuse, on the other hand.152 In light of the above, the following will demonstrate the necessity to consider all the circumstances in order to qualify an exclusive dealing practice as abusive by object. Hence, it will be shown that similar to what needs to be done in the context of object restrictions and Article 101 TFEU, a context analysis for the qualification of an exclusive practice is also necessary in the context of Article 102 TFEU. Considering the case law of the EU courts, no assessment of the latter in the abstract has ever been conducted. Put differently, in the context of exclusive dealing a strict per se approach (as existing in US antitrust law) does not and has never existed.

4.4.1.1

General Remarks

This section will deal with the case law as regards exclusive dealing practices excluding recent case law concering loyalty and fidelity inducing rebates. As emphasised,153 rebates are in principle a heavily, if not one of the most heavily,154 debated area of European competition law.155 Thus, a separate section is devoted to 149

Michelin I (n 80), para 73; Tomra (n 80), paras 70 and 71. INTEL (Chap. 1, n 43), para 139. 151 Fumagalli et al. (2018), p. 129 et seq. 152 For example, Wils (2014) and the response to the latter’s article: Rey and Venit (2015), pp. 3–30, with further references for each position. 153 See Sect. 4.4.1. 154 Zenger (2012), pp. 717–768, 718. 155 van Wijck (2020), p. 3; Gormsen (2013), p. 235. 150

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the latter (see Sect. 4.4.2). However, although the ECJ’s landmark ruling in Hoffmann La Roche156 concerns rebates, it is indispensable for understanding the legal framework for the assessment of exclusive dealing too and thus dealt with already in this section. As mentioned, the concern as regards exlcusive dealing and a customer’s commitment to purchase all or most of its requirement exclusively from the respective dominant undertaking concerned is, apparently, market foreclosure. In principle, the likely anticompetitive effects of such agreements, when there is a dominant undertaking involved, are broadly recognised in economics literature.157 Therefore, denying the potential of the latter practice to lead to foreclosure is hardly possible.158 Furthermore, also practices and obligations which lead to de facto exclusiveness (and, as a consequence, to foreclosure), that is, measures having the same effect as naked exclusive dealing agreements, are treated similarily. The Commission in its Guidance on Article 102 Enforcement Priorities mentions, for example, stocking obligations.159 Moreover, loyalty as well as fidelity inducing rebates provide further examples in this respect (however, as stressed, they will be dealt with in a separate section160). Looking at the case law of the ECJ there has, according to some voices in the literature, been a shift in the approach as regards exclusive dealing agreements.161 According to this view, former cases, such as, for example, Suiker Unie162 and Hoffmann La Roche163 arguably followed a strict per se illegality rule. However, such strict per se approach has arguably been softened in later, more recent case law of the EU courts, such as Van den Bergh164 and Intel.165,166 Yet, not in the sense that the harmful effects of a practice are considered being less likely to be detrimental to competition, but as regards the extent to which the actual circumstances of a case need to be taken into account. O’Donoghue and Padilla refer to such ‘relaxation’ of the presumption as modified per se illegality,167 that is, a shift ‘towards a rule of reason-type inquiry’.168 However, in my view, first such analogy to the rule of reason seems misleading, as a rule of reason in the EU context (i) does not exist and

156

Hoffmann LaRoche (Chap. 1, n 40). Ibid. 158 Fumagalli et al. (2018), p. 239. 159 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 33. 160 See Sect. 4.4.2. 161 O’Donoghue and Padilla (2013), p. 226, 429 et seq. 162 Case 40/73 Suiker Unie and other vs Commission [1975] ECLI:EU:C:1975:174 (Suiker Unie). 163 Hoffmann LaRoche (Chap. 1, n 40). 164 Van den Bergh Foods (Chap. 3, n 299). 165 INTEL (Chap. 1, n 43). 166 O’Donoghue and Padilla (2013), p. 226. 167 Ibid. 168 O’Donoghue and Padilla (2013), p. 226. 157

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(ii) seems furthermore misplaced.169 Rather, in this context it would arguably be more appropriate if one referred to the need to conduct a ‘context analysis’. The argument would thus be that the modified per se illegality is identical with the consideration of the legal and economic context of a measure in the context of an establishment of an object restriction pursuant to Article 101(1) TFEU.170 However, as will be shown in the following, I nevertheless agree with those voices arguing that although not explicitely referred to in earlier case law, a context analysis has ever since been necessary also in the context of per se abuses and Article 102 TFEU.171

4.4.1.2

The Early Case Law: Suiker Unie,172 Hoffmann LaRoche173 and BBP Industries174

The first case where the ECJ had to deal with exclusive dealing in the context of Article 102 TFEU dates back to the mid-1970s of the last century in Suiker Unie.175 The case concerned an all-across Europe cartel and other practices adopted by Südzucker Verkaufsgesellschaft (‘SZV’). Thus, some practices, namely, exclusive dealing arrangements and fidelity rebates, were scrutinised by the Commission under Article 102 TFEU. Whereas the finding of an abuse was annulled as regards the exclusivity clauses due to the fact that the contracting parties of SZV were considered being agents (i.e. trade representatives, that is, they did not qualify as undertaking and thus the competition provisions were not applicable),176 as regards the loyality rebates the Court dismissed the appeal submission and upheld the finding that SZV had ‘abused its dominant position by tying its customers by granting loyalty rebates.’177 In its later landmark judgement in Hoffmann LaRoche178 the Court clarified that the ban on exclusivity would also apply to exclusive purchasing commitments.179 Hoffmann LaRoche180 concerned the abusive behaviour of Hoffmann-La Roche (‘Roche’), the dominant undertaking on the market for various different vitamins, by means of exclusivity terms and fidelity rebates. Roche’s sale agreements with

169

Whish and Bailey (2021), p. 140. See Sects. 3.3 and 3.4. 171 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75; Gormsen (2013), p. 245. 172 Suiker Unie (n 160). 173 Hoffmann LaRoche (Chap. 1, n 40), para 89. 174 BPB Industries (Chap. 3, n 297). 175 Suiker Unie (n 160). 176 Suiker Unie (n 160), para 497. 177 Suiker Unie (n 160), para 528. 178 Hoffmann LaRoche (Chap. 1, n 40), para 89. 179 Whish and Bailey (2021), p. 717. 180 Hoffmann LaRoche (Chap. 1, n 40). 170

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22 large purchasers of vitamins thus contained clauses ‘under which these purchasers undertook to obtain all or most of their requirements of vitamins or certain vitamins expressly mentioned therein exclusively from Roche or which gave them an incentive to do so by including a promise of a discount which the Commission classifies as a fidelity rebate.’181 Another case concerning naked exclusive dealing agreements is the GC’s ruling in BPB Industries.182 The latter concerned promotional payments made by British Gypsum, the subsidiary of a dominant supplier of plasterboard in the UK to its customers ‘in return for an undertaking to obtain supplies exclusively from [British Gymsum]’183 (emphasis added). Notwithstanding the fact that the GC recognised promotional payments to customers in exchange for exclusivity being a standard business and commercial practice between a supplier and its distributors which is— in a normal competitive market situation—in the interest of both parties,184 it condemned such practice in case of a market where competition was already restricted due to the dominant position of one market player.185 Consequently, the GC held that the system of payments to its costumers made by British Gypsum constituted an abuse of dominance within the meaning of Article 102 TFEU. In all the abovementioned cases, the concerns lay with the exclusivity arrangements being prone to lead to market foreclosure. As already stressed, this is even more likely in case such (business) strategy is pursued and implemented by dominant undertakings and by means of exclusivity commitments. Also, from an economics perspective, there is in principle nothing wrong with applying a strict approach to naked exclusive dealing agreements under Article 102 TFEU.186 Moreover, as mentioned initially,187 claiming that the ECJ in its early cases pursued a very strict per se approach, which means that there was no analysis of the conduct in its legal and economic context,188 is, in my view, at odds with the ECJ’s case law. The Court has, although not explicitely referred to, always applied an approach requiring the consideration of the respective relevant facts and circumstances of a case in order to establish an (object) abuse also in the context of Article 102 TFEU.189

181

Hoffmann LaRoche (Chap. 1, n 40), para 80. BPB Industries (Chap. 3, n 297). 183 BPB Industries (Chap. 3, n 297), para 63. 184 BPB Industries (Chap. 3, n 297), para 65. 185 BPB Industries (Chap. 3, n 297), para 67. 186 Fumagalli et al. (2018), p. 239 et seq. 187 See Sects. 4.3 and 4.4. 188 O’Donoghue and Padilla (2013), p. 226, 429 et seq. 189 Arguing similarily, AG Wahl in its Opinion Intel: INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75. 182

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In Suiker Unie,190 for example, the Court did not qualify the system of loyalty rebates of SZV as naked abuse by means of its form. Rather the Court’s analysis explicitly referred to the fact that the respective loyalty rebate clause was not only ‘incorporated in a large number of sales contracts [. . .] without however having been inserted in all of them’,191 but also had in any case no negligible effect ‘since it was incorporated in contracts for large quantities’.192 Furthermore, the ECJ also took into consideration the fact that in case of rebates that had been immediately deducted from the invoice price, the respective customers concerned were in fact dissuaded to obtain supplies from other suppliers than SZV. This was owed to the fact that if the latter did so, ‘they would either be required to repay the amount originally deducted’193 or run risk to lose the benefit of the rebate in the future.194 Thus, the ECJ did in fact consider the specific circumstamces of the case and even recognised the potential ‘dissuasive effect’195 of the implemented measures. Furthermore, as recognised by AG Wahl196 in its opinion in Intel,197 while the language in Hoffmann LaRoche198 might indicate a strict and formal approach, the ECJ’s decision was, however, based on a thourough analysis of, inter alia, the conditions surrounding the grant of the rebates and the market coverage thereof. It was on the basis of that assessment that the Court held that the loyalty rebates in question were, in that case, intended, by granting financial advantage, to prevent customers from obtaining their supplies from competing producers.199

Later in the opinion the AG reiterated that ‘the Court considered several circumstances relating to the legal and economic context of the rebates in finding that the undertaking had abused its dominant position’200 (emphasis added). In concrete terms, the assessment of the Court considered (i) the particularities of the pharmaceutical market, (ii) the aforementioned market coverage of the rebates and (iii) the terms and conditions of the respective contracts.201 Borrowed from the ECJ in Hoffmann LaRoche, ‘[i]t is in the light of these special features that it is necessary to consider whether the disputed contracts were an abuse by Roche of its dominant position’.202 There is nothing to add to this effect. Hence, I agree with AG Wahl that

190

Suiker Unie (n 160), paras 499 et seq, in particular the analysis under paras 510 et seq. Suiker Unie (n 160), para 510. 192 Suiker Unie (n 160), para 512. 193 Suiker Unie (n 160), para 513. 194 Ibid. 195 Suiker Unie (n 160), para 514. 196 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788. 197 INTEL (Chap. 1, n 43). 198 Hoffmann LaRoche (Chap. 1, n 40). 199 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 66. 200 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75. 201 Ibid. 202 Hoffmann LaRoche (Chap. 1, n 40), para 88. 191

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the ECJ in its decision in Hoffmann LaRoche203 did in fact consider the legal and economic context within which the abusive conduct occurred, notwithstanding the fact, however, that the Court did not explicitly state that an analysis of all the circumstances was necessary for the assessment of a prima facie abusive measure under Article 102.204 Moreover, also in BPB Industries,205 the ‘scheme of payments to builders’ merchants who agreed to purchse plasterboard exclusively from [British Gypsum]’206 (‘loyalty scheme’) was not assessed in the abstract too. Rather, the GC considered the respective strategy pursued by British Gypsum against the backdrop of the respective relevant market and the fact that British Gypsum did not apply its policy to all of its customers uniformily, but rather adopted a selective approach, that is, it offered its loyalty scheme in particular to customers ‘who handled or had handled Lafarge or Iberian plasterboard’.207 Important to stress in this respect: Merchants were under pressure as regards their buying policy due to other merchants selling British Gympsym’s competitors plasterboard, that is, plasterboard from Lafarge UK Ltd. and Iberian Trading UK Ltd. Hence, it is especially against this backdrop that British Gypsum also decided to offer its loyalty scheme to ‘a very large customer’,208 who was under competitive pressure due to other merchants selling plasterboard from Lafarge UK Ltd. and Iberian Trading UK Ltd. Furthermore, the GC also took into consideration British Gypsym’s intention, that is, the fact that the loyalty scheme ‘would prevent the loss of customers and at the same time would make it possible to recover the market share lost by [British Gypsym] to its competitors’.209 Thus, it is my view that in all of the abovementioned cases, the EU courts did in fact consider the specific circumstamces and facts of the respective cases. Nonetheless, it could be argued that the analyses of the circumstances were, in part, rather tenuous. However, this can be explained by the fact that the measure in BBP Industries,210 for example, arguably concerned a clear-cut abusive practice, that is, payments in return for the commitment to obtain plasterboard exclusively from British Gypsym as a strategy that was evidentially adopted to eliminate competition from Lafarge UK Ltd. and Iberian Trading UK Ltd. Moreover, also the agreements in Suiker Unie211 and Hoffmann LaRoche212 led to de facto exclusiveness to the benefit of a dominant undertaking and thus to market foreclosure. In other words, the

203

Hoffmann LaRoche (Chap. 1, n 40). INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75. 205 BPB Industries (Chap. 3, n 297). 206 BPB Industries (Chap. 3, n 297), para 38. 207 BPB Industries (Chap. 3, n 297), para 63. 208 BPB Industries (Chap. 3, n 297), para 39. 209 BPB Industries (Chap. 3, n 297), para 62. 210 BPB Industries (Chap. 3, n 297). 211 Suiker Unie (n 160). 212 Hoffmann LaRoche (Chap. 1, n 40). 204

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EU courts’ rather tenuous analysis of the circumstances seems justified, as the above practices arguably constituted naked abuses, that is, there seems to be little or no doubt as regards their detrimental nature to competition. In this context, it should be emphasised that the extent of the consideration of the legal and economic context within which a certain measure occurs can be both, tenous and extensive or almost overextensive reaching a level where it is hard to draw the line to an actual analysis of a measure’s effects as conducted under the ‘effect-heading’. This is owed to the fact that different practices and the actual circumstances within which they occur might provide for a different level of harmfulness of a measure (keyword: ‘context-specific’ outcome). By way of example, as illustrated in the context of Article 101(1) TFEU: naked price fixing cartels opposed to information exchange. Whereas the consideration of all the circumstances, that is, the legal and economic context in case of naked price fixing agreements might be rather tenous, as the latter are, undoubtedly, textbook examples of object restrictions of competition, a more thorough analysis seems necessary to qualify information exchange as restrictive of competition by object, as it depends a lot on the nature of the respective data shared213 as well as ‘on the characteristics of the market in which it takes place (such as concentration, transparency, stability, symmetry, complexity etc.)’214 whether or not the exchange of information is considered harmful by its very nature. Put differently, ‘the nature and purpose of the exchange [and] the context in which it is implemented’215 are crucial for the qualification of information exchange as restrictive by object or not. Two illustrative examples to this effect provided above,216 are the decisions in Bananas217 and Asnef-Equifax.218 Whereas the former concerned the exchange of sensitive information and factors relevant for the future pricing of the respective undertakings concerned and thus its qualification as object restriction of competition was pretty straightforward; in the latter decision a register for credit institutions, which served as platform to indirectly exchange credit information about existing or potential future borrowers219 was held—in light of the legal and economic circumstances of the case—not to qualify as anticompetitive by its very nature, that is, restrictive of competition by object.220

213

Horizontal Guidelines (Chap. 3, n 262), para 58. Ibid. 215 Pablo Ibáñez Colomo, ‘The one about bananas and credit cards: exchanges of information as restrictions by object’, Chillin’Competition Blog, available at accessed 6 February 2023. 216 See Sect. 3.3.1.2. 217 Bananas (Chap. 3, n 4). 218 Asnef-Equifax (Chap. 3, n 138). 219 Asnef-Equifax (Chap. 3, n 138), paras 30 and 46. 220 Asnef-Equifax (Chap. 3, n 138), para 48. 214

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Hence, a different extent of the consideration of all the circumstances in different cases concerning different practices appears certainly justified. However, attention should be paid as regards measures and practices which arguably have, from an economics perspective, rather ambiguous effects on competition, and thus require a pretty in-depth analysis of the circumstances in order to allocate the latter to the object box. As explained above and elsewhere,221 there is a risk to mingle the concept of a context analysis, that is, the consideration of the legal and economic circumstances in order to establish an object restriction of competition, with the analysis of a measure’s actual effects as required for the establishment of an effect infringement of competition. The example as regards Article 101 TFEU were reverse payment settlement agreements in pharmaceutical markets.222 In the context of Article 102 TFEU, the example to this effect, as will be shown in Sect. 4.4.2, provides the practice of loyalty rebates (covering loyalty rebates, fidelity rebates as well as loyalty-inducing/building and fidelity-inducing / building rebate schemes).

4.4.1.3

Van den Bergh Foods223: Old Wine in New Skins or Shifting Baselines?

It has been argued that Van den Bergh Food was the first case where the willingness of the EU courts to apply a coherent approach to exclusive dealing with respect to both, Articles 101(1) TFEU and 102 TFEU, became apparent.224 However, as already stressed, it is my view that the courts have applied a coherent standard ever since. The case concerned Van den Bergh Foods Ltd. (‘HB’), the dominant undertaking for the supply of impulse ice cream in Ireland. HB had entered into exclusive cabinet distribution agreements with its retailers in Ireland by which HB equipped the latter with freezer cabinets free of charge, provided no competing products were stocked within the HB cabinets.225 Hence, the retailers were allowed to use the freezer cabinets to store HB impulse ice cream only.226 Notwithstanding the fact that there was no contractual commitment on the side of the retailers, that is, they were in principle entitled to terminante the agreement with HB at any given moment, as well as the fact that the retailers were not banned from setting up other freezer cabinets to store competing products, the Commission found that 40% of the sales outlets were de facto tied to HB.227

221

See Sect. 3.7.4.2 and Zelger (2020b). Ibid. 223 Van den Bergh Foods (Chap. 3, 299). 224 O’Donoghue and Padilla (2013), p. 431. 225 Van den Bergh Foods (Chap. 3, 299), para 2. 226 Ibid. 227 Van den Bergh Foods (Chap. 3, 299), para 19. 222

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The voices arguing that Van den Bergh Foods brought a change in the approach as regards exclusive dealing see such change manifested in paragraph 160 of the judgement:228 The fact that an undertaking in a dominant position on a market ties de facto – even at their own request – 40% of outlets in the relevant market by an exclusivity clause which in reality creates outlet exclusivity constitutes an abuse of a dominant position within the meaning of Article [102] of the Treaty. The exclusivity clause has the effect of preventing the retailers concerned from selling other brands of ice cream (or of reducing the opportunity for them to do so), even though there is a demand for such brands, and of preventing competing manufacturers from gaining access to the relevant market [. . .].229

According to these voices,230 the GC thereby suggested that ‘when assessing exclusive dealing arrangements under Article 102 TFEU, the EU institutions will now look closely at the actual or likely effects of a particular arrangement in the relevant market and its impact on consumers’.231 However, this argument misses the fact that the potential or likely effects of a practice have, in my view, also played a role in earlier cases of the EU courts. Put differently, as shown above, a consideration of all the circumstances, that is, a context analysis which is somehow guided by the likelihood of a measure’s detrimental effects considering its respective legal and economic context, has always been necessary. Take, for example, the decision of the ECJ in Suiker Unie,232 where the Court acknowledged ‘that in any case the effect of the [respective rebate] clause was in practice by no means negligible’.233 This ‘dissuasive effect’ was again recognised and explicitly referred to by the ECJ also in the context of the effect on trade between Member States criterion later in the judgement.234 Moreover, as stressed by AG Wahl,235 also in Hoffmann LaRoche,236 the Court contemplated the conditions surrounding the abusive practices as well as the market coverage thereof. Thus, as explicitely stressed by the Court itself, ‘[i]t is in the light of these special features that it is necessary to consider whether the disputed contracts were an abuse by Roche of its dominant position’.237 Furthermore, also in BPB Industries238 the loyalty scheme as implemented by British Gypsum, was not assessed in the abstract. Rather, the General Court considered it against the backdrop of the respective relevant market

228

O’Donoghue and Padilla (2013), p. 432. Van den Bergh Foods (Chap. 3, 299) para 160. 230 O’Donoghue and Padilla (2013), p. 432. 231 Ibid. 232 Suiker Unie (n 160), paras 499 et seq, in particular the analysis under paras 510 et seq. 233 Suiker Unie (n 160), para 512. 234 Suiker Unie (n 160), para 514. 235 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, paras 66 et seq, 75 et seq. 236 Hoffmann LaRoche (Chap. 1, n 40). 237 Hoffmann LaRoche (Chap. 1, n 40), para 88. 238 BPB Industries (Chap. 3, n 297). 229

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and the fact that British Gypsum did not apply the loyalty scheme to all of its customers uniformily, but rather adopted a selective approach and particularly offered the rebates to customers who handled plasterboard of its competitors.239 Hence, by taking into consideration all the facts and circumstances of the case, that is, in short British Gypsym paying its customers off in return for their commitment to exclusively purchase British Gypsym plasterboard, the loyalty scheme was held to constitute an abuse. Thus, the arguably new approach to exclusive dealing in the context of Article 102 TFEU introduced by the GC in Van den Bergh Foods240 is, in my view, anything but new, as the consideration of all the circumstances in order to establish an object abuse under Article 102 TFEU had indeed already (implicitly) taken place in earlier cases too. Consequently, there are no naked abuses or naked per se abuses that can be deviated from the form of a practice only. Hence, the respective legal and economic context within which a certain measure occurs is always crucial for the assessment of the latter through the competition law lense. Put differently, similar to what is true in the context of object restrictions and Article 101(1) TFEU, also in the context of exclusive dealing and Article 102 TFEU the practice needs to be analysed considering all the circumstances in order to determine whether it qualifies as abusive ‘by object’.

4.4.1.4

Exclusive Dealing: A Coherent Framework under Article 101 and 102?

As already emphasised, it seems widely recognised in the economics literature that naked exclusivity agreements, where one party to the agreement is a firm holding a dominant position, very likely produce anticompetitive effects.241 The concern with exclusivity, when there is a dominant undertaking involved, is market foreclosure. Furthermore, as stressed earlier, the treatment of naked exclusivity agreements in the context of Article 102 TFEU as prima facie abusive appears appropriate. Although there are voices arguing the converse,242 the illustrated approach as regards 102 TFEU seems consistent with the way exclusivity is treated in the context of Article 101(1) TFEU, even though exclusive distribution under the latter provision does in principle not qualify as object restriction of competition.243 However, as the ECJ clarified in its ruling in STM,244 in case agreements lead to a partitioning of the internal market by the conferral of absolute territorial protection (‘ATP’), they

239

BPB Industries (Chap. 3, n 297), para 63. Van den Bergh Foods (Chap. 3, 299). 241 Fumagalli et al. (2018), p. 239 et seq. 242 O’Donoghue and Padilla (2013), p. 429; Colomo (2016), p. 728 et seq. 243 For further details see Sect. 3.3.2.1. 244 STM (Chap. 1, n 35). 240

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might however do so.245 This fact is crucial, as it is, in my view, exactly what makes the two approaches as regards exclusivity under Article 101 and 102 TFEU compatible. Put differently, in case an agreement in the context of Article 101 TFEU basically leads to a similar situation as unilateral behaviour of a dominant undertaking does, the treatment of the exclusivity arrangements or clauses under both provisions appears uniform. Hence, in the context of Article 101(1) TFEU there are cases where exclusive distribution qualifies as restrictive of competition by object, that is, in case ATP is conferred as it might very likely lead to a partitioning of the market. In case of exclusivity arrangements in the context of Article 102 TFEU, however, the potential of the latter to lead to market partitioning by means of foreclosure effects and ATP is inherent to the implementation of an exclusive dealing practice by an undertaking with market power. In other words, the strict approach as regards exclusivity in the context of Article 102 TFEU seems valid, as the existence of a dominant undertaking (almost) always leads to a situation of market foreclosure and thus, a situation which is equivalent to exclusivity agreements conferring ATP in the context of Article 101 (1) TFEU. Hence, any time a dominant undertaking pursues a business strategy based on naked exclusivity agreements with its customers, ATP is very likely, if not most likely, to occur. Furthermore, considering in a second step, what is broadly recognised in economics literature,246 that is, the potential and very likely anticompetitive effects of naked exclusive dealing commitments (i.e. market foreclosure) when there is a dominant undertaking involved, the treatment of the latter as prima facie abusive appears anything but surprising. Hence, the application of a rather strict approach seems reasonable and appropriate also from an economics perspective, as the anticompetitive effects of naked exclusivity restraints in the context of Article 102 TFEU do not seem to be controversial from an economics perspective.247 The assessment is, however, slightly different as regards bilateral exclusive measures in the context of Article 101(1) TFEU. It is inherent to the lack of market power of the respective undertakings concerned that exclusivity agreements might have less coverage of the relevant market concerned. Hence, they do not necessarily lead to market foreclosure. Consequently, exclusivity arrangements in the context of Article 101 TFEU are not by their very nature restrictive of competition, in particular when the amount required to be purchased by the customers tied by an exclusivity clause does not reach or exceed a certain threshold. Therefore, a treatment of the latter under the effect-heading, unless the respective agreements confer ATP, seems reasonable as the measure’s effects on competition are rather ambiguous.

245

Zelger (2018) with further references. Fumagalli et al. (2018), p. 239 et seq. 247 Ibid. 246

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The above seems very well echoed in the Commission’s approach to single branding agreements,248 that is, exclusive dealing agreements in its Guidelines on Vertical Restraints.249 According to the latter, an agreement qualifies as single branding if it contains ‘an obligation or incentive scheme which makes the buyer purchase more than 80% of its requirements on a particular market from one supplier’250 (emphasis added). Furthermore, such agreements are, provided there is a non-compete obligation exceeding the duration of 5 years, exempted from the ambit of the VBER.251 Hence, such agreements do not benefit from its safe harbour. In other words, the approach taken by the Commission seems to mirror the concern of exclusive purchasing agreements given 80% or more of the respective products are obtained from one single supplier and, given the commitment to exclusivity, ties the respective customers for a period exceeding 5 years. The reason for this, as recognised by the Commission,252 are, inter alia, ‘foreclosure of the market to competing suppliers and potential suppliers, softening of competition and facilitation of collusion between suppliers in the case of cumulative use and, where the buyer is a retailer, a loss of in-store inter-brand competition’.253 Hence, against this backdrop it is my view that the treatment of exclusive dealing, considering the overall framework of Articles 101 and 102 TFEU, appears to be sound. When taking account of what is broadly recognised in economics literature,254 that is, the potential and very likely anticompetitive effects of naked exclusive dealing commitments (i.e. market foreclosure) when there is a dominant undertaking involved, the treatment of the latter as object abuse appears anything but surprising and sound.

4.4.2

Loyalty Rebates

4.4.2.1

General Remarks

This section will deal with rebates and, in particular, with loyalty rebates, fidelity rebates, loyalty or fidelity inducing or building rebates, or exclusivity rebates (referred to all of the latter as ‘loyalty rebates’). It will be shown that whereas some categories of rebates are harmless from an abuse of dominance law

The Commission subsumes agreements under the ‘single branding’ heading ‘which have as their mein elemant the fact that the buyer si obliged or induced to concentrate its orders for a particular type of product with one supplier’, see Vertical Guidelines (Chap. 3, n 84), para 298. 249 Vertical Guidelines (Chap. 3, n 84) para 298. 250 Vertical Guidelines (Chap. 3, n 84) para 298. 251 Vertical Block Exemption Regulation (Chap. 3, n 159) Article 5(1) a. 252 Vertical Guidelines (Chap. 3, n 84) para 299. 253 Ibid. 254 Fumagalli et al. (2018), p. 239 et seq. 248

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perspective, that is, for example, standardised and volume-based rebate schemes,255 loyalty rebates provide for a more controversial discussion. In contrast to naked exclusivity agreements, that is, a buyer’s commitment to purchase exclusively from the respective dominant undertaking concerned, the difficulty as regards loyalty rebates is that there is no formal commitment of the buyer to purchase exclusively from the dominant supplier offering a price discount. However, loyalty rebates might nevertheless be an incentive for customers to actually meet all their requirements in order to secure the granting of the discount, that is, respectively, not to run risk to lose the benefit of the latter by purchasing part of their requirements from other suppliers. Hence, loyalty rebate schemes have the capacity to lead to de facto exclusiveness, but do not necessarily have to do so. In principle, rebates and discounts are a controversial topic not only in the context of the law of abuse of dominance but also among economists. According to the latter ‘price discrimination in its various forms (rebates, discounts, coupons, etc.) [. . .] abstracting from possible exclusionary reasons [. . .] is not necessarily welfaredetrimental’.256 However, it is also recognised that it may be a powerful tool for an incumbent firm to exclude smaller or new rivals.257 Hence, the risk of market foreclosure in case of practices which lead to de facto exclusiveness appears to be recognised. Therefore, ‘rebate schemes offered by incumbent firms may have anticompetitive effects and may be worth investigating, especially when they offer large dicounts, they are contingent on buyers buying very large volumes or requirement shares, and are individualized’258 (emphasis added). However, finding and designing a clear cut, uniform ex-ante rule that can easily distinguish procompetitive loyalty rebates from anticompetitive ones tends to be anything but hope over experience. It appears from the foregoing that unlike naked exclusive dealing which imposes a commitment on customers to buy all or most of their requirements exclusively from the dominant undertaking concerned, loyalty rebate schemes lack such formal commitment. Thus, the concerns as regards exclusive dealing glancing through a competition law lense are in principle more severe than with respect to loyalty rebates.259 Hence, from an economics perspective, the effects and impact of loyalty rebates on competition are ambiguous even if implemented by a dominant undertaking.260 As a consequence, the argument that the basis for a presumption of illegality of the latter is rather tenuous and thus should be omitted is not at all unsubstantiated. Put differently, and borrowed from Colomo,261 a presumption of

255 Volume-based rebates are linked to the volume of purchases made only. They are neither retroactive nor individualised. 256 Fumagalli et al. (2018), p. 191. 257 Fumagalli et al. (2018), p. 192. 258 Fumagalli et al. (2018), p. 192. 259 Fumagalli et al. (2018), p. 313. 260 Colomo (Chap. 1, n 9, 2004), p. 4. 261 Colomo (Chap. 1, n 9, 2004), p. 14.

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harmfulness shall only apply to conduct which is ‘presumed to serve an anticompetitive purpose, that is, it has no plausible explanation other than the desire to eliminate competition’.262 A principle that equally applies in the context of Article 101 TFEU.263 However, as the case law stands, whether or not rebates qualify as prima facie abusive practice under Article 102 TFEU depends on the respective relevant circumstances and facts within which the rebates occur as well as their substance and structuring. Hence, whether or not a rebate system has or leads to a loyalty-inducing mechanism or effect is not assessed without consideration of the context within which the respective scheme is operated. A fact which is, arguably, also very well echoed in the respective case law of the EU courts.264 Furthermore, considering what has been argued in the context of reverse payment settlement agreements,265 the difficulties in the context of loyalty rebates are, arguably, similar. Hence, it is anything but clear, where to draw the concise line between a context analysis conducted for the establishment of a prima facie abuse and an analysis of the full effects of a measure necessary in the context of practices dealt with under the effect-heading. This becomes particularly difficult in borderline cases, where the analysis of all the circumstances is, arguably, fairly extensive, as to qualify a measure it is necessary to conduct an in-depth analysis of the latter. Consequently, such in-depth analysis runs risk to get very close to an actual analysis of a measure’s effects. Hence, why not treat rebates accordingly?

4.4.2.2

Categories of Rebates in the Case Law

In principle, there are different categories of rebates, namely, (i) conditional rebates, that is, ‘rebates that are conditional on the customer to purchase all or most of its requirements from the dominant undertaking’.266 (ii) Loyalty inducing rebates (lacking a formal condition of exclusivity), such as for example, ‘[r]ebates, be it retroactice and individualised, as in the cases Michelin I, British Airways and Tomra or market-share based and individualised as in Hoffmann-La Roche’267 (emphasis added). (iii) Volume-based rebates, that is, ‘rebates that are linked solely to the volume of purchases made from an undertaking in a dominant position’.268

262

Ibid. See Chap. 3. 264 Michelin I (n 80), para 73; Michelin II (Chap. 1, n 49), para 60; Tomra (n 80), para 71; Post Danmark II (n 80), paras 29 et seq. 265 See Sect. 3.7.4.2 and Zelger (2020b). 266 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 61. 267 Ibid. 268 INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 61. 263

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According to the the case law of the ECJ as regards rebates of the category (i) and (ii) a presumption of unlawfulness under Article 102 TFEU applies. Thus, it is only the volume-based rebates of category (iii) that are not presumed to be harmful to competition and thus prima facie abusive, rather a presumption of lawfulness applies (in some circumstances).269 However, as stressed earlier, the presumption of unlawfulness is not without consideration of all the circumstances, as such analysis is necessary in order to establish the loyalty or fidelity inducing or building character of a loyalty rebate of any form whatsoever. Put differently, whether a rebate scheme qualifies as object abuse depends on various factors and circumstances. This is what the following section shall shed light on by means of illustrating the existing case law.

4.4.2.3

The Early Case Law: Hoffmann LaRoche, Michelin I and II

As regards the consideration of all the circumstances in the ECJ’s landmark judgement in Hoffmann LaRoche, reference shall be made to Sect. 4.4.1.2 dealing with the latter. As will be shown in the following, with respect to the rulings in Michelin I270 and 271 II (as well as in British Airways272) the Court, in all of the latter judgements, explicitly mentioned the necessity to ‘consider all the circumstances’273 in order to qualify the respective rebate schemes at hand as anticompetitive by object. In Michelin I (already in 1983) the case concerned selective, inidividualised, target-based discounts and target bonus schemes.274 The Court, while emphasising that the respective scheme operated by Michelin was ‘not a mere quantity discount linked solely to the volumes of goods purchased’,275 it also acknowledged that the customers were not formally obliged by an exclusivity clause either, and thus the discount granted could not be equated with loyalty rebates of the type as considered by the Court in Hoffmann LaRoche.276 Hence, it was against this backdrop, that the Court, stressing the necessity to ‘consider all the circumstances’,277 took into account (i) the individualised nature of the sales targets,278 (ii) the relatively long

269

Post Danmark II (n 80), para 28. Michelin I (n 80). 271 Michelin II (Chap. 1, n 49). 272 British Airways (Chap. 1, n 50). 273 Michelin I (n 80), para 73; Michelin II (Chap. 1, n 49), para 60; British Airways (Chap. 1, n 50), para 67. 274 Ezrachi (2018a), p. 256. 275 Michelin I (n 80), para 72. 276 Ibid. 277 Michelin I (n 80), para 73. 278 Michelin I (n 80), para 72. 270

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reference period,279 as well as (iii) the lack of transparency of the system, in order to conclude that the rebate scheme qualified as an abuse of Article 102 TFEU.280 Moreover, it also emphasised that it was crucial whether in providing an advantage not based on any economic service justifying it, the rebate tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition281 (emphasis added).

Hence, the ECJ not only provided guidance as regards the criteria necessary to be taken into account in the assessment of a measure as abusive or not, but also implied that an economic justification of a measure is, in principle, possible. Michelin II, a case decided by the GC, concerned a system of quantity rebates, which was however, qualified as ‘loyalty inducing’, and thus lead, as operated by a dominant undertaking, to foreclosure effects prohibited by Article 102 TFEU. The GC emphasised that ‘[t]he mere fact of characterising a discount system as “quantity rebates” does not mean that the grant of such discounts is compatible with Article [102]’.282 Hence, as the quantity rebates were not linked to the volume of purchases of an undertaking only, but also had a loyalty-inducing effect, they were, arguably, a ‘sham’. Put differently, the quantity rebates were not genuine quantity rebates but, however, of loyalty inducing nature. Thus, as the ‘Commission demonstrated that the purpose of the discount systems [. . .] was to tie the dealers to [Michelin]’283 it was sufficient to qualify the latter’s practice as abuse. Moreover, as ‘[f]or the purposes of applying [Article 102 TFEU], establishing an anti-competitive object and the anti-competitive effect are one and the same thing’,284 it follows that ‘[i]f it is shown that the object pursued by the conduct of an undertaking in a dominant position is to limit competition, that conduct will also be liable to have such an effect.’285 Hence, as the rebates and discount scheme operated by Michelin tended to restrict competition because their aim was, in particular, to make it more difficult for competitors to enter the relevant market,286 the GC qualified them as abuse. As will be discussed in the analysis of the case law below,287 such approach as regards quantity rebate systems is to be criticised as the context analysis necessary to be conducted in this respect seems, particularly in ‘borderline’ cases, to get too close

279

Michelin I (n 80), para 81. Michelin I (n 80), paras 85–86. 281 Michelin I (n 80), para 73. 282 Michelin II (Chap. 1, n 49), para 62. 283 Michelin II (Chap. 1, n 49), para 240. 284 Michelin II (Chap. 1, n 49), para 241. 285 Ibid. 286 Michelin II (Chap. 1, n 49), para 244. 287 See Sect. 4.4.2.5. 280

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to an actual analysis of the effects of a measure;288 an argument that has also been made in the context of reverse payment settlement agreements and Article 101 TFEU.289 Another prominent case, where the ECJ dealt with the fidelity building effects of a bonus scheme, provides British Airways.290 However, this section does not aim to be exhaustive, but uses selected case law to shed light on the concept of a ‘context analysis’ in order to create a better understanding of the overall meaning of the latter when establishing prima facie abuses. Therefore, considering the fact that ‘[t]he judgement added little to the existing case law’,291 a more detailed analysis of the latter can be omitted.

4.4.2.4

Tomra, Post Danmark II and Intel

As regards the cases which have occurred since 2010, that is Tomra292 (in 2012), Post Danmark II293 (in 2015) and Intel294 (in 2017), the ECJ, in all of the latter too, refers to the necessity of a context analysis, that is, a consideration of all the circumstances in order for a practice to qualify as prima facie abusive.295 The case in Tomra concerned a retroactive rebate scheme containing a loyalty mechanism which the ECJ, while considering all of the relevant facts surrounding that conduct,296 and thus, also the strategy pursued as well as the undertaking’s subjective intent,297 qualified as an abuse pursuant to Article 102 TFEU. In its analysis of the context and circumstances the Court held that an incentive to exclusively obtain all the requirements from the dominant undertaking is particularly strong when thresholds, such as those applied by Tomra, were combined with a system whereby the achievement of the bonus threshold or, as the case may be, a more advantageous threshold benefited all the purchases made by the customer during the reference period and not exclusively the purchasing volume exceeding the threshold concerned.298

In this context, the Court also emphasised the rebate scheme’s individualised nature as the thresholds for each customer were established on the basis of the latter’s

288

Ezrachi (2018a), p. 259. See Sect. 3.7.4.3. 290 British Airways (Chap. 1, n 50). 291 Ezrachi (2015), p. 263. 292 Tomra (n 80). 293 Post Danmark II (n 80). 294 INTEL (Chap. 1, n 43). 295 Tomra (n 80), para 71; Post Danmark II (n 80), para 29; INTEL (Chap. 1, n 43), para 142. 296 Tomra (n 80), paras 17–19. 297 Ibid. 298 Tomra (n 80), para 75. 289

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estimated requirements or past purchasing volumes.299 Furthermore, it deviated the aim of ensuring loyalty from the fact that the retroactive rebates often applied to some of the largest customers of Tomra. Moreover, as Tomra failed to show that the conduct was objectively justified and generated efficiency gains, the ECJ qualified the rebate scheme as anticompetitive. In Post Danmark II,300 a case which reached the ECJ by request for preliminary ruling, the rebate scheme concerned standardised rebates, ‘that is to say, all customers were entitled to receive the same rebate on the basis of their aggregate purchases over an annual reference period’.301 Moreover, the rebates were conditional (upon sales targets) as well as retroactive (meeting the threshold made the rebate retroactively applicable to all mailings presented during the respective reference period).302 Similar to the GC’s arguing in Michelin II,303 the ECJ denied that the rebate scheme at hand qualified as pure quantity rebate.304 Rather, it stressed the necessity to consider all the circumstances in order to qualify the rebate scheme accordingly. The circumstances to be considered in this respect are, in particular, ‘the criteria and rules governing the grant of the rebate’,305 as well as whether in providing an advantage not based on any economic service justifying it, the rebate tends to remove or restrict the buyer’s freedom to choose his sources of supply, to bar competitors from access to the market, to apply dissimilar conditions to equivalent transactions with other trading parties or to strengthen the dominant position by distorting competition.306

Thus, the aspects provided by the Court to be considered when conducting an analysis of ‘all the circumstances’, are, arguably, pretty vague and remarkably extensive.307 Put differently, and borrowed from Colomo, ‘the assessment of all the circumstances in Post Danmark II was not merely confined to the nature and the operation of the scheme’.308 Hence, even if rebate systems appear to be of quantity nature, they might qualify as prima facie abusive given they have a loyalty mechanism or loyalty-inducing effect, which can be established considering the respective relevant circumstances within which the rebate system occurs. Arguably though, Post Danmark II serves as further proof for an existing tendency of bringing the concept of a ‘context analysis’, necessarily to be conducted in the context of a prima facie abuse, ever closer to an actual analysis of a measure’s effects, as necessary in the context of practices treated under the ‘effect-heading’.

299

Ibid. Post Danmark II (n 80). 301 Post Danmark II (n 80), para 23. 302 Post Danmark II (n 80), paras 24–25. 303 Michelin II (Chap. 1, n 49). 304 Post Danmark II (n 80), para 28. 305 Post Danmark II (n 80), para 29. 306 Ibid. 307 Post Danmark II (n 80), paras 30–50. 308 Colomo (2016), p. 720. 300

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The last case, to be discussed here, is the ECJ’s ruling in Intel.309 The case concerned anticompetitive practices of Intel, which consisted of two different sets of abusive practices, that is, ‘(i) loyalty rebates as well as (ii) compensation payments of Intel paid to its customers for their breaching of contracts concluded with its competitor on the market for [central processing units], namely [Advanced Micro Devices Inc]’.310 In its judgement, the Court, contrary to the GC’s arguing that for the qualification of an exclusivity rebate, there was no analysis of the actual circumstances necessary,311 emphasised that the Commission is, in the context of the establishment of an abuse pursuant to Article 102 TFEU, indeed required to analyse and take account of (i) the undertaking’s dominant position on the market, (ii) the share of the market covered by the challenged practice, (iii) the conditions and arrangements for granting the rebates as well as their duration and amount, as well as (iv) the possible existence of a strategy aiming to exclude competitors (at least as efficient as itself) from the market.312 Moreover, the ECJ further emphasised that its case law concerning exclusive dealing practices which qualify as an abuse, must be further clarified in the case where the undertaking concerned submits, during the administrative procedure, on the basis of supporting evidence, that its conduct was not capable of restricting competition and, in particular, of producing the alleged foreclosure effects.313

Hence, the Court has been clear that there is a requirement to examine all arguments provided by the dominant undertaking concerned,314 and, in particular, to ‘investigate all of Intel’s arguments regarding the [as efficient competitor] test’.315 Put differently and borrowed from Colomo, ‘where supporting evidence is produced, the Commission must take seriously any arguments showing that the practice is not capable of having effects on competition’.316 Therefore, although some voices in the literature argue that the approach of the ECJ in its judgement in Intel317 overturned the presumption of unlawfulness,318 I agree with those voices arguing that such presumption of unlawfulness has not been

309

INTEL (Chap. 1, n 43). Zelger (2020a), pp. 2–3, 613–627, 8. 311 Intel (Chap. 1, n 52), paras 80–93. 312 INTEL (Chap. 1, n 43), para 139. 313 INTEL (Chap. 1, n 43), para 138. 314 INTEL (Chap. 1, n 43), para 144. 315 Van Wijck (2020), p. 17. 316 Pablo Ibáñez Colomo, ‘Comments on Case C‑413/14 P, Intel: presumptions, effects-based analysis and open questions’, Chillin’Competition Blog, available at accessed 6 February 2023. 317 INTEL (Chap. 1, n 43). 318 Colangelo and Maggiolino (2018), pp. 685–699, 697; Van Wijck (2020), p. 18; Komninos et al. (2017). 310

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abolished.319 Rather, ‘[t]he principle whereby exclusive dealing and loyalty rebates are prima facie abusive (or ‘by object’) stands’.320 Hence, the judgement does not herald a new era as regards the treatment of loyalty rebates, but rather provides for ‘desirable clarification’.321 For the sake of completeness, however, it shall be mentioned here that Intel and the argument that a practice is not capable of producing any anticompetitive effects at all, is of relevance with respect to the notion of appreciability (and the de minimis doctrine) in the context of Article 102 TFEU. More details to this effect are provided in Sect. 4.5.

4.4.2.5

Analysis of the Case Law

Arguably, the following principles can be inferred from the above-illustrated case law regarding loyalty rebates: For a qualification of rebates as prima facie abusive, it has ever since the ECJ’s landmark judgement in Hoffmann LaRoche,322 been necessary to consider ‘all the circumstances’. Furthermore, abusive rebates have always been subject to (potential) objective justification.323 This principle was reiterated by the Court most recently in Intel.324 Hence, a strict per se approach as existing in US antitrust law, that is, the principle that per se anticompetitive behaviour cannot be subject to objective justification, has never existed in the context of EU law on abuse of dominance and loyalty rebates. However, considering an economics perspective and the fact that the effects of loyalty rebates appear to be rather ambiguous, a treatment of the latter according to their actual effects seems reasonable. Notwithstanding the fact that the law as it stands is not to be criticised, that is, there is nothing wrong qualifying a measure as restrictive or abusive by object in case there is no other explanation of a measure than its aim to hamper competition, with respect to rebates in boarderline cases the latter are, arguably, not to be considered detrimental by their very nature. Put differently, it cannot be held with certainty that the vast majority of loyalty rebates do, more likely than not, produce anticompetitive effects. Hence, considering the relevant factors and criteria to be taken into account in the context of the consideration of all the

For example, Colomo (n 314); Peter Ondrejka, ‘Gewährung von Rabatten nach dem EuGHUrteil Intel’, RdW – Österreichisches Recht der Wirtschaft 2018/14, 13–17, 16; Christian Karbaum, ‘EuGH zu Rekordbußgeld für Intel: Die Krux mit den Treuerabatten’ (7 September 2017) available at accessed 6 February 2023. 320 Colomo (n 314) referring to paragraph 137 of the ECJ’s judgment in INTEL (Chap. 1, n 43). 321 Ibid. 322 Hoffmann LaRoche (Chap. 1, n 40). 323 Such principle was first implied in United Brands (n 85), para 184; in the context of rebates reiterated in Michelin I (n 80), para 73; British Airways (Chap. 1, n 50), para 69; Post Danmark I (n 83), para 40 and the respective case law cited. Most recently see INTEL (Chap. 1, n 43), para 140. 324 INTEL (Chap. 1, n 43). 319

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circumstances (i.e. the context analysis) in such cases, the same argument as raised in the context of reverse payment settlement agreements and Article 101 TFEU applies: If the context analysis of a measure reaches a certain extent, where to draw the line between object and effect abuses, that is, between a consideration of all the circumstances on the one hand, as well as an analysis of actual effects? Thus, also in the context of Article 102 TFEU and rebate systems in general, it all boils down to the question whether or not a rebate system is of ‘genuine quantity nature’, or rather qualifies as ‘loyalty inducing’ in any form whatsoever. Hence, the question in this respect is similar to the one whether reverse payment settlement agreements relate to a ‘genuine’ patent dispute or not. However, such assessment appears, in the context of both examples, to be anything but clear cut, and thus, as a consequence, the context analysis runs risk to get very close to the analysis of the actual effects of a measure. These considerations lead (again) to the question: Why not treat the latter accordingly, that is, according to their effects?

4.4.3

Tying and Bundling

4.4.3.1

General Remarks

In general, tying and bundling is referred to ‘the combined sale of more than one product’.325 Such combination can, of course, occur in different variants. In the context of EU competition law, the following categories of tying and bundling have been established:326 (i) pure bundling (i.e. neither of the products is offered individually), (ii) tying (i.e. the combination of a tying and a tied product; however, whereas tied products remain available individually, the tying ones do not, that is, they can only be bought in combination with the tied product), and (iii) mixed bundling (i.e. each product of a bundle is both, available as package as well as individually). Moreover, one can further distinguish between contractual and technical tying.327 With respect to the former, the tie is constituted by the decision of a supplier to combine the sales of two of its products by means of an agreement or contract, while the products combined actually remain individual components.328 Hence, such tie can easily be untangled. Technical tying, however, ‘involves the integration of the

325

O’Donoghue and Padilla (2013), p. 596. Ibid; Holzweber (2018a), pp. 2–3, 344. 327 Fumagalli et al. (2018), p. 351. 328 Fumagalli et al. (2018), p. 352. 326

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products (for example, in the design or manufacturing process) in such a way that it may be quite costly to undo the bundling or tying decision’.329 As the case law stands, tying constitutes a prima facie abuse of Article 102 TFEU.330 Moreover, that tying practices, pursued by a dominant undertaking, can amount to an abuse of dominance pursuant to Article 102 TFEU has its legal basis, inter alia, in the wording of Article 102(2)(d) TFEU stipulating that an abuse may, in particular, consist in ‘making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts’.331 Hence, the Treaty provision explicitly states tying as an example of an abuse. Moreover, the ECJ has clarified that even if a tying practice does not fall within the precise terms of Article 102(2)(d) TFEU, the latter might, nevertheless, qualify as abuse,332 as, according to the ECJ, ‘the list of abusive practices set out in the second paragraph of Article [102] of the Treaty is not exhaustive’.333 As a consequence, even in case the tied products have, by their nature or by means of their commercial usage, a connection, the latter might still constitute an abuse, unless objectively justified.334 Hence, as a general note, it shall be emphasised here that such reasoning of the Court provides proof as regards the Court’s teleological approach with respect to its reading, understanding and interpreting of the Treaty provisions. In principle, as will be shown in the following, the early approach of the EU courts and the Commission as regards tying has been fairly formalistic.335 Hence, due to potential foreclosure effects, tying was considered as prima facie abusive, provided the following criteria are met: (i) dominance of the undertaking concerned in the market of the tying product, (ii) the tying and the tied product being two distinct products; and (iii) a coercion element towards the customer purchasing the tying and the tied product.336 Moreover, although, in theory, an objective justification defence is possible,337 it rather played a subordinate role in practice, as such defence was treated ‘with considerable scepticism’338 in deciding the outcome of a case. Such strict approach has, however, shifted towards an approach that is less formalistic, and rather based on anticompetitve foreclosure effects.339

329

Ibid. Hilti (Chap. 1, n 5); Tetra Pak II (Chap. 1, n 27). 331 Article 102(2)(d) TFEU. 332 Tetra Pak (n 81), para 37; Whish and Bailey (2021), p. 726. 333 Tetra Pak (n 81), para 37. 334 Ibid. 335 Fumagalli et al. (2018), p. 443; O’Donoghue and Padilla (2013), p. 610. 336 O’Donoghue and Padilla (2013), p. 610; Whish and Bailey (2021), p. 726. 337 See, inter alia, Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 62. 338 O’Donoghue and Padilla (2013), p. 610. 339 O’Donoghue and Padilla (2013), p. 611. 330

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Considering an economics perspective, tying practices appear to have ambiguous effects on competition.340 Hence, there seems to be consensus among economists that a detailed analysis is necessary before condemning a tying practice as anticompetitive.341 This is owed to the fact that a foreclosure effect of actual or potential competitors is only likely to occur in a particular set of circumstances and facts.342 Put differently, and borrowed from Fumagalli et al, although ‘there exist a number of theories of harm [. . .] some of these theories may need particular circumstances.’343 Against this backdrop, criticism as regards the by object approach towards tying in EU abuse of dominance law appears reasonable. Moreover, as already mentioned above, the fact that US antitrust law has changed its approach as regards tying, that is, it shifted from a strict per se towards a rule-of-reason approach,344 runs in the same vein. However, as the EU approach in the context of RPM shows,345 needless to say, only because US antitrust law undergoes a ‘change of paradigm’, such change in the US does not automatically lead to a shift in the approach in EU competition law.

4.4.3.2

The Case Law

The case law as regards tying is, as it is in the area of Article 102 TFEU in general,346 rather tenuous. Landmark cases to this effect provide the decisions in Hilti,347 Tetra Pak348 and Microsoft.349 As will be shown in the following, whereas the early decisional practice arguably followed a rather strict per se approach, there has been a shift in later cases, such as, in Microsoft.350 The case in Hilti351 concerned a tying practice of Hilti AG (‘Hilti’), the dominant undertaking in, inter alia, the market for nail guns as well as for the nails and cartridge strips for those guns. The abusive practice implemented by Hilti made the purchase of its cartridge strips conditional upon a corresponding quantity of its nails.352 In other words, the dominant undertaking tied the sale of the nails to the sale of cartridge strips. Hilti did so, in order to drive one of its competitors, inter alia

340

O’Donoghue and Padilla (2013), p. 599 with further references as regards economics literature. Ibid. 342 O’Donoghue and Padilla (2013), p. 613 with further references as regards economics literature. 343 O’Donoghue and Padilla (2013), p. 399. 344 See Sect. 4.1.1. 345 See Sect. 3.1.3. 346 See Sect. 4.2. 347 Hilti (n 5); Case C-53/92 Hilti v Commission [1994] ECLI:EU:C:1994:77 (HILTI). 348 Tetra Pak II (Chap. 1, n 27) and Tetra Pak (n 81). 349 Microsoft (n 81). 350 O’Donoghue and Padilla (2013), pp. 610–611. 351 Hilti (n 5); Case C-53/92 Hilti v Commission [1994] ECLI:EU:C:1994:77 (HILTI). 352 Hilti (n 5), para 4. 341

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producing nails intended for use in the nail guns of Hilti, from the market for nails compatible with Hilti products.353 The Commission qualified the tying of the latter products as abuse of Article 102 TFEU.354 Hilti appealed against the Commission’s decision and, while denying that it had behaved improperly, it also mentioned safety grounds as objective justification of the tie.355 In its judgement, the GC pursued a fairly formalistic approach. It held that it was clear from the documents of the file that the commercial strategy of Hilti was selective and discriminatory. Moreover ‘the strategy employed by Hilti against its competitors and their customers is not a legitimate mode of competition on the part of an undertaking in a dominant position’.356 As a consequence ‘it must be concluded [. . .] that Hilti abused [its dominant position] by engaging in all the commercial practices of which the Commission accused it in this regard’.357 Moreover, it also dismissed Hilti’s reasoning to objectively justify its tying practice by claiming that its actions stem out of safety concerns.358 Upon appeal, the ECJ upheld the GC’s decision.359 The decisions in Tetra Pak360 concerned various abusive practices of Tetra Pak International SA (‘Tetra Pak’), and, among other things (i.e. predatory price cutting),361 the tying of the sale of machinery for packaging with the sale of cartons being a necessary input for the packaging process. In other words, borrowed from Whish and Bailey, ‘Tetra Pak required customers to whom it supplied liquid packaging machines to purchase cartons from it’.362 Thereby, Tetra Pak aimed to ensure that only its own cartons were used with its packaging machines. The GC’s analysis of Tetra Pak’s practice was again rather formalistic, as the GC’s finding of an abuse was basically equated with the establishment of the practice’s anticompetitive object;363 however, arguably applying such strict per se approach without an actual consideration of the specific circumstances of the case, that is, the context within which the tie actually occured. Hence, since the object of Tetra Pak’s practice was anticompetitive, the ‘clauses could be considered as abusive in themselves’.364 Moreover, the GC also rejected Tetra Pak’s argument that the tie was objectively justified due to technical grounds, public health as well as product liability

353

Hilti (n 5), para 3. Eurofix-Bauco v Hilti (Cases No IV/30.787 and 31.488) Commission Decision 88/138/EEC [1987] OJ L65/19. 355 Hilti (n 5), para 95. 356 Hilti (n 5), para 100. 357 Hilti (n 5), para 101. 358 Hilti (n 5), paras 115–117. 359 HILTI (n 345). 360 Tetra Pak II (Chap. 1, n 27) and Tetra Pak (n 81). 361 To this effect, see below Sect. 4.4.4.2. 362 Whish and Bailey (2021), p. 727. 363 Tetra Pak II (Chap. 1, n 27), para 135. 364 Ibid. 354

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considerations.365 The GC, while referring to the principles established as regards safety reasons or reasons of public health protection in its decision in Hilti,366 it held that ‘it is clear that the tied-sale clauses [. . .] went beyond their ostensible purpose and were intended to strengthen Tetra Pak’s dominant position by reinforcing its customers’ economic dependence on it’.367 The subsequent appeal of Tetra Pak was dismissed in its entirety; thus the ECJ upheld the GC’s decision.368 The case in Microsoft369 concerned a set of abusive practices implemented by Microsoft Corp (‘Microsoft’), holding market power on the market for client PC operating systems as well as the market for work group server operating systems, by which the latter had abused its dominant position. Among other abusive practices (i.e. a refusal to supply of necessary information, that is, technical documentation, not however, access to the Windows software code) Microsoft had tied its Windows Media Player (‘WMP’) with its Windows Operating System (‘WOS’). As a consequence, Microsoft was able to expand its dominant position and ‘to significantly weaken competition on the media player market by foreclosing this market and artificially reducing the incentives of media companies, software developers and content providers to develop competing media players’.370 The basis for the Commission’s finding of a tying abuse was fourfold:371 (i) the dominant position of Microsoft, inter alia, in the market of PC operating systems, (ii) the distinct nature of the two combined products, that is, the WMP and the WOS, (iii) the coercion element, which leaves the customers without choice but to obtain the WOS together with the WMP, and (iv) the potential of the tying practice to foreclose competition. Hence, in light of the fourth criterion, the Commission explained in detail ‘why the tying in this particular case is liable to foreclose competition’.372 In essence, in Microsoft it thus established the tying practice’s actual foreclosure effects. The GC upheld the Commission’s decision and confirmed the constituent elements for qualifying the tying practice as an abuse.373 Moreover, it explicitely stressed that the Court observes that, while it is true that neither [Article 102(2)(d) TFEU] nor, more generally, Article [102 TFEU] as a whole contains any reference to the anticompetitive effect

365

Tetra Pak II (Chap. 1, n 27), para 138 et seq. Hilti (n 5). 367 Tetra Pak II (Chap. 1, n 27), para 140. 368 Tetra Pak (n 81). 369 Microsoft (n 81). 370 Ezrachi (2018a), p. 305. 371 Microsoft (Case COMP/C-3/37.792) Commission Decision 24 May 2004 (Decision Summary published 2007 OJ L32/23) para 24 (Microsoft COMP summary). 372 Microsoft COMP summary (n 369), para 28. 373 Microsoft (n 81), para 859. 366

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of bundling, the fact remains that, in principle, conduct will be regarded as abusive only if it is capable of restricting competition374 (emphasis added).

The GC goes on claryfing that the Commission considered that, in light of the specific circumstances of the present case, it could not merely assume, as it normally does in cases of abusive tying, that the tying of a specific product and a dominant product has by its nature a foreclosure effect. The Commission therefore examined more closely the actual effects which the bundling had already had on the streaming media player market and also the way in which that market was likely to evolve375 (emphasis added).

Hence, contrary to earlier cases concerning tying practices of dominant undertakings, like Hilti376 or Tetra Pak,377 the Commission, in its administrative proceedings, arguably abstained from a strict per se approach. Rather, by taking into consideration the measure’s actual or likely foreclosure effects, it took into account all the circumstances of the case, as it acknowleged that ‘[th]ere are indeed circumstances relating to the tying of WMP which warrant a closer examination of the effects that tying has on competition in this case’.378 As a consequence, it basically adopted an effects-approach towards Microsoft’s tying practice by conducting an actual analysis of the measure’s effects. In a nutshell, the GC upheld the Commission’s decision and confirmed its approach; however, it did not abolish the per se approach as regards tying in general (for further details see immediately below Sect. 4.4.3.3).

4.4.3.3

Analysis of the Case Law

In light of the above, the approaches in Hilti379 and Tetra Pak380 were, undoubtedly, fairly formalistic. Hence, a consideration of all the circumstances did not appear to be relevant for the establishment of tying being a prima facie abuse of Article 102 TFEU. Rather, the identification of a tying practice itself was enough to establish its anticompetitive aim or purpose, that is, an anticompetitive object. As a consequence, anticompetitive effects were presumed. Moreover, interestingly, in both cases, safety reasons were, inter alia, rejected by the Court to justify the tying practice. Such approach appears to be in line with what the ECJ held in the context of Article 101 TFEU in, for example, IAZ International,381 where the legitimate aim claimed by the undertakings in order to justify the restrictive agreements were public 374

Microsoft (n 81), para 867. Microsoft (n 81), para 868. 376 Hilti (n 5) and HILTI (n 345). 377 Tetra Pak II (Chap. 1, n 27) and Tetra Pak (n 81). 378 Microsoft COMP (n 49), para 841. 379 Hilti (n 5) and HILTI (n 345). 380 Tetra Pak II (Chap. 1, n 27) and Tetra Pak (n 81). 381 IAZ International (Chap. 3, n 24). 375

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health considerations. However, as stressed elsewhere,382 ‘“the fact that the agreement also pursue[d] the objective of protecting public health [. . .]” could not free it from being restrictive by object’.383 Hence, in particular the case in Tetra Pak proves that a practice ‘is presumed to serve an anticompetitive purpose or object is understood to mean that, by definition, it is also capable of having such effects’.384 A principle which is not only very well established in the context of Article 101 TFEU and object restrictions, but the EU courts have also referred to in later Article 102 decisions such as, for example, Michelin II385 and Intel.386 However, as an anticompetitive object (in the context of Article 101 TFEU) requires a context analysis, that is, a consideration of the legal and economic context within which a measure occurs, it appears reasonable to criticise the decisions in Hilti and Tetra Pak for their being formalistic, as the latter judgements contain almost no consideration of the circumstances of the specific cases. However, the Commission decision in Microsoft387 provides for a change in paradigm and thus a more nuanced approach as regards tying practices. The Commission basically distanced itself from the ‘straight’ presumption of harmfulness and acknowledged that there might be specific circumstances related to the tying practice concerned, ‘which warrant a closer examination of the effects that tying has on competition’.388 The reason for this lay, inter alia, with the fact that in the specific circumstances in Microsoft, users could and did, to a certain extent, obtain, even for free, third party media players through the Internet.389 Hence, the Commission concluded that there were ‘therefore indeed good reasons not to assume without further analysis that tying WMP constitutes conduct which by its very nature is liable to foreclose competition’.390 As a concequence, it demonstrated why tying in Microsoft had the potential to foreclose competition and put the maintenance of an effective competition structure at risk.391 However, it is my view that with its decision in Microsoft, the Commission has not abolished its by object approach as regards tying in general. Rather, the Commission proved an acknowledgment of the necessity to conduct a context analysis in order to establish an object abuse. Hence, before concluding that it wanted, in the specific case in Microsoft, to abstain from its per se approach as regards tying and thus show an actual foreclosure effect, the Commission took account of all the relevant circumstances surrounding Microsoft’s tying practice. Put differently, had the Commission not undergone a context

382

Zelger (2020b), p. 274. Ibid. 384 Colomo (Chap. 1, n 9, 2004), p. 15. 385 Michelin II (Chap. 1, n 49), para 241. 386 INTEL (Chap. 1, n 43), para 203. 387 Microsoft COMP (n 49). 388 Microsoft COMP (n 49), para 841. 389 Ibid. 390 Microsoft COMP (n 49), para 841. 391 Microsoft COMP (n 49), para 842. 383

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analysis, that is, a consideration of the context within which the respective tie occurred, it would have probably sticked to the strict per se approach of the earlier case law and qualified the tie as prima facie abusive, as it would not even have identified the specific circumstances warranting a closer examination of the tie’s effect. The GC, in principle, confirmed the Commission’s decision. Moreover, it did indeed not abolish the object approach as regards tying either. However, it arguably clarified the need that per se abusive practices must have the potential to have negative effects. In the words of the GC, ‘in principle, conduct will be regarded as abusive only if it is capable of restricting competition’392 (emphasis added). This principle, which has most recently been reiterated by the ECJ in its preliminary ruling decision in Generics393 implies the necessity to take account of the likely effects of a measure in the establishment of an object abuse. Hence, borrowed from Colomo, ‘a practice is not abusive within the meaning of Article 102 TFEU if it is incapable of having restrictive effects’.394 As explained above,395 this can only be done by considering the actual circumstances within which a measure occurs as well as its possible impact from an economics perspective to this effect, as, as a matter of principle, only if a measure is capable to produce anticompetitive effects on the market, a qualification of the latter as object restriction seems justified.396 Thus, argumentum e contrario, the potential, likely or possible effects of a practice must, in light of all the circumstances within which the latter occurs, be taken into consideration in order to qualify a practice as abusive by object. Moreover, in Microsoft the GC’s actual analysis of the context within which the tying occurred, that is, its consideration of all the arguments, legal as well as economic, as regards the criteria necessary for the tying practice to qualify as abuse, was very detailed and extremely thorough.397 Furthermore, the GC’s approach seems also compliant with the Commission decision, as also the latter, before having decided to actually show the anticompetitive foreclosure effects of Microsoft’s tying practice, took into consideration all the circumstances.

392

Microsoft (n 81), para 867. Generics (Chap. 3, n 221), para 154. 394 Colomo (n 14). 395 See above under Sect. 3.1 et seq. 396 See above under Sect. 3.1 et seq. 397 O’Donoghue and Padilla (2013), p. 613. 393

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4.4.4

Predatory Pricing

4.4.4.1

General Remarks

Effects and Article 102 TFEU

Predatory pricing is, described in its simplest terms, selling below cost. Hence, a result of predation is basically the offering of low prices to customers. Admittedly, against the backdrop of the idea of fierce competition and low prices, it appears—at first sight—to be odd to condemn such practice from a competition law perspective. However, the concern with selling at less than cost if done so by a dominant undertaking is the potential foreclosing effect of actual or potential competitors, thereby strengthening or maintaining market power and, consequently, causing consumer harm in the long term.398 Hence, the concern with predatory price cutting in the context of Article 102 TFEU lies with market foreclosure as well as with the creation of a barrier to entry, notwithstanding the fact, however, that competition on the merits may cause rivals, that are less efficient than the dominant undertaking, to leave a market.399 Moreover, it is uncontested and broadly acknowledged that dominant firms, like every other company offering goods or services on a market, are and must be entitled to compete on price.400 Moreover, price competition is, undoubtedly, a fundamental tenet of our understanding of competition law and policy.401 However, borrowed from the ECJ in AKZO, ‘not all competition by means of price can be regarded as legitimate’.402 Hence, ‘[t]he law on predatory price cutting has to tread a fine line between condemning dominant firms for competitive price cutting on the one hand while not condoning unreasonable exclusionary predation on the other’.403 From an economics perspective, predation appears to be a heavily debated and controversial topic.404 However, consensus exists as regards two core tenets, that is, (i) the usefulness of cost benchmarks for assessing the predatory nature of prices,405 as well as (ii) the requirement to appreciate the ‘strategic context’406 of the pricing, that is, the necessity to consider the respective context within which the price occurs and to not apply the law of predation in the abstract by using the cost benchmark as the exclusive yardstick only. With respect to possible cost benchmarks, there exist different approaches as regards which set of measurement of costs should be applied. An overview of the

398

Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 63. Post Danmark I (n 83), para 22. 400 Whish and Bailey (2021), p. 780. 401 O’Donoghue and Padilla (2013), p. 291. 402 AKZO (Chap. 1, n 40), para 70. 403 Whish and Bailey (2021), p. 780. 404 O’Donoghue and Padilla (2013), p. 292 with further references to the vast amounts of literature regarding the economics debate. 405 O’Donoghue and Padilla (2013), p. 292. 406 O’Donoghue and Padilla (2013), p. 293. 399

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various cost benchmarks used in the context of the law of abuse of dominance in the EU provides, inter alia, the Commission Guidance on Article 102 Enforcement Priorities.407 Hence, a reference to the following cost benchmark measurements can be found in the case law of the EU courts as well as the administrative proceedings of the Commission: (i) average variable cost (‘AVC’), that is, the total variable cost per unit of output; (ii) average total cost (‘ATC’), that is, the average cost per unit of output taking into account all fixed and variable costs; (iii) average avoidable cost (‘AAC’), that is, ‘the average of the costs that could have been avoided if the company had not produced a discrete amount of (extra) output’,408 (iv) long-run average incremental cost (‘LRAIC’), that is, ‘the average of all the (variable and fixed) costs that a company incurs to produce a particular product’409; as well as (v) above average incremental cost (‘AIC’) as variant of LRAIC, assessed by the Court in its preliminary ruling in Post Damark I,410 as it referred to the benchmarks provided in the main proceedings. Interestingly, whereas the test established by the ECJ in AKZO411 suggests the use of AVC, the Commission appears to favour the use of AAC as a benchmark for its price-cost analyses.412 This is owed to the fact that the AAC standard not only includes the average of variable costs incurred over the period of time during which a dominant undertaking charges predatory prices, but also considers any fixed costs. By way of example, a company with market power engaging in predatory price cutting would not only have to incur variable costs which increase with each single unit produced, but also part of the fixed costs, such as, for example, lease and rental payments, insurance and interest payments as well as costs for machinery or other means of production. As a consequence, notwithstanding the fact that in some cases AVC and AAC might be the same, there are circumstances, however, where AAC could indeed be higher than AVC. Admittedly, from an economics perspective, the Commission’s approach thus appears to be compelling.413 However, it is nevertheless bound by the case law of the Court. Yet, as will be shown in the following, regardless of the debate concerning which cost benchmark provides the best means to adequately assess the predatory nature of a dominant undertaking’s pricing policy, the ECJ, on the basis of the principles provided by economics, has developed a sound legal framework in order to assess

407

Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38). Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 26 note 2. 409 Ibid. 410 Post Danmark I (n 83). 411 AKZO (Chap. 1, n 40). 412 Guidance on Article 102 Enforcement Priorities (Chap. 1, n 38), para 26. 413 Whish and Bailey (2021), p. 787. 408

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whether prices charged by a dominant undertaking indeed qualify as predatory by object or whether a further analysis of the measure’s effects is required. With respect to the extent of the consideration of all the circumstances necessary, the framework provided is threefold. Whereas the Court developed a standard which provides for a rebuttable presumption of unlawfulness (selling below AVC), that is, a fairly strict per se rule on the one hand, there is a presumption of lawfulness and thus the requirement of an actual proof of effects on the other hand (selling above ATC). Cases providing for circumstances occurring somehow in between (pricing above AVC but below ATC) require a deeper analysis of the actual circumstances and facts in order to establish a prima facie abuse.

4.4.4.2

The Case Law

The landmark case of the ECJ in AKZO414 concerned a predatory price cutting strategy of AKZO Chemie BV (‘AKZO’), the dominant undertaking in the market for organic peroxides, in the flour additives sector in order to drive one of its rivals, namely Engineering and Chemical Supplies (Epsom & Gloucester) Ltd. (‘ECS’), out of the market. In AKZO, the Court developed the legal framework within which pricing practices shall be analysed in order to determine their predatory nature. Important to mention in this respect: The Court’s developed framework soundly echoes economics at the base of pricing policies. In AKZO the Court, while acknowledging that not all price competition can be considered legitimate,415 held that ‘prices below average variable costs [. . .] by means of which a dominant undertaking seeks to eliminate a competitor, must be regarded as abusive [as] [a] dominant undertaking has no interest in applying such prices except that of eliminating competitors [. . .]’.416 In this context, the abuse can be presumed as with such pricing practice, the dominant undertaking generates a loss with each and every single sale.417 Hence, the standard established in AKZO is a rebuttable presumption of the existence of abusive predatory pricing provided the respective dominant undertaking concerned sells below AVC. Moreover, the ECJ established a second standard to determine the predatory nature of a price by stressing that ‘prices below average total costs, that is to say, fixed plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor’.418 In this context, the Court furthermore emphasised that ‘[s]uch price can drive from the market undertakings which are perhaps as efficient as the dominant undertaking but which, because of their smaller financial resources, are incapable of withstanding the 414

AKZO (Chap. 1, n 40). AKZO (Chap. 1, n 40), para 70. 416 AKZO (Chap. 1, n 40), para 71. 417 Ibid. 418 AKZO (Chap. 1, n 40), para 72. 415

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competition waged against them’.419 Hence, prices above AVC but, however, below ATC may constitute an abuse, provided the dominant undertaking intended to eliminate a competitor. Hence, in such cases the consideration of all the circumstances within which the arguably harmful pricing practice occurs is inevitable. Moreover, selling above ATC is considered lawful.420 With respect to the facts in Tetra Pak,421 as the case concerned a combination of both, that is, tying practices as well as predatory price cutting, as regards the former practice, reference shall be made to Sect. 4.4.3.2. However, apart from the tying, Tetra Pak had abused its dominant position by charging predatory prices for its non-aseptic cartons in Italy.422 The Court basically referred to the standards established in AKZO423 and concluded that Tetra Pak’s pricing strategy was of predatory nature as the purpose of the losses generated by the price cutting ‘cannot reflect any economic rationale other than ousting’424 its competitor and aimed to ‘strengthen Tetra Pak’s position on the market in non-aseptic cartons where it already had a leading position [. . .] thereby weakening competition on those markets’.425 As a consequence, the ECJ qualified Tetra Pak’s price cutting as an abuse of Article 102 TFEU.426 Moreover, the Court explicitly held that there was no requirement to show that the dominant market player had indeed the chance to recoup the losses generated.427 This principle (no need of recoupment of losses) was reiterated and approved by the EU courts in France Télécom.428 The case concerned Wanadoo Interactive (‘Wanadoo’), a subsidiary of France Télécom, which was dominant in the market for ASDL-based internet access services.429 Wanadoo was fined for a breach of Article 102 TFEU due to engaging in predatory price cutting for its internet access services. Interestingly, the Commission in its decision applied the standards as established in AKZO, however, arguably, with ‘greater flexibility’.430 Hence, apart from the fact that Wanadoo had charged prices below AVC for a significant period, the Commission also took into consideration the latter’s strategic rationale as well as

419

Ibid. Colomo (2016), p. 717. 421 Tetra Pak II (Chap. 1, n 27), upheld by the ECJ in Tetra Pak (n 81). 422 Tetra Pak II (Chap. 1, n 27), para 142 et seq. 423 Tetra Pak II (Chap. 1, n 27), paras 148–149. 424 Tetra Pak II (Chap. 1, n 27), para 150. 425 Ibid. 426 Tetra Pak II (Chap. 1, n 27), para 150. 427 Ibid, Tetra Pak (n 81), para 44. 428 Case T- 340/03 France Télécom SA v Commission [2007] ECLI:EU:T:2007:22 (France Télécom GC), paras 227; Case C-202/07 P, France Télécom SA v Commission [2009] ECLI:EU:C:2009:214 (France Télécom), para 30 et seq. 429 France Télécom (n 426) para 1. 430 Ezrachi (2018a), p. 242. 420

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the impact or effect of the pricing strategy on competition.431 In its appeal decision the GC sticked to the settled case law and rejected arguments that an actual proof of the predatory practice’s effect was necessary.432 It furthermore stressed and reiterated its principle as established in Michelin II433 that ‘for the purposes of applying [Article 102 TFEU], showing an anti-competitive object and an anti-competitive effect may, in some cases, be one and the same thing’.434 However, interestingly, whereas in Michelin II,435 the GC held that establishing the object an the anticompetitive effect are one and the same thing, in France Télécom the GC slightly adapted and mitigated its original statement by emphasising that such establishment of an object and the anticompetitive effect may be one and the same thing.436 Moreover, it also held that an actual recoupment of the losses generated is not necessary to establish predation.437 The ECJ dismissed the appeal and upheld the GC decision.438 Another important case in the area of predatory pricing is Post Danmark I,439 as the ECJ provided, additionally to its standards established in AKZO, a complementary analytical framework and set of cost benchmarks.440 Moreover, the case provides for an excellent example as regards the context specific outcome in abuse of dominance cases. In other words, similar to what holds to be true in the context of Article 101 TFEU,441 depending on the context and circumstances of a case, a certain practice can be considered both, either restrictive or abusive by object or by effect, depending on the very specifics and facts of each single case (remember the example of information exchange to this effect).442 In case of predation, the latter is measured by cost benchmarks. A fact which serves well finding the dividing line between object and effect infringements of competition. The case concerned a request for preliminary ruling of the Danish Supreme Court as regards selective price reductions of Post Danmark A/S (‘Post Danmark’), which enjoyed a legal monopoly in the delivery of addressed letters and parcels not exceeding a certain weight through a national network.443 Post Danmark charged to its competitor’s former customers rates that were different from those it charged to

431

O’Donoghue and Padilla (2013), p. 226. France Télécom GC (n 426), para 195. 433 Michelin II (Chap. 1, n 49), para 241. 434 France Télécom GC (n 426), para 195. 435 Michelin II (Chap. 1, n 49), para 241. 436 France Télécom GC (n 426), para 195. 437 France Télécom GC (n 426), para 227. 438 France Télécom (n 426). 439 Post Danmark I (n 83). 440 Ezrachi (2018a), p. 247. 441 See above Sect. 3.3. 442 See above Sect. 3.3.1.2 (in the context of Article 101 TFEU) as well as Sects. 4.1.1 and 4.4.1.2 (used as example contrasted with abusive practices in the conetx of Article 102 TFEU). 443 Post Danmark I (n 83), paras 4 et seq. 432

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its pre-existing customers.444 Moreover, Post Danmark was not capable to reasonably explain the significant differences in the rates charged thereby justifying its pricing policy.445 In its judgement, the ECJ basically referred to the benchmarks used in the main proceedings, that is, ATC and AIC. It furthermore held that prices below ATC and above AIC may be abusive if they exclude or are likely to exclude competitors and have no objective justification.446 Hence, in the circumstances in Post Danmark I the Court considered it necessary to prove actual anticompetitive effects. Put differently, and borrowed from the ECJ, ‘in order to assess the existence of anti-competitive effects in circumstances such as those of that case, it is necessary to consider whether that pricing policy, without objective justification, produces an actual or likely exclusionary effect, to the detriment of competition, and thereby, of consumers’ interest’.447 However, the Court did by no means abolish the presumption of predation constituting a prima facie abuse according to the framework as established in AKZO.448

4.4.4.3

Analysis of the Case Law

With its decision in AKZO, the ECJ developed a framework and the standards necessary to be applied in order to determine the predatory nature of prices. This framework is tripartite: Firstly, there is a rebuttable presumption of an abuse provided the respective dominant undertaking concerned sells below AVC. Undoubtedly, this standard provides for a fairly strict per se rule. Secondly, prices above AVC but, however, below ATC may constitute an abuse, provided the dominant undertaking intended to eliminate a competitor. Hence, a consideration of the wider circumstances within which the pricing practice occurs and, in particularly, of those which serve as proof as regards the dominant undertaking’s intent, is inevitable. Thirdly, selling above ATC is considered lawful.449 Hence, in order to qualify the latter as abuse, actual or likely effects of a price reduction must be proved. Such framework is not only based on, arguably sound, economics, but also serves as useful yardstick in order to draw a concise dividing line between object and effect abuses. Moreover, the Court’s reasoning in AKZO reminds of principles established in the context of object restrictions and Article 101 TFEU: ‘A dominat undertaking has no interest in applying such prices except that of eliminating competitors’450 (emphasis added). Put differently, and borrowed from Colomo, a practice is presumed to serve

444

Post Danmark I (n 83), para 8. Ibid. 446 Post Danmark I (n 83), para 44. 447 Post Danmark I (n 83), para 44. 448 Post Danmark I (n 83), paras 27–29. 449 Colomo (2016), p. 717. 450 AKZO (Chap. 1, n 40), para 71. 445

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an anticompetitive purpose if ‘it has no plausible explanation other than the desire to eliminate competition’.451 Hence, as the pricing strategy in AKZO was irrational for a firm to adopt, the condemnation of the latter as prima facie abuse appeared appropriate.452 This approach is, in my view, gratifying from a consistency perspective and considering the aim of an overall coherent framework for both, Article 101 and 102 TFEU. Moreover, considering the legal framework and the respective standards, that is, the cost benchmarks used, in order to assess the prima facie abusive nature of a pricing policy, it also provides for legal certainty. This is owed to the fact that such framework and benchmarks provide for an easy-to-handle measurement for identifying the dividing line between practices considered prima facie abusive from those requiring the demonstration of anticompetitive effects and a detrimental impact on competition. The decisions in Tetra Pak453 are interesting as they clarified that there is no need of showing an actual recoupment of losses generated by the predatory price cutting, a principle which was reiterated and emphasised in the EU courts’ decisions in France Télécom.454 The GC decision in France Télécom455 is furthermore of interest as it reiterated its tenet established in Michelin II,456 however in a slightly adapted and mitigating form stating that the object and anticompetitive effect of a practice may be, instead of stressing that the latter are, one and the same thing.457 Moreover, the judgement in Post Danmark I458 provided not only a complementary analytical framework additional to the standards as developed in AKZO.459 Rather, it perfectly demonstrates the context specific outcome that not only occurs in the context of Article 101 TFEU decisions and practices,460 but also in abuse of dominance cases. Furthermore, as already emphasised, such standards as developed in AKZO and Post Danmark I provide useful yardsticks in defining the dividing line between by object and effect abuses. In addition, it is my view that they prove that finding the ‘dividing line’ can be a pretty straightforward exercise in case the use of cost benchmarks and pricing models is possible, that is to say, they are usefool tools to measure a practice from an abuse of dominance law perspective.

451

Colomo (Chap. 1, n 9, 2004), p. 14. Ibid. 453 Tetra Pak II (Chap. 1, n 27), upheld by the ECJ in Tetra Pak (n 81). 454 France Télécom GC (n 426); France Télécom (n 426). 455 France Télécom GC (n 426). 456 Michelin II (Chap. 1, n 49), para 241. 457 France Télécom GC (n 426), para 195. 458 Post Danmark I (n 83). 459 Ezrachi (2018a), p. 247. 460 See above Sect. 3.3. 452

4.4 Object Abuses: Case Law, Context Analysis and Context-Specific Outcomes

4.4.5

Removal of a Railway Track

4.4.5.1

The Case: Lithuanian Railways

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One recent case and ‘perhaps the most blatant abuse the European Commission has ever considered’,461 provides Lithuanian Railways.462 The case concerned the removal of a railway track connecting Lithuania and Latvia by Lietuvos geležinkeliai AB, the Lithuanian national railway company (‘Lithuanian Railways’) managing, inter alia, Lithuanian railway infrastructure (being the property of the Lithuanian State).463 Lithuanian Railways did so, as one of its customers, namely AB Orlen Lietuva (‘Orlen’), a company specialised in refining crude oil and distributing refined oil products,464 redirected its freight from Lithuania to Latvia by using the services of a rail operator other than Lithuanian Railways.465 The engagement of the other rail operator was a consequence of a commercial dispute between Lithuanian Railways and Orlen regarding the rates paid by Orlen for the transport of its oil products.466 As a consequence of the removal of the track, Orlen would need to use a much longer route to reach Latvia. Moreover, the argument of Lithuanian Railways that the removal was due solely to the occurrence of a deformation of the track was not accepted by the GC, as the deformation alone could not have justified the removal of the entire rail track467 in great haste.468 Hence, one could argue that the justification put forward by Lithuanian Railways appeared to be a ‘sham’.

4.4.5.2

Analysis

The practice in Lithuanian Railways,469 considering, as emphasised by the GC470 and confirmed by the ECJ,471 the respective factual and legal circumstances, was a fairly blatant abuse and thus considered inherently anticompetitve.472 Provocatively speaking, as Colomo puts it, it is hard to find ‘other examples of this kind (besides

Pablo Ibáñez Colomo, ‘Lithuanian Railways: the most straightforward abuse case ever?’, Chillin’Competition Blog, available at accessed 6 February 2023; Colomo (n 112). 462 Lithuanian Railways (Chap. 1, n 42); Lithuanian Railways ECJ (Chap. 1, n 42). 463 Lithuanian Railways (Chap. 1, n 42), para 1. 464 Lithuanian Railways (Chap. 1, n 42), para 3. 465 Lithuanian Railways (Chap. 1, n 42), para 10. 466 Lithuanian Railways (Chap. 1, n 42), para 9. 467 Lithuanian Railways (Chap. 1, n 42), paras 114 et seq. 468 Lithuanian Railways (Chap. 1, n 42), para 219. 469 Lithuanian Railways (Chap. 1, n 42). 470 Lithuanian Railways (Chap. 1, n 42), para 224. 471 Lithuanian Railways ECJ (Chap. 1, n 42), paras 106 et seq. 472 Colomo (n 112). 461

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that of a company blowing up a rival’s plant, which is a classic)’.473 As a consequence, the dismantling was ‘deemed prima facie abusive without it being necessary to carry out an analysis of effects (just like cartels and predatory pricing within the meaning of AKZO)’.474 In other words, in light of all the circumstances in Lithuanian Railways, there was just no other plausible explanation for the dismantling of the railway track than the restriction of competition. Admittedly, the case in Lithuanian Railways is one of the very rare occasions where a practice is not capable to, in principle, have both, that is, an anticompetitive as well as a procompetitive effect or impact on competition. Rather, that the measure in Lithuanian Railways amounts to a naked abuse appears to be quite obvious. Hence, the case arguably serves, as does the ECJ ruling in Generics,475 as proof for the existence of a category of ‘by object abuses’.476

4.5

The Concept of Appreciability, De Minimis and Article 102 TFEU

As already indicated, the fact that effects are not appreciable provides for a legitimate reason to fall outside the scope of Article 101(1) TFEU.477 However, as explicitly stated by the ECJ in Post Danmark II,478 reiterated by the GC in its decision in Intel,479 and most recently confirmed by the ECJ in its decision in MEO,480 a de minimis threshold does not exist in the context of Article 102 TFEU. In other words, and borrowed from the ECJ, ‘fixing an appreciability (de minimis) threshold for the purposes of determining whether there is an abuse of a dominant position is not justified’.481 Hence, non-appreciability of effects is not a valid argument rendering Article 102 TFEU inapplicable.482 However, the Court’s decision in MEO483 arguably indicates a softening of the rule that appreciability is not of relevance in the context of abuse of dominance law. Whereas the ECJ, basically referring to the principle

473

Colomo (n 459). Colomo (n 112). 475 Generics (Chap. 3, n 221), para 151. 476 Colomo (n 112). 477 As the concept of appreciability (see Sects. 3.8 and 3.8.1) being enshrined and echoed in the De Minimis Notice of the Commission (see Sects. 3.8 and 3.8.2) is a very-well recognised one. 478 Post Danmark II (n 80), paras 72–73. 479 Intel (Chap. 1, n 52), para 116. 480 Case C-525/16 Meo – Serviços de Comunicações e Multimédia [2018] ECLI:EU:C:2018:270 (MEO) para 29. 481 Ibid; Post Danmark II (n 80), para 73. 482 Post Danmark II (n 80), paras 72–73. 483 MEO (n 477), para 29. 474

4.5

The Concept of Appreciability, De Minimis and Article 102 TFEU

131

established in Post Danmark II, acknowledged that the establishment of a de minimis threshold as yardstick is not justified in abuse of dominance cases,484 as the structure of competition is already weakened by the presence of a dominant undertaking.485 However, it also emphasised that it remains ‘in some circumstances’486 possible that a practice is indeed ‘not capable of having any effect on the competitive position of that operator’.487 Moreover, as regards the measure’s anticompetitive effect, the Court stressed that there is ‘no need to show that it is of a serious or appreciable nature’.488 As a consequence, despite the fact that there does not exist a non-appreciability presumption in the context of Article 102 TFEU, the providing for evidence of an actual lack of foreclosure effects remains possible and, if proved successfully, it renders Article 102 TFEU inapplicable.489 Such argument can also be inferred from the ECJ’s judgement in Intel490 where the Court acknowledged the possibility that a practice might not be capable of producing any anticompetitive effects at all.491 Put differently, the ECJ basically clarified that where the dominant undertaking concerned submits evidence proving that a measure was not capable of having the alleged foreclosure effects, the latter must be taken into consideration in the decision-making process of the Commission or the respective competent court. Consequently, if a lack of effects or impact can indeed be shown, that is to say in other words if the non-appreciability of the practice at stake can be proven successfully, such finding would, as a consequence, render Article 102 TFEU inapplicable. Moreover, as the de minimis presumption does not apply to object restriction of Article 101 TFEU, it shall be emphasised that the framework for assessment to this effect is indeed not that different, as in both cases it is arguably possible to proof a measure’s lack of effects and thus its non-appreciable nature. Admittedly, from a consistency perspective and the aim of a coherent overall framework, however, it is my view that it would indeed be appropriate to consider appreciability more explicitly also in the context of Article 102 TFEU. Put differently and borrowed from Whish and Bailey who advocate for the application of a de minimis threshold also in the context of Article 102 TFEU, the consideration of non-appreciability in the context of Article 102 TFEU cases appears reasonable and

484

Ibid. Post Danmark II (n 80), paras 72–73. 486 MEO (n 477), para 34. 487 Ibid. 488 Post Danmark II (n 80), para 74. 489 Arguing similarily, however, on the basis of the GC’s judgement in Intel (Chap. 1, n 52), Whish and Bailey (2018), p. 207; however slightly more cautious, arguably taking a more nuanced/ differentiated stance: Whish and Bailey (2021), p. 208. 490 Ibid. 491 INTEL (Chap. 1, n 43), para 138. 485

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appropriate as ‘the law ought not to concern itself with trivial or insignificant effects on competition’.492

4.6

Conclusions

It has been shown that there is indeed a differentiation of object and effect infringements also in the context of Article 102 TFEU. Put differently, and borrowed from the ECJ in Continental Can,493 ‘Articles [101] and [102] cannot be interpreted in such a way that they contradict each other, because they serve to achieve the same aim’.494 Hence, the underlying legal framework for the assessment of a measure is a uniform one as regards both Treaty competition provisions, that is, Article 101 and 102 TFEU. Moreover, also the framework for the assessment of object infringements is uniform. Hence, the principles to be considered when assessing unilateral measures under the law of abuse of dominance qualifying as prima facie abusive are consistent with the principles established in the context of bilateral behaviour and Article 101 TFEU. Hence, with respect to both Treaty competition provisions, it is necessary to conduct a context analysis, that is, to take account of all the circumstances or the legal and economic context within which a certain measure occurs. Arguably, such consideration of all the circumstances has, with respect to the majority of categories of object abuses (an exemption provides tying), ever since been necessary and required also in the context of Article 102 TFEU cases. Notwithstanding the fact though that it was held to be necessary rather implicitly in the early case law. However, the fact that the EU courts have not explicitly referred to such consideration being essential cannot alter the finding that they actually took account of the circumstances within which a measure occured. Hence, the notion of a context analysis and, consequently, also the role and meaning of effects in the context of object abuses or restrictions seems to be a uniform one with respect to both Treaty competition provisions. This is even more so as in recent years the language used by the EU courts in 102 TFEU cases appears to have adjusted and resembles more and more the language and diction used in the context of Article 101 TFEU case law. Therefore, although actual effects, understood in the sense of effects that have actually materialised when conducting a full effect-analysis of a measure on the respective relevant market, do not play a role in the context of object abuses, a context analysis which is somehow guided by the likelihood of detrimental effects a

492 Whish and Bailey (2018), p. 207; furthermore, interestingly, the England and Wales High Court of Justice (Chancery Division) has acknowledged the need that effects are ‘serious or appreciable’, given ‘the effect is on a separate market where the undertaking is not dominant’. See High Court of Justice [2016] EWHC 253 (Ch) para 96 et seq. 493 Continental Can (Chap. 2, n 65). 494 Continental Can (Chap. 2, n 65), para 25.

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Conclusions

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measure might have considering its respective legal and economic context is, as it is in the context of Article 101(1) TFEU, also necessary. By the same token, to provide for objective justification is also possible with respect to object infringements in the context of both, Article 101 and 102 TFEU: With regard to Article 101 TFEU by means of its paragraph 3; with regard to Article 102 TFEU, such principle was established by the case law of the EU courts.495 However, a small difference lies with the concept of non-appreciability of a measure’s effects. Whereas in the context of Article 101 TFEU, there does exist a threshold for the presumption of de minimis, such presumption does not exist in the context of Article 102 TFEU.496 Nonetheless, as the de minimis presumption does not apply to object restriction of Article 101 TFEU either,497 it appears that the framework is indeed not that different, as it is, in both cases, arguably possible to prove a measure’s lack of effects and thus its non-appreciable nature, thereby rendering either of the Treaty competition provisions inapplicable. Furthermore, as the analysis of the case law showed, there is such thing as a ‘context-specific’ outcome also in abuse of dominance cases. Hence, minor differences in the facts might provide for a different outcome in the assessment of arguably similar practices. Predation and the respective parameters and tests used for assessing a measure provide only one example to this effect. Moreover, also quantity rebates which, however, upon closer analysis of the respective relevant circumstances within which they occure, qualify as loyalty rebates by means of a loyalty or fidelity-inducing effect, serve as prove for the context-specific outcome of abuse of dominance cases. By the same token, it should be emphasised that the fact that a finding of the dividing line between object abuses on the one hand and practices which are rather treated according to their actual effects on the other hand, is, at least with respect to some measures, anything but a simple exercise. Notwithstanding the fact that as regards some practices, such as, for example, selling below cost (i.e. abusive predation) in the context of Article 102 TFEU or naked price fixing in the context of Article 101 TFEU, such differentiation can be done by the application of clear parameters and tests; as regards other practices, however, the dividing line appears to be rather blurry. Examples of the latter in the context of Article 102 TFEU provide loyalty rebates. Hence, similar to what has been argued with respect to reverse payment settlement agreements and Article 101 TFEU, the same argument applies to loyalty rebates in the context of unilateral behaviour and Article 102 TFEU. A last thing worth mentioning is the role of policy considerations and enforcement priorities in the context of abuse of dominance cases. Arguably, similar to what

495 For example, United Brands (n 85), para 184; British Airways (Chap. 1, n 50), para 69; Post Danmark I (n 83), para 40 and the respective case law cited. Most recently see INTEL (Chap. 1, n 43), para 140. 496 Post Danmark II (n 80), paras 72–73; Intel (Chap. 1, n 52), para 116; MEO (n 477), para 29. 497 See to this effect the ECJ’s judgement in Expedia (Chap. 3, n 270) as well as my remarks under Sect. 3.8. The Concept of Appreciability.

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is true in the context of bilateral practices and Article 101 TFEU, also with respect to Article 102 TFEU cases, there seems to be a slight preference of the Commission to pursue ‘object abuses’.498 Moreover, such trend is arguably also echoed in more recent Commission cases, as although the Commission actually sought to provide evidence regarding actual anticompetitive-effects in various cases (such as, for example, Microsoft,499 Intel,500 Tomra501 as well as in Google Shopping502) ‘it considered that it was not legally obliged to do so’.503 Such arguing seems familiar as it has also occurred in the context of Article 101(1) TFEU and cases such as Servier,504 Cartes Bancaires,505 CISAC506 and ISU.507

498

See table 2 in Dethmers and Engelen (2011). Apart from the cases in Deutsche Telekom AG (Case COMP/C-1/37.451, 37.578, 37.579) and Wanadoo (Case COMP/38.784) (concerning a margin squeeze), all Commission decisions listed constituted ‘object abuses’. 499 Microsoft COMP (n 49), para 835–954. 500 Intel Commission Decision (n 9), paras 1597–1616. 501 Tomra Commission Decision (n 51), para 20. 502 Google Shopping (n 52), paras 606–607. 503 Whish and Bailey (2018), p. 206. 504 Servier (Chap. 3, n 249). 505 Cartes Bancaires Commission Decision (Chap. 3, n 370). 506 CISAC Commission Decision (Chap. 3, n 370). 507 Commission Decision ISU (Chap. 3, n 90).

Chapter 5

Particularities of the Digital Economy

This chapter illustrates the changes digitisation brought with respect to the digital economy and digital markets. It will be shown why markets online differ from markets offline and why established classical economic theory and models might need to be revised and adapted to the novelties related to digitisation and a digital economy. Whether or not markets function similarly or not is crucial in particular for the context analysis necessary for the establishment of an object infringement of competition. Hence, whether a measure offline is, with respect to its potential detrimental impact on competition, to be assessed equally or differently as the very same practice in an online environment depends a lot on whether we can conclude that the context of digital markets is or is not to be equated with (market) mechanisms known from the analogue world. As mentioned initially, a fact one could arguably doubt. Hence, the changing economic environment, that is, economic trends and phenomena evolving due to digitisation1 (such as, for example, platforms in any form whatsoever) are particularly interesting and crucial when trying to define a coherent approach for the meaning and role of effects in competition law cases.

5.1

The Age of Digitisation: Setting the Scene

After the commercialisation of the internet in the late eighties and early nineties of the last century, expectations were high regarding the positive impact of the technology on the economy and the way it functions. The internet was seen to provide ‘a nearly perfect market because information is instantaneous, and buyers can compare the offerings of sellers worldwide’.2 Consequently, ‘[t]he result [would be] fierce

1 2

As mentioned above, e.g. the role of digital markets, FAANG as multi-sided platforms etc. Kuttner (1998).

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_5

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price competition, dwindling product differentiation, and vanishing brand loyalty’.3 Therefore, the innovation was seen as promising to lead to ‘friction-free capitalism’.4 However, the picture today is a different one: Significant market power obtained by only a small number of firms combined with barriers to entry digital platform markets, owed to the fact that such markets have high economies of scale and scope,5 network externalities and lock-in effects, dominate the debate.6 Moreover, it cannot be denied that both, globalisation in general as well as the online environment with its marketplaces as such had a huge influence on real world markets and our shop landscape. Globalised chains active in the various industries (food, clothing, jewellery etc) mark the streetscape in our cities. It is hard to identify any small or medium-sized city where international chains such as Apple, H&M, Zara, Primark, Ikea, or nationwide supermarket chains (take for example Billa and Spar in Austria, Tesco and Sainsbury’s in the UK as well as Carrefour and Delhaize in Belgium) are not represented.7 Needless to mention in this respect: big cities and metropolis where they seem to be an integral part of the cityscape. Hence, our globalised world provides a potential threat for nowadays minorities, that is, owner-managed retail stores. This becomes particularly apparent in rural and remote areas where more and more owner-managed shops close due to unprofitability. Arguably, ‘brick-and-mortar shops are closing at a faster rate’.8 Moreover, real world markets are further challenged by the opportunities the online environment offers to entrepreneurs. Even huge commercial chains seem to be threatened by the giants of the online world (namely, for example, Amazon). Undoubtedly, prices offered online tend to be ‘unbeatable’ and (much) lower than prices offline, as online retailers have the opportunity to save costs indispensable in real world markets, such as, for example, rent or personnel costs, which are unavoidable in brick and mortar shops.9 By way of example, as ‘the web contributed to the reduction of the intermediate stages in the supply chain [. . .] allowing consumers to develop a more direct access to the production points’,10 in the travel industry, for

3

Ibid. Anderson (1997). 5 Explained by collecting data and low marginal costs. 6 For example, Report of the Committee for the Study of Digital Platforms, Market Structure and Antitrust Subcommittee Report dated 1 July 2019, George J. Stigler Center for the Study of the Economy and the State, The University of Chicago Booth School of Business, available at accessed 6 February 2023 (‘Market Structure and Antitrust Subcommittee Report’); OECD, Maintaining competitive conditions in the era of digitalisation – OECD report to G-20 finance Ministers and Central Bank Governors, July 2018, available at accessed 6 February 2023 (‘OECD Digitisation Report’). 7 Arguing similarly Precht (2018). 8 Ezrachi and Stucke (2018), p. 39. 9 This explains why the online environment is prone to lead to an increase of the free rider problem. 10 Petropoulus (2018), para 5. 4

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The Age of Digitisation: Setting the Scene

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example, the number of travel agency offices dropped from 29,500 to 15,700 within the 10-years period of 1997 to 2007.11 Therefore, similar to adaptions after the invention of earlier technologies,12 it seems that there might be a need to respond to the ‘unintended and unforeseen harm’,13 which might have occured. The crucial question in this respect remains however, how and to what extent, as, arguably, there is still the potential of markets regulating themselves.14 Undoubtedly, ‘the Internet has contributed immensely to access to and diffusion of information. Moreover, it has opened numerous opportunities to improve life across the globe, [however,] it has also brought challenges, risks and harms that may endanger the very democratic and liberal order that many believed it would advance.’15 Therefore, digitisation has started to bother a wide range of (international) institutions and authorities.16 Furthermore, digitisation seems to be that kind of (radical) technological development, innovation or progress requiring wide-ranging adaption, similar to advances in the past such as ‘the automobile, the airplane, radio and television [as well as] cell phones’.17 Hence, current changes and developments obviously go beyond a pure competition law interest or concern, as they tend to transform and affect society and the way it functions as a whole. Take for example, the role of digital platforms and their potential of having a detrimental impact not only on market structures, but also on politics18 (potentially concentrating power), the media19 (potentially reducing plurality) and also private data provided by customers in exchange for—most often—free online platform services (regarding price asymmetries see below Sect. 5.2.2.2.1). However, such services do not really seem to be free of charge when

11

Ibid. For example, the changes the invention of the automobile brought, such as new laws and regulations to safeguard the functioning of traffic. 13 Market Structure and Antitrust Subcommittee Report (n 6) 4. 14 The invisible hand according to Adam Smith leading to a self-regulation of markets. 15 Report of the Committee for the Study of Digital Platforms, Media Subcommittee Report dated 1 July 2019, George J. Stigler Center for the Study of the Economy and the State The University of Chicago Booth School of Business, available at accessed 6 February 2023 (‘Media Subcommittee Report’). 16 To name only a few examples, University institutions and centres ( for example, the Stigler Center for the Study of the Economy and the State) the OECD, the EU, national competition authorities (e.g. UK, Australia, Germany), the German Federal Ministry for Economic Affairs and Energy and the German Monopolies Commission, etc. 17 Market Structure and Antitrust Subcommittee Report (n 6) 4. 18 Report of the Committee for the Study of Digital Platforms, Politics Subcommittee Report dated July 2019, George J. Stigler Center for the Study of the Economy and the State The University of Chicago Booth School of Business, available at accessed 6 February 2023 (‘Politics Subcommittee Report’). 19 Media Subcommittee Report (n 15). 12

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considered that data does indeed have a value materialised when resold or used respectively by the platform provider. During such eventful and vibrant times, especially taking into account the role of competition law and policy being one that serves democracy as such, its meaning for the shaping of democratic societies based on social market economies as well as its role as ‘pioneer’ safeguarding the functioning of the latter, seem essential. The art in adequately responding to technologies and change associated therewith is to strike the balance between the protection and preservation of innovation and progress while minimising harm. There is no doubt that digitisation brought many benefits for consumers. However, legitimate concerns as to the actual or potential benefits granted may require action in order not to undermine the latter.20 Certainly, there is no such thing as one solution or answer. Rather, such response is usually anything but clear-cut, not given without intensive debate and a variety of proposals of ways and approaches to meet the respective challenges. Undoubtedly, ‘[w]hile often messy, this is a healthy and desirable debate’.21 In light of the above, the issues and concerns inherent to the era of digitisation seem obvious. However, their impact is not measurable and predictable in terms of facts, figures or a clear timeline. Rather, they convey vague impressions as regards the likely consequences of these changes for the competitive landscape and the economy as a whole. By way of illustration, the number of customers within the EU, who have made an online purchase within the last three months, for example, doubled in less than 10 years.22 Furthermore, e-commerce, that is, firms’ online sales via networks increased from 11% to 18% of their total turnover from 2007–2017.23 Moreover, in Europe, ‘[t]he percentage of people aged between 16 and 74 that have ordered goods or services over the internet has grown year-on-year from 30% in 2007 to 55% in 2016’.24 Therefore, change seems to materialise and progress rapidly. The fact that digitisation is a global phenomenon massively increasing the ‘speed’ of any kind of transactions, operations, interactions etc further fuels the delicate nature of our times and the latter phenomenon. Moreover, considering the worldwide health crisis owed to the COVID-19 pandemic and its aftermath, the latter might have—as a consequence of worldwide lockdowns, closed shops and a paralysation of the economy—further intensified such development. In other words, the pandemic might have further fostered the use of the online economy. Against this backdrop, the following sections of this chapter shall shed light on the phenomenon of the internet and characteristics of digital markets, that is, for

20

Market Structure and Antitrust Subcommittee Report (n 6), p. 5. Market Structure and Antitrust Subcommittee Report (n 6), p. 4. 22 OECD Digitisation Report (n 6), para 9. 23 Ibid. 24 Commission, ‘Report from the Commission to the Council and the European Parliament – Final report on the E-commerce Sector Inquiry’, COM(2017) 229 final (E-Commerce Sector Inquiry Report). 21

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example peculiarities of digital or online platforms in any form whatsoever. As mentioned earlier it shall be shown why markets online differ from markets offline and why established classical economic theory and models might need to be revised and adapted to the novelties related to digitisation and a digital economy. A fact that is crucial for object infringements of competition and particularly for the context analysis necessary for the establishment of the latter. Furthermore, also peculiarities related to the internet as such (for example, the increase of transparency, the decline in information asymmetries, that is, the fact that customers are generally better-informed due to information being available within seconds) as well as e-commerce, that is, the online trade of goods (being a costsaving distribution channel as regards lower overhead costs) shall be illustrated. Hence, this chapter shall provide the backdrop against which the respective relevant Article 101 and 102 TFEU cases that have already been occurred in the online environment are scutinised. It will therefore span a bridge to the core topic of this monograph, that is, the role and meaning of economic analysis/effects in the context of object infringements in a digital economy.

5.2 5.2.1

Online Markets, E-Commerce and Digital Platforms: Challenges in a Digital Economy General Remarks

Undoubtedly, the digital revolution with its new technologies and the creation of an online environment had and are still having a significant impact on our economy. On the one hand, the internet created new business models (namely, social networks, search engines and online trade platforms or marketplaces) differing significantly from traditional industries, which manufacture physical goods, such as ‘steel, automobile, pipe, aluminium, railroad cars, roadbuilding materials, and cigarettes’.25 On the other hand, besides these new industries which have arisen, the internet provides for a new distribution channel (so-called e-commerce) for consumer goods and digital content (as, for example, audio-visual and music products26). Moreover, the online environment is characterised by special features and economic peculiarities as regards their respective markets and has thereby changed or challenged the competitive structure of traditional markets as well as our understanding thereof.27 Broadly speaking, peculiarities accompanying the internet are increased transparency as well as dynamic and fast-changing markets. Furthermore, the tremendous significance of digital platforms for the development of our

25

Posner (2000), p. 2. E-Commerce Sector Inquiry Report (n 24), para 16. 27 Robertson (2020), pp. 161–190. 26

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economic environment and the impact they had on the digital economy has not been without notice.28 As we can see in particular from the growing presence and role of digital platforms, such as search engines, social networks and online marketplaces, long-standing principles of the social-market economy are coming under mounting pressure or being undermined. While the progressive expansion of actors such as Facebook, Google, Uber, Airbnb, Amazon and also MyHammer is undoubtedly a measure of growing consumer popularity and power, it is also giving rise to increasing market concentration and the attendant market power, larger volumes of collected and evaluated data and changes in traditional market and competition structures.29

It seems that the German Ministry for Economic Affairs and Energy with its statement in the preface of its Green Paper on Digital Platforms30 got to the heart of the issue. Platforms provide an essential, if not ‘the’ key phenomenon of digital markets. Apparently, we do have an issue with internet markets and platforms, or, to be more precise, with the challenges imposed by the latter in order to maintain competitive conditions in the era of digitisation, as it seems that the digital novelties test the functioning of our social market economy and therefore also our society by affecting competitive structures. As concluded by various competition reports such as, for example, of the United Kingdom, the European Commission, Australia and Germany, digital platforms’ market power seems to have become entrenched.31 As illustrated earlier, such bundling of economic power has the potential to become not only a threat to competition or the competitive process as such (by means of ‘permanent monopoly’), but also to the functioning of democracy as such. Moreover, ‘while some markets may self-correct, [. . .] rapid self-correction in markets dominated by large digital platforms is unlikely’.32 This is, inter alia, owed to the fact that online markets are prone to concentration and market tipping. Moreover, ‘the nature of

28

For example, Communication from the Commission, Online Platforms and the Digital Single Market – Opportunities and Challenges for Europe, COM(2016) 288 final (‘Online Platform Communication’). 29 Green Paper on Digital Platforms, German Federal Ministry for Economic Affairs and Energy (May 2016) 23, available at accessed 6 February 2023 (‘Green Paper on Digital Platforms’) 4. 30 Ibid. 31 Cremer et al. (2019), p. 112; Furman et al. (2019), p. 75; Australian Competition & Consumer Commission, ‘Digital Platforms Inquiry: Preliminary Report’ (December 2018), available at accessed 6 February 2023, p. 35; Heike Schweitzer et al, German Federal Ministry for Economic Affairs and Energy, ‘Modernising the law on abuse of market power – Summary of the report’s recommendations’ (4 September 2018), available at accessed 6 February 2023, p. 2. 32 Market Structure and Antitrust Subcommittee Report (n 6), p. 8.

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online markets means that they are more susceptible to dominant hybrid platforms leveraging their strength into related markets’.33 For clarification purposes, it shall be emphasised that this section shall not address the issue of how to best handle or deal with platforms as economic phenomenon (prone to concentration) and whether or not specific means, such as regulatory steps or adaptions of the law are necessary.34 Rather, the subsequent section shall give an impression and idea of what difficulties economic theory and, as a consequence, also competition law face when shedding light on the economic features and potential positive or negative effects of measures occurring in an online environment. Put differently, if the characteristics of online markets differ significantly from those offline, it appears obvious that we cannot automatically draw the same conclusions as regards actual or potential effects of the very same measures offline and online. Hence, the potential, likely or actual effects of a practice occurring in an online environment might differ from those materialising in an analogue environment. Consequently, the assessment—at least—could be a different one. Therefore, by way of illustration, it might be that restrictions of online sales, for example, need to be assessed differently than their offline equivalent, that is, restrictions of analogue distribution channels, as there are specific characteristics and features, which justify a different handling due to different economic effects in the online and offline world. Furthermore, ‘market definition’ as required in the context of merger control or an abuse of dominance case pursuant to Article 102 TFEU serves as another example pointing out that the online economic environment is just different. There is no doubt, for example, that digital markets challenge the conventional way of how markets are defined, due to their special features and economic peculiarities.35 Against this backdrop, the fact that online markets are indeed peculiar and different from offline markets seems essential in particular with respect to the potential role of effects and of an actual effect analysis. Arguably, an increase of effect-analysis as a tool to adequately shape competition law in the digital era is, more than in any analogue market, inevitable as regards online markets. Online and in particular platform markets have distinct economic features (see below Sect. 5.2.2.2), which in combination make the latter being an economic phenomenon,

Linklaters contribution ahead of the conference ‘Shaping competition policy in the era of digitisation’ hosted by the European Commission on 17 January 2019 (30 September 2018) available at accessed 6 February 2023, p. 1. 34 See to this effect, for example, the Digital Markets Act: Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act) [2022] OJ L265/1. 35 See, for example, Nazzini (2018); Filistrucchi et al. (2013); OECD, ‘Maintaining competitive conditions in the era of digitalisation – OECD report to G-20 finance Ministers and Central Bank Governors’ (July 2018), available at accessed 6 February 2023. 33

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which is new in its scope and difficult to assess adequately by means of traditional economic theory.36 Put differently, ‘there is no single characteristic that would make competition in digital platforms different from more traditional markets. Rather, it is the coincidence of several factors at a scale that has not been encountered before.’37 However, it must be born in mind that the concept of two-sided markets, which the internet is prone to, is anything but new and does exist in analogue markets too. Take for example shopping malls, fairs or nightclubs, all providing a platform facilitating exchange between two or more interdependent groups, that is, for example, buyers and sellers (shopping mall, fairs). The nightclub-example provides another illustrative instance for bringing together party, drinking or date willing people. Hence, such premises also act as ‘match-makers’ in the very same way as online platforms do. However, platforms in an online environment have peculiarities, as their services provided are easily multipliable with a mouse-click only. Furthermore, they are also not limited in space; their offline equivalents however are by means of construction.

5.2.2

Online Platforms

5.2.2.1

In Search for a Definition

There does not seem to be a generally accepted definition covering the many and ‘in part highly diverse online or digital platforms’.38 According to the German Monopolies Commission ‘[t]he fundamental [characteristic] service provided by a multisided platform is the ability to facilitate a beneficial interaction between economic players belonging to different groups’.39 The German Ministry for Economic Affairs and Energy uses a similar broad definition as ‘digital platforms are Internet-based forums for digital interaction and transaction [. . .] also designated as intermediaries’.40 As exemplified above online platforms cover a wide-ranging set of activities, such as, inter alia ‘online advertising platforms, marketplaces, search engines, social media and creative content outlets, application distribution platforms, communications services, payment systems, and platforms for the collaborative economy’.41 Players such as Facebook, LinkedIn, Xing (social networks), Google, Yahoo, Bing 36

Competition Policy: The challenge of digital markets, Special Report by the Monopolies Commission pursuant to section 44(1)(4) of the Act Against Restraints on Competition (2015), available at

accessed 6 February 2023 (Monopolies Commission Report), paras 16–33. 37 Market Structure and Antitrust Subcommittee Report (n 6), p. 11. 38 Green Paper on Digital Platforms (n 29), p. 26. 39 Monopolies Commission Report (n 36), para 54. 40 Green Paper on Digital Platforms (n 29), p. 26. 41 Online Platform Communication (n 28), p. 2.

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(search engines), Amazon, eBay (online marketplaces), Tripadvisor (comparison and review portals) as well as Uber, Tinder, Airbnb (match-maker platforms) and their business models provide examples to this effect. For the purpose of this analysis, a concrete, abstract and conclusive definition of digital or online platforms can be omitted, as the following shall illustrate the peculiarities (that is, the peculiar potential effects and impact) of the latter phenomenon from an economics perspective only. Therefore, in such context, it rather seems sufficient to comprehend that almost all online business models of the ‘usual suspects’, that is, for example FAANG42 and some other ‘digital players’43 form—in its broadest sense and meaning—a platform business.

5.2.2.2

Economic Characteristics

The concept of platform markets is anything but new (see Sect. 5.2.1) and also exists in the offline world (for example, shopping malls, nightclubs or fairs etc). However, from an economics perspective, the assessment of a platform business model in the online environment is different and particularly challenging due to the various factors at a scale in online markets complicating the competitive assessment from an economics perspective.44 In principle, the following features are of interest in the assessment of online platform markets: (i) network effects (direct and indirect ones), (ii) economies of scale, (iii) single-/multi-homing, switching costs and platform differentiation, (iv) data and innovation potential.45

5.2.2.2.1

Platform Markets and Network Effects

Direct and indirect network effects are key characteristics of online markets and serve as parameter for the intensity of competition.46 In principle, network effects may be a significant barrier to entry consequently leading to increased market power and concentration.47 Another specific feature of online platforms are price asymmetries, where one side of the network or platform does not have to bear any cost at all.

42

Facebook, Amazon, Apple, Netflix and Google (acronym). Uber, Tinder, Airbnb, Tripadvisor, eBay etc. 44 Market Structure and Antitrust Subcommittee Report (n 6), p. 11. 45 Federal Cartel Office (BKartA), B6-113/15, ‘Working Paper – The Market Power of Platforms and Networks – Executive Summary’ (June 2016), available at accessed 6 February 2023, 9 (Federal Cartel Office Working Paper). 46 Monopolies Commission Report (n 36), para 36. 47 Market Structure and Antitrust Subcommittee Report (n 6), p. 17. 43

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Direct network effects have their origin in the size of a network. In simple terms, the customer’s advantage using the network increases with each new customer joining the latter. A traditional, ‘offline’ example provide telecommunication networks.48 However, examples of the online world are social media networks, such as Facebook, LinkedIn, Xing, as well as telecommunication apps like WhatsApp or Skype. Costumers just benefit from being part of the same network as other users are. It seems apparent that such ‘magnetic effect’ is somehow prone to lead to concentration.49 Indirect network effects, however, have a ‘two-sides component’, which means that the benefit for customers using a network or platform on one side of a market increases with each new customer joining the network on the other side.50 Take for example the ‘analogue’ example of credit cards or shopping malls. Shopping malls mainly act as intermediate to enable interactions between two different customer groups, namely retailers and shoppers. Therefore, their role is essential for the respective competitive structure of a market.51 The same is true as regards cardpayment-systems, the more customers holding and using a certain type of card, the more shops will accept payments using the latter and provide the respective cardreaders necessary and vice versa. Therefore, in so-called two- or multi-sided markets, complementary interest groups interact through a platform. The respective decisions of both parties (that is in our examples, cardholders and card-readers, as well as retailers and shoppers) are affecting each other’s obtained value created by the platform.52 In other words, the parties on each of the market’s sides benefit from an increase of the other side’s users. There is, however, no direct benefit from an increase of the number of users on the same market side. Hence, the effect is an indirect one, as the benefit for a customer is materialised through the growth of the opposite side of the market. Put differently, the two sides of such markets are interdependent and determine each other. Amazon and eBay serve as prime example in this respect, as ‘more potential buyers attract more sellers to offer goods’ on the marketplace.53 In general, network effects are essential when it comes to online platform markets. These effects basically drive the latter markets. Particularly, indirect network effects are key characteristics of two- or multisided markets and ‘cause platform markets to tend towards concentration’.54 Moreover, indirect network effects are prone to lead to price asymmetries, that is, price formations, which are different from those in one-sided markets or business models.55 Take for example,

48

Haucap and Heimeshoff (2013), p. 3. Market Structure and Antitrust Subcommittee Report (n 6), p. 15. 50 Haucap and Heimeshoff (2013), p. 3. 51 Frishammara et al. (2008), p. 35 (‘Shopping Mall Case Study’). 52 Ibid. 53 Shopping Mall Case Study (n 51), p. 4. 54 Monopolies Commission Report (n 36), para 42. 55 Monopolies Commission Report (n 36), paras 39–40. 49

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search engines, social media networks or online marketplaces. Services provided by the latter are usually free of charge for consumers and primarily or exclusively financed through advertising of undertakings to promote their goods and services. Therefore, ‘many important characteristics of conventional [. . .] one-sided business models cannot [necessarily] be applied to multi-sided platforms’.56 Furthermore, the mere fact that a platform creates indirect network effects alone is not in itself sufficiently indicative with respect to whether a business model is prone to lead to market concentration.57 Take for example the platforms in the real estate, travel and hotel booking industry as well as dating portals or vehicle and job exchange sites, where competition and competing platforms exist.58 Against this backdrop, it becomes apparent that there must be further, additional conditions (see below Sects. 5.2.2.2.2–5.2.2.2.4), which are necessary in order for a platform market to become highly concentrated.59 Furthermore, from an economics perspective, it is also not clear whether competition between platforms actually increases welfare.60 In other words, whereas it is clear in one-sided business models that vibrant competition usually results in an increase of consumer welfare, economists are not so sure whether this is the case with respect to competition between platforms as well. Occurring parallelism may cause a new entrant to be inefficient61 as platform businesses are prone to tipping.62 Their aim is to attract as many users as possible in order to address and attract further new users. Such aim to ‘collect’ as many users as possible seems inherent to the business model of a platform and, consequently, it is prone to have indirect network effects as an inevitable consequence. Put differently and by way of illustration, if there is Facebook, why should I change to a new social media platform entering the market if not all of my ‘connected friends’ are available there as well? It seems apparent that a new competitor might have hard times to get its business run efficiently. In a nutshell, the challenges imposed by online markets are, inter alia, the fostering of two- or multi-sided markets and its peculiarities in the online environment. The latter combination makes their economic assessment difficult, as conventional economic theory and principles do not necessarily apply. Hence, the combination of the latter two aspects, that is, the peculiarities of the internet market as such combined with the business model of platforms (creating two- or multi-sided markets) in the online environment, contribute to the complexity of the economic assessment. The following sections (Sects. 5.2.2.2.2–5.2.2.2.4) shall illustrate those

56

Monopolies Commission Report (n 36), para 35. Haucap and Heimeshoff (2013), p. 5, see also Monopolies Commission Report (n 36), para 42. 58 Ibid. 59 Monopolies Commission Report (n 36), para 42. 60 Monopolies Commission Report (n 36), para 43. 61 Despite cost savings as there is no need to duplicate fixed costs. 62 Market tipping describes markets where the increase in a firm’s market share dominance is caused by indirect network effects. 57

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aspects, which are, apart from network effects, necessary to be considered when assessing the competitive reality in online platform markets.

5.2.2.2.2

Economies of Scale

First, economies of scale are one aspect to be considered when determining the competitive structure and functioning of online platform markets. Such as network effects, economies of scale may be a barrier to entry and hinder competition to flourish lacking a competitor actually entering a market.63 Economies of scale describe the proportionate saving in costs gained by an increased level of production. In other words, average costs decrease when output increases. As internet markets typically have high fixed costs, but rather no or low variable costs, online platform business models are prone to economies of scale.64 Take for example eBay’s fix costs for servers, software, as well as their (arguably rather limited) employees. Regardless of the number of customers, the latter costs remain unchanged. Thus, costs do not increase proportionally with each new customer joining the platform to perform a transaction.65 Rather, each new, additional transaction actually lowers the average costs.

5.2.2.2.3

Single- and Multi-Homing, Switching Costs and Platform Differentiation

Another issue relevant in the context of the economic assessment of online platform markets is whether or not customers are able to use multiple platforms simultaneously. Hence, it is decisive whether costumers have the opportunity to ‘multihome’ or not. In this context, however, it is important that it is not the mere possibility of parallelism, but whether such parallel use is realistic and actually made. If ‘multi-homing’ is not possible or likely to be done as there is— untechnically speaking—‘no benefit’ for customers in using various different platforms, there would be a ‘competition bottleneck’ on one side of the market.66 Such effect is also called ‘lock-in effect’.67 Furthermore, also the fact whether there are fix costs charged for the service provided is essential.68 Apparently, as regards social media and communication platforms, switching costs are usually much higher due to strong direct network

63

Market Structure and Antitrust Subcommittee Report (n 6), p. 17. Monopolies Commission Report (n 36), para 46. 65 Market Structure and Antitrust Subcommittee Report (n 6), p. 13. 66 Monopolies Commission Report (n 36), para 49. 67 Federal Cartel Office Working Paper (n 45), p. 14. 68 Haucap and Heimeshoff (2013), p. 7, see also Monopolies Commission Report (n 36) para 49. 64

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effects.69 Again, why should I leave Facebook or WhatsApp and switch to a new social network or a new communication service provider, if my contacts were not identical, respectively easily and identically available on the new platform too? With respect to hotel, travel or flight booking websites, however, switching costs are usually low and multi-homing is anything but uncommon, as it is easy to search on various platforms in parallel before actually booking. The same principle applies to search engines, be it general search engines, such as Google, Bing and Yahoo! or specialised search platforms such as Amazon or Ebay.70 Switching costs from Google to any other search engine seem rather modest. The fact that Google appears dominant (at least in Western countries71) however, is again owed to economies of scale and network effects.72 Put differently, size matters also with respect to search engines as the quality of the search results generated by a search engine is—to a great extent—determined by specific data acquired and collected by the engine in the past, that is, during previous search processes.73 Technically speaking, the quality of a search algorithm is highly dependent on (historical) data as search results can be optimised by refining and adapting the search algorithm respectively.74 Therefore, in the area of search engines it is also a combination of various aspects, that is, economies of scale and network effects combined with only modest switching costs, which lead to market concentration. Against this backdrop, it becomes apparent that switching costs are not necessarily of a monetary nature in the strict sense but to be understood more broadly, especially considering the effort to be made to actually switch as well as the respective benefits rewarded. How easy is it to actually multi-home and is there any advantage I could gain therefrom? Furthermore, switching costs alone are inconclusive and must be interpreted within their given economic context, also considering other aspects, such as, economies of scale and network effects. Moreover, it also seems apparent that not only switching costs, but also the degree of differentiation between platforms and networks might be decisive for and considered by customers in their decision to multihome or not.75 Put differently, is there any feature the new service offers, which provides added value or meets not yet satisfied customer needs? In principle, the more heterogeneous user preferences are, the more likely they multi-home.76 However, ‘an increasing degree of [product or service] differentiation will [also] curb the tendency towards monopolisation’.77

69

Haucap and Heimeshoff (2013), p. 7. Ibid. 71 Haucap and Heimeshoff (2013), p. 8. 72 Haucap and Heimeshoff (2013), p. 9. 73 Monopolies Commission Report (n 36), paras 198–220. 74 Haucap and Heimeshoff (2013), p. 9. 75 Federal Cartel Office Working Paper (n 45), p. 14. 76 Federal Cartel Office Working Paper (n 45), p. 16. 77 Federal Cartel Office Working Paper (n 45), p. 15. 70

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User Data and Innovation Potential

A last point worth mentioning in the context of the internet and online markets is the role of data.78 Data has always been a valuable source for entrepreneurs. Unsurprisingly data is an important economic factor in the digital era as well.79 However, what is different in the digital world is the way data can be collected and used. Nowadays, it is only a couple of mouse-clicks combined with (inter alia self-learning) algorithms that personalised advertising and pricing require. Furthermore, as exemplified with respect to Google above (see Sect. 5.2.2.2.3), in a digital economy data has the potential to become essential when it comes to product quality. Google’s dominant position in Europe, the US and Australia80 can be explained not only by the strong and good reputation it has among its users, but also by the quality of its search results, which are a result from its algorithms being ‘fed’ with historical data of the searching users. By doing so the search engine is not only capable to achieve adequate results in terms of meeting objective search parameters and factors, but also taking account of the personal search history of a user, thereby maximising the likelihood of very precisely meeting its preferences by adapting search results to individual needs. In this context, it becomes apparent that data might be a potential source of market power, as ‘the collection of data may result in entry barriers when new entrants are unable either to collect the data or to buy access to the same kind of data, in terms of volume and/or variety, as established companies’.81 Furthermore, such individualisation in the use of data for whatever activity be it search results, advertising etc, might consequently lead to an individualisation of products and prices.82 The potential effect of such individualisation, however, is ambiguous and can be both, advantageous for some as well as disadvantageous for others.83 Moreover, it also seems legitimate to question in this respect whether all the free services provided online are actually for free or rather paid off by sharing personal data. However, it can also not be denied that data is an essential source for innovation and might ‘help to improve an undertaking’s product or service’.84

78 There is a vast body of literature on the topic of data, privacy and competition law considering different angles. To this effect see the following excerpt: Robertson (2020); Majcher and Robertson (2022), pp. 622–646; Kemp (2020), pp. 628–672; Volmar and Helmdach (2018), pp. 195–215; Townley et al. (2017), pp. 638–748; Kerber (2016), pp. 856–866. 79 Federal Cartel Office, Competition Law and Data (Report 10th May, 2016) available at accessed 6 February 2023, 8 (Competition Law and Data Report). 80 Haucap and Heimeshoff (2013), p. 8. 81 Competition Law and Data Report (n 79), p. 11. 82 Monopolies Commission Report (n 36), para 72. 83 Ibid. 84 Competition Law and Data Report (n 79), p. 9.

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5.2.3

149

Online Markets, E-Commerce and Free-Riding

Notwithstanding the peculiarities rooting in the business model of online platforms, the internet itself does show further specific features rendering market conditions special. For example, digital goods often have low or no marginal costs, that is, the costs added by producing one additional unit of a product or service.85 Put differently, to expand a product to another user, marginal costs are low or even zero. Furthermore, whereas distribution costs are one of the major expanding expenses in the offline world, that is, of conventional brick and mortar stores, such costs are, in most instances,86 virtually zero in online markets. Moreover, the global reach of the online environment is also crucial and unique as the internet provides a global ‘window’ for shoppers all around the world. However, total costs of expansion are ‘generally lower than in brick and mortar businesses’.87 As a consequence, the internet lead to a broader geographic scope of transactions88 and new geographical areas, that is, in particular rural and remote areas have been opened up for a variety of products that have originally been sold in big cities only.89 Furthermore, online markets tend to be more transparent as well as dynamic opposed to conventional analogue markets, thereby making ‘the assessment of competition on the market blurry compared to offline markets that are often more static’.90 Lastly, the digital economy has had a great impact on distribution strategies of manufacturers and retailers, as the internet offers alternative online distribution models such as online marketplaces.91 Thus, the trend towards vertical restraints as response to fierce price competition due to an increased transparency is not entirely unexpected. Another point being crucial in the list of peculiarities the online economoy has brought along is the possibility of online trading, that is, the opportunity to distribute goods via the internet. Be it consumer goods as available in the analogue world in shops or supermarkets, or digital content, such as audio-visual and music products.92 Such phenomenon of online trade is covered by the notion of e-commerce. The development of e-commerce had an impact on competition and its functioning as, undoubtedly, ‘[it] has [affected] both demand and supply fundamentals of markets’.93 Thus, there are disruptive forces associated with e-commerce. Arguably, 85

Market Structure and Antitrust Subcommittee Report (n 6), p. 17. Some online platform businesses do have marginal or distribution costs such as ‘a piece of hardware, ecommerce warehouses, or maintenance of scooters for example’ (Market Structure and Antitrust Subcommittee Report [n 6], p. 17). 87 Market Structure and Antitrust Subcommittee Report (n 6) 17. 88 Petropoulus (2018), para 8. 89 Ibid. 90 Mandrescu (2017), pp. 353–365. 91 E-Commerce Sector Inquiry Report (n 24), paras 14–15. 92 E-Commerce Sector Inquiry Report (n 24), para 16. 93 Petropoulus (2018), para 2. 86

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‘new business models [therefore] imply relevant changes for the structure of some industries, which rely on the disruptive forces of e-commerce’.94 The e-commerce sector has been in the focus of an inquiry of the European Commission, the so-called e-commerce inquiry, which forms part of the Digital Single Market strategy adopted by the Commission on 6 May 2015 to overcome and remove impediments of cross-border e-commerce. The report and the conducted inquiry ‘confirm that the growth of e-commerce over the last decade and, in particular, increased online price transparency and price competition, had a significant impact on companies’ distribution strategies and consumer behaviour’.95 Hence, a last peculiarity of the digital economy to be mentioned in this context is the increasingly occurring phenomenon of free-riding in the context of digital markets.96 Arguably the latter is a response of the market players to the respective developments and challenges (i.e. in particular the increase in price transparency in digital markets) as imposed by the era of digitisation and the occurrence of online markets with their peculiarities, structural changes and challenges. The producer’s argument is that vertical restraints in online markets are a means to handle free-rider concerns97 being a result of the tensions between the online and the conventional analogue market. The free-rider phenomenon describes the problem associated with horizontal externalities between firms operating on the same level of the value chain. By way of illustration, in case of complex technical products, for example, such products might require extensive pre-sales service that the manufacturer would like retailers to offer. Such services, however, drive up the price of the product and thereby create incentives for customers to get pre-sales service at a particular ‘brick and mortar’ retailer. Subsequently, however, they purchase the good for a cheaper price online, where such pre-sales service is not offered.98 Hence, problems with free riders occur, when competitors compete on other levels than price only.99 Furthermore, it cannot be stressed enough that the internet exacerbates free-riding and thus affects competition where online retailers compete with traditional brick and mortar shops. Research shows ‘free riding in online sales is more significant than would be the case in traditional offline markets’.100 Consequently, as free-riding is a major concern for many manufacturers, there is an

94

Ibid. European Commission, ‘Sector inquiry into e-commerce’ available at accessed 6 February 2023; Commerce Sector Inquiry Report (n 24), para 9. 96 Akman and Sokol (2017), p. 137. 97 Akman and Sokol (2017), p. 137. 98 Zelger (2018), p. 451. 99 Ibid. 100 Akman and Sokol (2017), p. 137. 95

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increased use of contractual sales restrictions in online sales as a means to curb freeriding.101

5.3

Chapter 5 Conclusions

For the purpose of this analysis the essential aspects relevant in the context of the Treaty competition provisions and the respective relevant ‘online’ cases are manifold. It seems apparent that the internet has special features and economic peculiarities,102 which differ from the characteristics of conventional ‘analogue’ or ‘offline’ markets.103 Moreover, the e-commerce sector seems to flourish and foster phenomena as, for example, vertical integration, selective distribution and vertical restraints in any form, as they seem to occur increasingly in the online world.104 Furthermore—however not subject of this monograph—new technologies as, for example, pricing software, algorithms and AI, add on further complexity.105 In light of the above, it does not seem far-fetched that an economic analysis or an assessment of a measure against the backdrop of a digital environment becomes particularly tricky. Negative effects of a practice in real-world markets do not imply that such negative effects must necessarily occur in the online environment too. As economic features and circumstances might be different online (which means that economic characteristics of the markets online and offline are not identical) results might differ as well. Due to a lack of (economic) experience, actual or likely effects of various measures have not yet been adequately researched or investigated. That is when the role of effects and economic analysis comes into play.

101 Furthermore, RPM would also address such problem by eliminating the possibility of undercutting the price of the product by determining or guaranteeing the retailers a certain margin. However, although there are voices pleading for an effect-based approach of RPM (Ioannidou and Nowag 2015) tendencies to actually shift this view and align it with the US approach seem rather unlikely (for more details see above under Sect. 3.1.3). 102 To name a few examples, ist transparency, ist fast-changing and dynamic nature, low or no marginal cost, platforms and two-sided markets, global reach, etc. 103 See above Sects. 5.2.2–5.2.3. 104 Posner (2000), p. 2; Monopolkommission, ‘Wettbewerbspolitik: Herausforderung digitale Märkte – Sondergutachten der Monopolkommission gemäß § 44 Abs. 1 Satz 4 GWB – Kurzfassung’, available at accessed 6 February 2023 (Monopolies Commission Report Summary), para K50. 105 For reading as regards new phenomena to collude via algorithms and AI, see, for example: Ezrachi and Stucke (2016); Ezrachi and Stucke (2015); Ezrachi and Stucke (2018); Ezrachi (2018b).

Chapter 6

Competition Cases in the Digital Economy

6.1

Assessment Categories

In light of the previous chapter, the question is whether and to what extent the particularities of the digital economy alter the actual contextual backdrop against which practices are to be assessed and, as a consequence, also changes the latter’s qualification. Hence, could it be that a measure that qualifies as object infringement of competition in the analogue world is not, however, to be qualified as such given an online environment? Put differently, to what extent leads the online environment to changes which require, considering the very same conduct offline, a refinement of its assessment from a competition law perspective in the online context? Moreover, are there (new) practices put forth by the digital economy, which do not fit into any of the existing categories developed by the law as illustrated in the Chaps. 3 and 4? In principle, not all practices, which occur in an online environment, do necessarily bring difficulties as regards their assessment. It will be shown that the crucial question in this respect is whether a measure presumably being at odds with the competition provisions actually requires a novel assessment approach or whether such approach can remain unchanged as the practice at hand is ‘old wine in new bottles’ not requiring adaption. Essential for such differentiation and the assessment of the practice’s detrimental nature are basically the circumstances and the context within which the latter occurs. Put differently, the crucial aspect is whether or not the digital environment and the online economy provide for circumstances which require a refinement of the assessment of a measure as object infringement. Hence, I agree with Holzweber that the challenges imposed by digitisation and the application of doctrines, which were originally conceived for the analogue world, may require a modification of the latter as ‘in a new setting, a legal doctrine may be

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_6

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adapted to the specific circumstances of the case, which may necessitate additional considerations to be taken into account’.1 Arguably, the competition provisions provide for an assessment framework flexible enough to meet the challenges as imposed by a digital economy: The changes brought can be taken account of and captured by conducting a corresponding context analysis as required for the establishment of an object restriction of competition. Hence, a practice known from the offline environment might, when occurring in the online context, require a different assessment approach. Put differently, it could be argued that the fact that a measure occurs online provides for the minor changes in the circumstances which requires a refined assessment of the latter’s effects on competition and thus arguably provides for an alternative contextspecific outcome. Yet, the context-specific outcome of competition cases as discussed in Chaps. 3 and 4 above, might, as regards measures occurring online, have its roots in the consideration of the peculiarities of the online environment. Moreover, such—even if minor—difference in the circumstances with the potential to alter the outcome of a context analysis arguably also unveils a certain lack of (economic) experience as regards (new) phenomena in the digital economy. Against this backdrop, it will be shown that whether a measure that is familiar from analogue markets is indeed to be qualified the same way online as it is offline, depends on whether the measure was practiced in an online environment ‘only’ or whether ‘the online aspect added a relevant dimension for the competition law assessment by, for example, involving a platform’.2 In the next sections it shall therefore be distinguished between the following categories of practices occurring in the online environment: (i) Practices where the online environment does not add a further dimension which alters the facts and circumstances. Hence, in such cases the same assessment of a measure’s detrimental nature from a competition law perspective offline seems sound and appropriate for its assessment in an online environment. Put differently, the practice is known from the analogue world and the theory of harm established for its assessment seems suitable also in the online context. Examples to this effect provide the ECJ judgements in Eturas,3 Coty4 as well as the Commission’s decisions regarding RPM in the E-Commerce Sector5 as well as its Article 102 decision in Google AdSense.6 (Referred to in the following as ‘Category I’). (ii) Practices where the online environment adds a further dimension and thus alters the circumstances. Hence, measures have occurred in the analogue world, and 1

Holzweber (2018a), pp. 342–243. Akman and Sokol (2017), p. 146. 3 Case C-74/14 Eturas et al [2016] ECLI:EU:C:2016:42 (Eturas). 4 Coty (Chap. 3, n 158). 5 See below Sect. 6.2.3. 6 Google Search (AdSense) (Case AT.40411) Commission Decision of 20 March 2019 (Google AdSense). 2

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there does, in principle, exist a theory of harm for the latter’s assessment. However, the existing theory of harm does not seem to be appropriate for the assessment of the measure in an online environment. Hence, the online world alters the actucal circumstances and environment to an extent, thereby adding a ‘further dimension’, which requires a refinement and adaption as regards the latter’s assessment. RPM and the online equivalent of Most Favoured Nation or Customer clauses (‘MFN clauses’) provide for an Article 101 TFEU example in this respect. Moreover, the Commission decision in Google Android7 serves as example in the context of Article 102. (Referred to in the following as ‘Category II’). (iii) New practices, that is, novel ‘suspects’ under the competition provisions in the sense that those measures have, apparently, never occurred or been qualified as anticompetitive before. In this context, one could argue that, considering a legal certainty perspective, ‘the illegality of conduct [was] not clear ex-ante’.8 Consequently, they do not entirely fit into any of the already established categories of competition law infringements (such as, for example, price-fixing or hub and spoke cartels, market sharing, exlusive dealing, predatory pricing, refusal to deal etc) and thus, arguably, no adequate theory of harm exists. The self-preferencing practice in Google Shopping9 serves as one example to this effect. Notwithstanding the fact that self-preferencing might have, one way or another, occurred in the past,10 the latter was rather a consequence or result of another practice, not however, a standalone practice or measure on its own. Take for example, the case in Microsoft11 concerning a tie in form of the pre-installation of the Windows Media Player on the Windows Operating System. This tie, as recognised by the Commission12 and confirmed by the GC, conferred upon Microsoft ‘a significant advantage on the media players market’.13 Hence, arguably, the tying practice in Microsoft conferred not only a competitive advantage upon the dominant undertaking; rather it simultaneously brought about a de facto situation of self-preferencing. Moreover, the particularity as regards self-preferencing in the online world is the lack of a prevailing

7 Google Android (Case AT.40099) Commission Decision of 18 July 2018 notified under document number C(2018) 4761 final (Google Android). 8 Eben (2018), p. 130. 9 Google Shopping (Chap. 4, n 52). 10 Petit (2015) shedding light on analogue cases containing a self-preferencing element. The author mentions cases, such as, for example: Case T-229/94 Deutsche Bahn v Commission [1997] ECLI: EU:T:1997:155 (Discrimination according to Article 102(2)(c) TFEU as legal basis for selfpreferencing); Microsoft (Chap. 4, n 81) (Tying according to Article 102(2)(d) TFEU); Chiquita (IV/26699) Commission Decision 76/353/EC [1975] OJ L95/1 (Unfair trading conditions according to Article 102(2)(a) TFEU as legal basis for abusive self-preferencing; in the case at hand: unfair pricing). 11 Microsoft (Chap. 4, n 81). 12 Microsoft COMP (Chap. 4, n 49), para 979. 13 Microsoft (Chap. 4, n 81), para 1088.

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theory of harm appropriate for holding an undertaking liable of an unlawful abuse under the existing regime or among the existing theories of harm for abuse of dominance cases.14 Moreover, such genuine novelty is twofold and intertwined, as genuine new practices do not only occur in the online environment, but, however, are somehow provoked by the latter. In other words, the online economy, in the first place, provides for or serves as the breeding ground for the new practices to even occur. This is owed to the fact that the online environment does not only add a further dimension which is necessary to be taken into consideration when assessing a specific practice within the legal and economic context within which it occurs. Rather, the digital sector arguably imposes a threat to competition as such and thus adds an even more fundamental dimension to the debate. Admittedly, all cases of this category identified so far occur in the context of the law of abuse of dominance. A fact which is owed to the online environment’s tendency to lead to market concentration. Hence, digital markets, as a consequence, ‘pose a fundamental challenge for abuse of dominance enforcement’.15 (Referred to in the following as ‘Category III’) In case of measures falling into Category II and III, the qualification of the practices as object or effect infringement depends on the detrimental nature of the latter within and considering their respective legal and economic context. By way of example, in the ‘analogue world’, the dismantling of the rail track in Lithuanian Railways16 left no explanation other than the aim to hinder competition. Thus, the qualification of the latter as prima facie abuse was a logical consequence and inevitable result. However, in case the object and purpose of a measure can, considering all the circumstances, not be qualified as harmful by its very nature, which means, that it is very likely to have a harmful impact or effect on competition, the latter should be treated according to its effects. Put differently, if a practice appears ambiguous from a competition law perspective (again, in light of the given circumstamces of a case) it should be subject to effect analysis. A fact which is, inter alia, owed to the uncertainty as regards a measure’s likely or potential effects. However, such uncertainty is not set in stone. Rather, it can alter over time by filling the lack of experience with actual experience gained. Put differently, and borrowed from Colomo ‘[t]he assumptions and presumptions underpinning a particular ruling may seem accurate at the time when it is handed down. [However,] [i]t may become clear at a subsequent stage the premises on which they were based are at odds with the experience and the knowledge acquired over the years.’17 Against this backdrop, it will be shown that with respect to Article 101 TFEU cases, the ECJ seems to stick to its approach as developed by means of its case law in 14

For more details to this effect, see below Sect. 6.3.2.3. OECD (2020), Abuse of dominance in digital markets, available at accessed 6 February 2023 (‘OECD Dominance in Digital Markets Report’), p. 8. 16 Lithuanian Railways (Chap. 1, n 42); Lithuanian Railways ECJ (Chap. 1, n 42). 17 Colomo (Chap. 4, n 1), p. 734. 15

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the analogue world regarding those cases that have already occurred and been subject to scrutiny of the ECJ in an online environment. However, as regards (genuine) new practices, there seems to be a tendency of the Commission to qualify them as object restriction of competition. Notwithstanding the fact, however, that there might be controversial voices as regards their detrimental nature and thus their anticompetitive impact or effect on competition. Put differently, even if there is no consensus as regards a measure’s ambiguous or unambiguous effect or impact on competition, the Commission tends to qualify it as restrictive by object. This is, in my view, at odds with the notion of an object restriction as only measures that are inherently detrimental should qualify as object restriction. Moreover, if put into the object box, we might end up blurring the line between a context analysis necessary in object cases and a full-effect analysis as required in effect cases. A phenomenon which exists and has also been emphasised as regards practices occurring in the offline world.18 This is owed to the fact that the analysis of all the circumstances in borderline cases, that is, the legal and economic context within which a measure occurs, tends to be fairly extensive. Examples mentioned in the context of analogue markets provide reverse payment settlement agreements and quantity rebates with a loyalty or fidelity inducing mechanism or effect.19 Moreover, there is a need to keep in mind that as regards Article 102 TFEU cases in the digital economy, the underlying debate seems to be more fundamental. The online environment has the potential to alter the functioning of our markets massively, as digital markets are prone to concentration, tipping and leveraging practices which might lead to a situation where well established or ‘cemented’ market power cannot be overcome by, as Adam Smith put it, the invisible hand, that is, the selfregulating capacity of the market itself. In other words, the already existing and argubaly entrenched market power of some internet giants seems to threathen the functioning of our worldwide economy in such a fundamental way, which challenges not only the enforcement and application of the law of abuse of dominance, but rather requires a holistic strategy to beat off the latter challenges. Consider to this effect, for example, the EU Digital Markets Act,20 as well as the report of the Subcommittee of the US Committee on the Judiciary investigating into competition in digital markets.21 Hence, notwithstanding the fact that Article 102 TFEU and the various extisting laws of abuse of dominance and monopoly power existing in the international landscape might provide for suitable tools and a flexible enough22 framework as regards the assessment of abuse of dominance occurring in the online environment, ‘[t]hese frameworks cannot, however, address every digital market

18

That is, loyalty rebates and reverse payment settlement agreements. See above under Sects. 3.7.4 and 4.4.2. 20 Digital Markets Act (Chap. 5, n 34). 21 US Congress House, Committee on the Judiciary, Subcommittee on Antitrusr, Commercial, and Administrative Law, Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations (United States 2020). 22 Eben (2018), p. 135. 19

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policy concern’, as ‘[t]he debate about abusive conduct by large digital firms is a [. . .] microcosm of the broader discussion about competition in digital markets.’23 Nevertheless, it will be shown that the development of a robust theory of harm paired with the willingness to increase effect-analysis would provide for a suitable approach to face the latter challenges mentioned.

6.2 6.2.1

Article 101 TFEU Cases in the Digital Economy General Remarks

The following section shall shed light on those competition cases concerning Article 101 TFEU, which have already occurred against the backdrop of the online environment. Interstingly, opposed to abuse of dominance cases in the digital economy, cases concerning Article 101 TFEU in the online environment, that is, cases which demonstrate, one way or another, a certain link to the digital economy are rather seldom. A fact, which might be owed to the fact that the online envorinment is prone to concentration of market power and leveraging practices. A development which, as a consequence, makes Article 102 TFEU a prime candidate for application. However, there are at least some cases, which show a certain degree of interconnection with online markets, such as, for example, the judgements of the ECJ in Eturas24 and Coty,25 as well as the Commission’s decisions as regards RPM in the E-Commerce sector26 and the commitment decision concerning MFN clauses in Amazon.27 The focus obviously lies with cases that have occurred at the European level. However, where necessary and appropriate for the European debate, national28 cases will be included in the analysis. Hence, the German decisions in Asics29 and Adidas30 in the context of the ECJ’s decision in Coty,31 for example, as well as

23

OECD Dominance in Digital Markets Report (n 15) 7. Eturas (n 3). 25 Coty (Chap. 3, n 158). 26 See below Sect. 6.2.3. 27 E-book MFNs and related matters – Amazon (Case AT.40153) Commission Decision of 4 May 2017, C(2017) 2876 final (Decision Summary published 2017 OJ C264/7) (Amazon). 28 With a focus on German cases. 29 FCO decision of 26 August 2015, case B2-98/11, approved by the Düsseldorf Higher Regional Court, decision dated 5 April 2017, VI-Kart 13/15 (V), ECLI:DE:OLGD:2017:0405.VI. KART13.15V.00, approved by the German Federal Supreme Court (Bundesgerichtshof), decision dated 12 December 2017, KVZ 41/17, ECLI:DE:BGH:2017:121217BKVZ41.17.0 (Asics). 30 FCO decision of 27 June 2014, case report dated 19 August 2014, case B3-137/12 (Adidas). 31 Coty (Chap. 3, n 158). 24

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national decisions as regards MFN clauses in NRS32 and Booking33 in the context of the Commission’s commitment decision in Amazon34 will be subject to analysis. Glancing through the case law of Article 101 TFEU practices in the online environment, various means have already been subject to scrutiny under the formal heading of Article 101 TFEU. The case law inter alia concerns bans as regards specific distribution channels (that is, the internet or in particular certain platforms or marketplaces), concerted practices implemented by a platform as intermediary, as well as RPM and MFN clauses, that is, the online equivalent to RPM in the analogue world.

6.2.2

Eturas35

The question to be answered by the ECJ in its preliminary ruling in Eturas concerned the online booking system of Eturas (provider) in Lithuania enabling more than 30 Lithuanian travel agencies to provide their services and offers in a uniform manner. Via its system, Eturas implemented a mutual cap on discounts (of 3%) applicable to services and offers provided through its online booking platform. Eturas, prior to its implementation, communicated the cap for the discounts via the internal messaging service of the booking system. Thus, each travel agency being part of the Eturas-network received a message informing the latter about the mutual discount cap of 3%. Moreover, the message which was only accessible in the respective section of the booking system (under the heading information messages36), there is only record of two agents actually having accessed it. Furthermore, neither of the agents replied or distanced itself publicly from the intended practice.37 Theoretically, a change of the discount by the travel agents was possible, notwithstanding the fact, however, that such change would have required additional technical actions or intervention.38 Thus, the automated system lead to a de facto uniformly applied discount. Considering the facts and specific circumstances of the case (see immediately below), the ECJ qualified the latter behaviour as concerted practice, which had been implemented via automatic system.

32

FCO (Bundeskartellamt) decision of 20 December 2013, case B9-99/10 (HRS). FCO (Bundeskartellamt) decision of 22 December 2015, case B9-121/13 (Booking). 34 Amazon (n 27). 35 Eturas (n 3). 36 Alfonso Lamadrid, ‘ECJ’s judgement in Case C-74/14, Eturas (on the scope of “concerted practices” and on technological collusion)’, Chillin’Competition Blog, available at accessed 6 February 2023. 37 Ibid. 38 Eturas (n 3), para 43. 33

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It appears obvious, that such practice is at odds with Article 101(1) TFEU provided an agreement or concerted practice can indeed be established. Therefore, the crucial question of law in this respect lay with the notion of a ‘concerted practice’ (acting as ‘catch-all’ clause for all those practices and measures, which are not caught by the notion of an ‘agreement’39). In other words, that the exchange of the respective information together with the automatism as regards the discount cap and its ensuring of a uniform application of the price disounts constituted an object restriction of competition, provided the awareness level necessary for the respective undertakings being part of the concerted practice was met, is uncontroversial. Rather, there was no doubt as regards the detrimental nature of the practice as such, given the existence of an agreement or concerted practice. Hence, it was the question whether the facts of the case allowed the ECJ to actually establish the existence of a concerted practice, which bothered the Court.40 The ECJ answered this question in the affirmative. Hence, the case in Eturas concerned a naked restriction of competition, namely a ‘hub and spoke’ or ‘star cartel’. The fact that the practice occurred in an online environment and that automated technology was used in order to implement the latter does not change the detrimental nature of the practice to competition. In other words, the internet and technology were used as a means to collude and exchange sensitive information; however, this does not render a practice any less harmful or ambiguous from an antirust harm perspective. Therefore, considering all the circumstances and the respective practice concerned (i.e. exchange of sensitive information) in Eturas, the judgement provides a good example of a measure falling under Category I as defined above.

6.2.3

Commission Cases in Asus,41 Denon & Marantz,42 Philips43 and Pioneer44

A similar line of argument applies to the fines imposed by the Commission by means of prohibition decisions (pursuant to Article 7 Regulation (EC) 1/2003) upon four manufacturers of consumer electronics, namely Asus, Denon & Marantz, Philips and

39 In Whish and Bailey’s words, ‘the inclusion of concerted practices within Article 101 means that conduct which is not attributable to an agreement or a decision may nevertheless amount to an infringement’; see Whish and Bailey (2021), p. 117. 40 As regards an analysis on the scope of ‘concerted practices’ and the ECJ’s judgement in Eturas, see Lamadrid (n 36). 41 Asus (AT.40465) Commission Decision of 24 July 2018. 42 Denon & Marantz (AT.40469) Commission Decision of 24 July 2018. 43 Philips (AT.40181) Commission Decision of 24 July 2018. 44 Pioneer (AT.40182) Commission Decision of 24 July 2018.

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Pioneer, for having fixed online resale prices.45 The cases concerned fixed or minimum resale price maintenance in the e-commerce sector as regards various products, such as, kitchen appliances, notebooks and hi-fi products. The measures implemented by the manufacturers mentioned restricted the ability of their online retailers to set their prices independently. Notwithstanding the debatable nature of RPM,46 based on the current policy standpoint of the EU courts and the Commission as regards RPM, the decisions are anything but a surprise. Fixed or minimum resale price maintenance, opposed to recommended resale prices as well as maximum retail prices,47 are considered detrimental to competition by their very nature, that is, they qualify as object restrictions. Therefore, similar to the practice in Eturas, technology, that is, inter alia, pricing algorithms automatically adapting retail prices used by retailers as well as ‘sophisticated monitoring tools’48 used by the manufacturers to effectively track the retailer’s price setting, were applied by the undertakings to implement the price strategy and keep prices on the markets at a minimum level. Furthermore, deterrence factors to ensure the retailers’ compliance with the price strategy, such as, for example, the threat of blocking supplies, were deployed.49 Thus, in the cases against Asus, Denon & Marantz, Philips and Pioneer, new technologies were also used as a means to an end. However, they did not have an impact on or question the detrimental nature of the respective practice (that is, RPM). Hence, considering all the circumstances in the decisions in Asus, Denon & Marantz, Philips and Pioneer and the respective price-fixing practices (i.e. RPM) of the undertakings concerned, the decisions provide good examples of a measure falling under for Category I as defined above. As a last point, it shall again be emphasised that there might be a need to overthink the EU policy approach as regards RPM50 and, in particular, online RPM. As recognised in the literature,51 RPM might be a source of procompetitive effects by fostering both, intra-brand and inter-brand competition.52 Moreover, also free-riding ‘is an important element in the minimum RPM debate’.53 That the online environment fuels the debate as regards RPM seems also to be echoed in the fact that

45

European Commission Press Release, IP/18/4601 (24 July 2018). See above Sects. 3.3 and 3.1.3. 47 Genuine recommended resale prices (and not tacitly agreed upon) as well as maximum resale prices are considered being a harmless form of RPM; see in this respect Vertical Guidelines (Chap. 3, n 84) para 187 et seq. 48 Ibid. 49 European Commission Press Release, IP/18/4601 (24 July 2018). 50 Arguing similarily, Colangelo (2017), p. 13. 51 For example, Akman and Sokol (2017); Ioannidou and Nowag (2015). 52 OECD, ‘Roundtable on Resale Price Maintenance’ (2008), DAF/COMP(2008)37, available at accessed 6 February 2023, pp. 29 et seq. 53 Ioannidou and Nowag (2015), p. 11. 46

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‘shifts in antitrust policy in the United States and Europe regarding RPM occurred just as Internet markets began to flourish’.54 However, whereas the US could be considered as pioneer by abolishing the per se approach to RPM replacing the latter by an effects-based analysis, namely the rule or reason,55 the revision of the Commission’s approach to RPM has not shifted as radically. Although the 2022 Guidelines on Vertical Restraints56 recognise potential efficiency benefits of RPM,57 the by object standard in Europe seems to prevail tenaciously.

6.2.4

Coty58

The case reached the ECJ by request for preliminary ruling as regards the selective distribution system operated by Coty Germany GmbH (‘Coty’), a company selling luxury cosmetics in Germany. The distribution agreement contained restrictions with respect to online sales of Coty’s products. Hence, Coty’s distributors were obliged to use ‘an “electronic shop window” of the authorised store’.59 Furthermore, they were required to ensure that ‘the luxury character of the products is preserved’.60 Moreover, according to the selective distribution system also the ‘use of a different business name as well as the recognisable engagement of a third-party which is not an authorised retailer of Coty’61 was prohibited. The questions answered by the Court in Coty concerned the legality of Coty’s selective distribution system in its entirety.62 Arguably, the respective criteria necessary to render selective distribution compliant with Article 101(1) TFEU were met.63 This is crucial, as ‘it makes a difference whether a ban on online sales is imposed on a supplier (i) within a pure selective distribution system[64] (falling outside Article 101(1) TFEU) or (ii) within a selective distribution network which is compliant with the [Vertical Block Exemption Regulation 201065], that is,

54

Akman and Sokol (2017), p. 136. United States Supreme Court in Leegin (Chap. 3, n 78). 56 Vertical Guidelines (Chap. 3, n 84). 57 Vertical Guidelines (Chap. 3, n 84), para 197. 58 Coty (Chap. 3, n 158); for an extensive analysis of the decision in Coty see: Zelger (2018). Hence, the main reasoning here is similar to my argument in the aforementioned publication. 59 Coty (Chap. 3, n 158), para 15. 60 Ibid. 61 Coty (Chap. 3, n 158), para 15. 62 Zelger (2018), p. 446. 63 Coty (Chap. 3, n 158), paras 24 et seq and 38; Zelger (2018), p. 446. 64 The notion is to be understood as a selective distribution system meeting the criteria rendering it lawful/compliant with Article 101 (1) TFEU as established by the ECJ in Metro (Chap. 3, n 156). 65 Vertical Block Exemption Regulation 2010 (Chap. 3, n 164). 55

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presumably exempted from, rather than compliant with Article 101(1) TFEU only’.66 In other words, in Coty, the Court’s framework within which it had to assess the restrictive clause (that is, the ban on online sales) was a ‘selective distribution system being compliant with Article 101(1) TFEU’.67 However, this was different in case of, for example, the ECJ’s assessment in Pierre Fabre.68 which could be argued to be at odds with the subsequent ruling in Coty. In Pierre Fabre, however, the Court did not have to assess a selective distribution system in its entirety. Rather, it was for the ECJ to look at a specific clause within an operated selective distribution system being compliant with the Vertical Block Exemption Regulation 2010, not however, falling outside Article 101(1) TFEU altogether (by meeting the so-called Metro-criteria69). As the goods in Pierre Fabre were of non-luxury nature, they did not merit selective distribution. In Coty, however, they did,70 which explains the different outcome and assessment of the clauses in the latter cases.71 Thus, the restrictions as regards online sales in Coty were held not to be in breach with the competition law provisions.72 Consequently, bans on online sales, given specific circumstances (that is, a pure selective distribution system merited by, for example, the luxury nature of the respective products) are not restrictive of competition by object. Moreover, in light of the underpinning reasons of selective distribution, the ECJ’s decisions also seems compliant with the standards applied in real world markets. Put differently, with its decision in Coty, the ECJ seems to have transferred to the online world, what holds to be true in the analogue world. Take for example, the analogue equivalent of export bans. As argued elsewhere,73 it appears—at first glance— reasonable to condemn online sale bans per se, as their analogue equivalents of export bans qualify as by object restriction of competition. However, ‘that is when the law of selective distribution comes into play and sheds a different light on the deleteriousness of such bans’.74 As illustrated above,75 in Javico,76 for example, the ECJ considered export bans in a selective distribution agreement to be assessed according to their actual effects.77 Particularly important in this regard, as in Coty,

66

Zelger (2018), p. 461. Zelger (2018), p. 448. 68 Pierre Fabre (Chap. 3, n 10). 69 See above under Sects. 3.3.2–3.3.2.2. 70 Coty (Chap. 3, n 158) 38. 71 Full particulars as regards this argument, please see Zelger (2018). 72 Coty (Chap. 3, n 158) 58. 73 Zelger (2018), p. 454. 74 Zelger (2018), p. 455. 75 See Sect. 3.3.2.3. 76 Javico (Chap. 3, n 171). 77 Javico (Chap. 3, n 171), para 21. 67

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the products concerned were ‘luxury products’78 actually meriting the operation of a selective distribution system.79 Thus, in both cases, Javico and Coty, the factual backdrop within which the respective bans occurred were similar. Therefore, in light of the foregoing and against the background of selective distribution, it seems reasonable to consider online sale bans being ‘restrictive to competition, however, considering their actual effects [. . .] rather than a restriction to competition by object’.80,81 Hence, considering all the circumstances in Coty and the respective ban on online sales occurring within a pure selective distribution system falling outside the scope of Article 101 TFEU, the decision provides another example of a measure of Category I as defined above, as it is perfectly in line with the principles and standards established as regards sales bans in the context of analogue markets. Another aspect worth mentioning in this respect is the fact that such online sale bans within selective distribution agreements are suitable means to curb the free rider problem (as is RPM). As stressed earlier, the internet exacerbates free-riding and thus affects competition where online retailers compete with traditional brick and mortar shops. Hence, against this backdrop, that is, the fact that the free-rider concern is undoubtedly an issue in online and internet markets, it might, although not explicitly referred to by the ECJ, thus have implicitly influenced the decisional outcome in Coty.82 The luxury nature that warrants selective distribution and therefore allows restrictions as regards the distribution of the respective products runs in the same vein as any other means that combats free-riding (such as the abovementioned example of RPM guaranteeing a minimum resale price level and hindering free-riders to undercut prices benefitting from ‘showrooming’ of customers83). Furthermore, as argued elsewhere,84 it shall be emphasised that the different outcome in Pierre Fabre85 and the German decisions in Asics86 and Adidas87 are not inconsistent, but rather compatible with the ECJ’s ruling in Coty.88 Moreover, for the sake of completeness, it seems important to note that such view also echoes

78

Yves Saint Laurent Parfums (Case No IV/33.242) Commission Decision 92/33/EEC [1992] OJ L12/24 (Yves Saint Laurent Parfums) para II.A.5. 79 Ibid. 80 Zelger (2018), p. 4457. 81 Full particulars as regards this argument, please see Zelger (2018) under 3.2 Selective distribution and export bans – lessons to be learnt from “real world” markets?. 82 Ibid. 83 According to Luo et al. ‘[a] typical shopping scenario nowadays is that shoppers browse and try the products offline and then buy them online from a competing retailer. This phenomenon is commonly described as “showrooming”.’ (Luo et al. 2014). 84 See Zelger (2018). 85 Pierre Fabre (Chap. 3, n 10). 86 Asics (n 29). 87 Adidas (n 30). 88 Full particulars as regards this argument, please see Zelger (2018).

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the Commission’s approach as set out in its former Vertical Guidelines 201089 as well as its (revised) Vertical Guidelines 2022.90

6.2.5

Most Favoured Nation Clauses: Amazon,91 NRS92 and Booking93

Another practice leaving the competition law community divided are MFN clauses, also called antidiscrimination, price parity or most-favoured-customer clauses.94 Various EU and national cases, such as, for example, Amazon, NRS and Booking serve as proof in this respect. MFN clauses ‘involve a promise by one party—for example, a seller—to treat a buyer as favorably as the seller treats its best customer’.95 Therefore, in essence, such clauses lead to uniformity as regards the treatment of customers or buyers by a supplier.96 At first glance, this seems to be advantageous for customers. However, MFN (also in offline markets) and their potential effects on competition have been subject to controversy and extensive debate in the literature.97 However, the peculiarities and characteristics of the internet and online markets further fuel such debate and make the assessment of MFN even more complicated. The usual suspects to be mentioned in this respect: platforms (platform business models) as intermediaries in two-sided markets combined with characteristics such as the decline of price asymmetries and an increase of market transparency and speed. (For further details in this respect see below Sect. 6.2.5.2)

6.2.5.1

Amazon, NRS and Booking: The Jungle of EU and National Cases

There are several cases concerning MFN at both, the national as well as the EU level. MFN clauses in agreements concluded between Booking (a platform provider for online hotel bookings) and hotels, for example, have been targeted by various national competition authorities, namely in France, Italy, Sweden and Germany.

89

Vertical Guidelines 2010 (Chap. 3, n 165), para 54; for details see Zelger (2018), pp. 457–458. Vertical Guidelines (Chap. 3, n 84), para 208 et seq. 91 Amazon (n 27). 92 HRS (n 32). 93 Booking (n 33). 94 Baker (1996), p. 519. 95 Akman and Sokol (2017), p. 137. 96 Baker (1996), p. 519. 97 See, for example, Colangelo (2017), p. 5 and particular the references made in note 11. 90

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Whereas the French, Italian and Swedish competition authorities accepted commitments from Booking revising the disputed MFN clauses by actually narrowing them down in scope.98 The German Federal Cartel Office issued prohibition decisions, however with respect to both the original ‘wide’ MFN as well as the (in terms of scope) revised and adapted ‘narrow’ MFN99 that have been accepted by the French, Italian and Swedish competition authorities. For details as regards the notions of ‘wide’ and ‘narrow’ MFN, see immediately below Sect. 6.2.5.2. Moreover, such approach as regards a ban on both, that is, wide and narrow MFN was confirmed by the German Federal Court of Justice.100 Furthermore, in 2012 and 2013 investigations in the UK and Germany into the use of MFN clauses101 on Amazon Marketplace were closed upon Amazon’s announcement to abolish the respective disputed clauses.102 Thus, there is not only a lack of uniformity as regards the treatment of MFN clauses in the national competition law landscape in Europe, but also a lack of formal decisions (notwithstanding the ones concerning Booking in Germany) of the administrative authorities as well as of the courts. Furthermore, various national legislative initiatives103 banning MFN provide another aspect further fuelling the debate. However, the Commission’s new VBER104 as well as the revised Vertical Guidelines105 clarify the treatment of Commission of narrow and wide MFN clauses.106 Hence, while narrow MFN clauses shall profit from the safe harbour of the VBER, wide MFN clauses, however, shall not. The latter are subject to an individual assessment and thus case-by-case analysis. In light of legal certainty considerations as well as the aim for a uniform standard as regards the treatment of MFN at the European level, such mosaic in the decisional and legal landscape within the EU seems rather problematic.107 Moreover, in this 98 French Competition Authority (Autorité de la concurrence), decision 15-D-06 dated 21 April 2015 (Booking France); Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato), decision dated 21 April 2015 (Booking Italy); and Swedish Competition Authority (Konkurrensverket) Decision 596/2013 dated 15 April 2015 (Booking Sweden). 99 FCO decisions in HRS (n 32) and Booking (n 33). 100 German Federal Court of Justice (Bundesgerichtshof), decision dated 18 May 2021, KVR 54/20 (German Federal Court of Justice Booking). 101 The case concerned clauses that were wide in scope. Thus, they qualified as ‘wide MFN’ (see below Sect. 6.2.5.2). 102 FCO (Bundeskartellamt), decision dated 26 November 2013, case B 6 – 46/12 (Amazon Germany) and FCO decision in Booking (n 33); Office of Fair Trading (predecessor of the UK Competition and Markets Authority), case CE/9692/12 closed November 2013 (Amazon UK). 103 In Austria, France Italy and Belgium; for details see below under Sect. 6.2.5.3. 104 VBER (Chap. 3, n 159). 105 Vertical Guidelines (Chap. 3, n 84), paras 356 et seq. 106 For a detailed overview and analysis of the amendments (on the basis of the Commission’s draft of new VBER and new Vertical Guidelines) see: Zelger (2021). 107 Arguing similarly and shedding light on the risk of fragmentation of EU competition law more generally: Alfonso Lamadrid, ‘Against the Fragmentation of EU Competition Law: A Proposal for Reform’, Chillin’Competition Blog, available at accessed 6 February 2023. 108 E-books (AT.39847) Commission decision of 12 December 2012 (Apple E-books) and Amazon (n 27). 109 Apple E-books (n 108). 110 European Commission Press Release, IP/12/1367 (13 December 2012). 111 Chappatte et al. (2018). 112 Amazon (n 27). 113 Chappatte et al. (2018). 114 VBER (Chap. 3, n 159). 115 Vertical Guidelines (Chap. 3, n 84). 116 Argued similarly: Zelger (2021), pp. 180 et seq. 117 A Report Prepared for the OFT by LEAR – Laboratorio di economia, antitrust, regolamentazione: ‘Can “Fair” Prices be Unfair? A Review of Price Relationship Agreements’ (2012) available at accessed 6 February 2023 (LEAR). 118 Which was, by way of the Enterprise and Regulatory Reform Act 2013, succeeded by the Competition and Markets Authority as well as the Financial Conduct Authority.

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Fig. 6.1 Offline MFN clauses

Fig. 6.2 Online MFN clauses

whereby its price to buyers (either firms or final consumers) is related to another price’.119 Such definition captures a variety of different pricing policies, such as, for example Price Matching or Price Beating Guarantees, Most Favoured Nation (or Customer) Clauses as well as Across-Platforms Parity Agreements.120 Somehow inherent to the nature of diversity, these various forms of agreements are different as regards their concerns from an antitrust perspective as well as with respect to their potential benefits. Notwithstanding the EU approach as regards RPM, for example, there do exist good reasons for online RPM to be treated differently than traditional, offline RPM.121 As emphasised repeatedly, the aggravated free-rider concern in the online environment plays an important role and offers a strong argument to this effect. Furthermore, as carved out by Akman and Sokol there is also a difference between traditional MFN and MFN occurring in the online environment122 (as regards the differences, see Figs. 6.1 and 6.2). By way of example, MFN clauses in the analogue world are concluded between sellers and buyers directly (see Fig. 6.1). Thus, the purchase conditions of different customers by the same seller are linked to one

119

LEAR (n 117) 1. LEAR (n 117) 2 et seq. 121 Akman and Sokol (2017), pp. 133 and 138. 122 Akman and Sokol (2017), pp. 137 et seq. 120

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another.123 However, as regards MFN in the online world, such agreement or clause is agreed upon between a platform and a supplier, the former acting as an intermediary between suppliers and customers on a two-sided market124 (see Fig. 6.2). Consequently, online MFN are not about providing assurance to customers. Rather, they are about to assure the platform not to be undercut. Furthermore, whereas in the offline world the beneficiary of the clause is, at the same time, party to the respective agreement or clause (that is, the agreement between the supplier and its customer), as regards the online environment, the beneficiary of such agreement or clause is actually a third party. In other words, the customer benefitting from the MFN clause is not part of the agreement concluded between the supplier/manufacturer and the platform, however, benefitting from the latter. Considering the above, it becomes apparent that online MFN ‘link the prices that are offered to the same customer for purchases from different outlets (platforms)’,125 consequently ‘they are closer to “price matching guarantees” (PMGs) than are traditional MFNs’.126 Put differently, they are prone to prevent price competition between platforms.127 Furthermore, the characteristics of the internet itself, that is, price transparency as well as the reduction of information asymmetries further aggravate the above peculiarities of online MFN. Moreover, also the role of the respective business model used by the customer has been discussed to be essential as regards the anticompetitive effects resulting from MFN clauses. In this respect, it has been argued that MFN clauses used alongside the agency model, which is used by a variety of online players, such as, for example Amazon or Ebay, might lead to higher prices.128 According to Johnson the Agency model ‘refers to a supply chain in which suppliers (rather than retailers) set final retail prices and in which sales revenue is split between suppliers and retailers according to endogenously determined shares’.129 However, such price increase or effect is lacking when MFN are used within a traditional ‘wholesale model’, that is, a system where the retailer determines retail prices to sell the respective products to its customers and pays a wholesale price to its manufacturer/supplier. Thus, opposed to the agency model, there is no revenue-sharing term between the supplier and the retailer, but a wholesale price to be paid by the retailer to the supplier.130 Further-

123

Ibid. Akman and Sokol (2017), pp. 137 et seq. 125 Akman and Sokol (2017), p. 137. 126 Ibid. 127 Peeperkorn (2017), para 24. 128 Johnson (2017). 129 Johnson (2017), p. 1. 130 Johnson (2017), p. 3. For details as regards the wholesale and agency model as well as other business models, namely the franchise and consignment model see Johnson (2017), pp. 2 et seq. 124

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more, given specific circumstances, MFN might also lead to foreclosure. Hence, market entry for potential competitors might become more difficult.131 However, there are also procompetitive effects of online MFN that have been uncovered, such as, for example, efficiency benefits as the enabling platform may protect its investments made ‘to provide pre-purchase services to buyers such as reviews or advice’.132 In this respect, MFN might also curb free rider concerns as platforms might defend their investments in quality by hindering other platforms to free ride on them.133 Furthermore, efficiency is claimed to be gained by the reduction of (i) transaction costs (in particular bargaining and search costs)134 and (ii) delays in the act of purchase/contracting.135 In addition, with respect to online markets, there have been established two different types of MFN clauses, differentiated by their scope and their respective effects, i.e. the abovementioned wide and narrow MFN clauses.136 In case of a narrow MFN clause, the platform provider and the upstream supplier agree that the price as well as terms and conditions offered by the upstream supplier on its own website do not beat the price and purchase conditions offered for the same products or services through the platform of the platform provider. In case of wide MFN clauses however, such clause ensures that the price and purchase conditions are not undercut on any other supply channel. In other words, by means of a wide MFN clause, any other platform, online marketplace or distribution channel is also covered. Therefore, narrow MFN are considered being less prone to restrict competition.137 However, there is no consensus as regards narrow MFN providing ‘an adequate balancing formula’138 for the establishment of a competition law infringement. Take for example the German Federal Court of Justice139 following a stricter approach, thereby confirming the German Federal Cartel Office’s assessment approach,140 as it considered prohibition decisions justified not only with respect to wide MFN, but also regarding narrow MFN.141 Needless to mention in this respect that it is regrettable that the German Federal Court of Justice did not take the chance and submit a preliminary reference to the ECJ. The above shows that MFN clauses are—from an economics perspective— controversial, as the latter ‘may generate a mixture of effects which vary depending on the scope of the clause, the nature of distribution [such as, for example, the

131

Peeperkorn (2017), para 24. Akman and Sokol (2017), p. 139. 133 LEAR (n 117) Executive Summary, para 0.37. 134 Colangelo (2017), p. 6. 135 Ibid. 136 Ezrachi (2015), p. 489; Colangelo (2017), p. 5. 137 Ezrachi (2015), p. 506. 138 Colangelo (2017), p. 13. 139 German Federal Court of Justice Booking (n 100). 140 See above Sect. 6.2.5.1. 141 HRS (n 32) and Booking (n 33). 132

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wholesale vs the agency model] and the characteristics of the relevant market’. Thus, MFN are subject to economic ambiguity and do their pro- or anti-competitive effects depend on a variety of different factors, such as, to name further examples ‘the characteristics of the market, the specifics of the clause; and the nature of the seller that offers it’.142 Consequently, as stressed by Ezrachi the analysis of parity clauses is ‘[n]aturally [. . .] fact-intensive and dependent on the market context’.143 Against this backdrop to recommend the treatment of price relationship agreements, such as MFN or price parity clauses, according to their effects does not seem far-fetched. Rather the arguments for an effects-approach appear to be particularly strong considering the ambivalent nature as regards the potential or likely effects of online MFN.144 Moreover, taking account of the fact that (economic) experience as regards online MFN seems rather limited, such approach seems further reasonable. Thus, voices pleading ‘for an economics-based approach [. . .] and the need to move away from virtual per se treatment in Europe’145 are anything but unsubstantiated. Considering the ambiguous nature of MFN clauses as well as the fact that an assessment of the latter requires a consideration of a variety of different factors, it is my view that MFN clauses provide for a perfect candidate of a measure of Category II defined above. Put differently, as illustrated by Akman and Sokol, as there is a difference between traditional MFN and MFN occurring in the online environment,146 the refinement of the approach as regards the assessment of MFN in the online environment appears reasonable.

6.2.5.3

Uniform Competition Law Application vs. National Solutions

Notwithstanding the Commission’s approach to wide and narrow MFN clauses in its (revised) VBER147 and Vertical Guidelines,148 there is not yet a uniform European approach as regards MFN clauses established. Not only have national competition authorities’ adopted different approaches as regards the assessment of MFN from a competition law perspective, but also did national legislators (re)act indepenendtly to the problems and issues related to MFN by ways of legislation prohibiting MFN. Take for example, Austria,149 where the legislator decided to prohibit MFN by

142

Akman and Sokol (2017), p. 139. Ezrachi (2015), p. 519. 144 Colomo (2020c) para 20. 145 Akman and Sokol (2017), p. 148. 146 Akman and Sokol (2017), pp. 137 et seq. 147 VBER (Chap. 3, n 159). 148 Vertical Guidelines (Chap. 3, n 84). 149 Addendum to the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb) Z 32 amended by Federal Law (Bundesgesetz, mit dem das Bundesgesetz gegen den unlauteren Wettbewerb 1984 – UWG und das Preisauszeichnungsgesetz geändert werden) Federal Law Gazette (BGBl.) I Nr. 99/2016 (in force since 1. 1. 2017). 143

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qualifying and explicitly mentioning150 them in the list of ‘aggressive commercial practices’ (aggressive Geschäftspraktiken), which are, according to the Austrian Unfair Competition Act (Bundesgesetz gegen den unlauteren Wettbewerb), prohibited by law. Furthermore, also France,151 Italy152 or Belgium153 implemented laws in order to combat the challenges imposed by MFN. Apparently, such uncoordinated, independent national initiatives as well as the lack of a uniform competition policy approach at EU level leads to a mosaic and rag rug as regards the treatment of MFN clauses. Arguably, from a European integration perspective as well as in light of the existence of a European Competition Network (‘ECN’) since 2004, which was established in order to ‘ensure that the same rules are applied consistently throughout the enlarged EU and that the work-sharing is as efficient as possible’,154 such development seems anything but pleasing. Firstly, because ‘the welfare effects of the two approaches adopted under competition law, banning all price parity clauses or banning only wide price parity clauses, are as yet unclear’.155 Thus, the respective legislators might have acted prematurely when having adopted an absolute ban on MFN (of any form whatsoever). Secondly, it is not yet clear whether such rules also infringe EU law, as the respective national laws ‘can probably be challenged as restrictions on the provision of services’.156 However, given the (revised) VBER157 and Vertical Guidelines 2022158 the approach as regards wide and narrow MFN clauses of the Commission provided therein might have a unifying impact on the treatment of the latter within the EU.159

6.2.6

Interim Conclusion

Considering an economics perspective, what holds to be true in offline markets does not necessarily and always need to be true in the context of online markets. Hence,

150

See Z 32 Addendum of the Austrian Unfair Competition Act. Loi n. 2015-990 du 6 aout 2015 pour la croissance, l’activite et l’egalite des chances economiques (which entered into force on 1 October 2016). 152 Article 50, Legge annuale per il mercato e la concorrenza, 04/08/2017 n° 124, G.U. 14/08/2017 (in force since 29 August 2017). 153 Act on pricing freedom for tourist accommodation operators in contracts concluded with online reservation platform operators, adopted on 19 July 2018. 154 Website of the European Competition Network available at accessed 17 December 2019. 155 Monti and Augenhofer (2018), p. 21. 156 Ibid. 157 VBER (Chap. 3, n 159). 158 Vertical Guidelines (Chap. 3, n 84). 159 Argued similarly in Zelger (2021), pp. 180 et seq. 151

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rules and standards as applied in the analogue world are not automatically adequate for the assessment of a practice occurring in an online environment. Moreover, also technology and new forms of collusion add on further complexity. Crucial in this respect remains whether the practice presumably being at odds with the competition provisions requires a novel assessment approach or whether such approach can remain unchanged as the practice at hand is ‘old wine in new bottles’ not requiring adaption. In other words, whether a measure occurring online that is familiar from analogue markets is to be qualified the same way as its equivalent offline depends on whether the measure was practiced in an online environment ‘only’ or whether ‘the online aspect added a relevant dimension for the competition law assessment by, for example, involving a platform’.160 It appears from the foregoing that there are both strands echoed in the case law concerning Article 101 TFEU, that is, one requiring a refinement of the assessment, as well as another one not doing so. As shown in the analysis of those cases of the ECJ that have already occurred in an online environment (that is, Eturas and Coty),161 the ECJ seems to stick to its rules and standards as developed by the case law as regards the analogue world.162 This is particularly welcome as the ECJ applies, by means of an analysis of the respective relevant context within which a measure occurs (i.e. context analysis), a coherent framework as well as sound standards and rules as regards both, cases occurring in an online as well as in an offline environment. With respect to the Commission, however, it is hard to come to a final conclusion as there is a lack of formal prohibition decisions dealing with measures different from those qualifying as object restrictions, such as RPM (see the cases in Asus, Denon & Marantz, Philips and Pioneer)163 in the online environment. Furthermore, also the Commission’s commitment decision in the Amazon case concerning MFN clauses164 does not provide for clarification to this effect. However, its clarification as regards its future treatment of narrow and wide MFN clauses as adopted in its revised VBER165 and Vertical Guidelines 2022,166 arguably does. A last point worth mentioning, considering a European perspective and dimension, as regards MFN clauses it should be aimed to achieve a uniform approach. In this respect, the Commission and the ECN could definitely exploit their potential as regards cooperation and coordination in the area of competition policy. Moreover, also national supreme courts in their capacity as ‘juge communautaire’167 are called

160

Akman and Sokol (2017), p. 146. See Sects. 6.2.2 and 6.2.4. 162 See Sects. 3.6 and 3.7. 163 See Sect. 6.2.3. 164 Amazon (n 27). 165 VBER (Chap. 3, n 159). 166 Vertical Guidelines (Chap. 3, n 84). 167 Terhechte (2020), p. 570. 161

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upon to thoroughly obey their duty to submit requests for preliminary ruling to the ECJ.

6.3 6.3.1

Article 102 TFEU Cases in the Digital Economy General Remarks

Arguably, digitisation moved the law of abuse of dominance to the very centre of competition enforcement worldwide and thus also the European Commission’s priority in the digital era. The prominent triad of the Google cases, that is, Google Shopping,168 Google Android169 and Google AdSense,170 as well as the pending Commission proceedings against Apple171 serve as proof to this effect. Another example are proceedings against Amazon,172 which were settled by means of commitments offered by Amazon in accordance with Article 9 of Regulation 1/2003.173 This increase of investigations in digital markets does not come as a surprise, in particular when taking account of the particularities of online markets and the digital economy as such, that is, the tendency of the latter to lead to concentration as well as the fact that, considering the given circumstances, such market power has, arguably, become entrenched.174 Nevertheless, the extensive market power of internet giants turns out to be an existential threat for at least some of the latter: ‘The’ social media giant Facebook, for example, is currently facing major lawsuits from the US government and 48 states and districts accusing it of anticompetitive behaviour and claiming the split up of the

168

Google Shopping (Chap. 4, n 52). Google Android (n 7). 170 Google AdSense (n 6). 171 Commission Proceedings in Case AT.40437 Apple – App Store Practices (music streaming) (Apple Music Streaming); Commission Proceedings in Case AT.40652 Apple – App Store Practices (e-books/audiobooks) (Apple E- and Audiobooks). 172 Case AT.40462 Amazon Marketplace (Amazon Marketplace); Commission Proceedings in Case AT.40703 Amazon Buy Box (Amazon Buy Box). 173 Regulation 1/2003 (Chap. 3, n 17). 174 See to this effect, above Sect. 5.2.1; Cremer et al. (2019), p. 112; Furman et al. (2019), p. 75; Australian Competition & Consumer Commission, ‘Digital Platforms Inquiry: Preliminary Report’ (December 2018), available at accessed 6 February 2023, p. 35; Heike Schweitzer et al, German Federal Ministry for Economic Affairs and Energy, ‘Modernising the law on abuse of market power – Summary of the report’s recommendations’ (4 September 2018), available at accessed 6 February 2023, p. 2. 169

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175

latter’s monopoly.175 Hence, competition law, and in particular the law of abuse of dominance, seems to provide one possible solution (among others such as, for example, regulation176) to react to the increasing concentration of market power and dominance in digital markets.177 Undoubtedly, the transforming power and potential of the online environment and digital markets to alter the functioning of our markets is recognised being immense. Hence, notwithstanding the fact that Article 102 TFEU and the laws of abuse of dominance or monopoly power might provide for suitable tools as regards the assessment of abuse of dominance occurring in the online environment, ‘[t]hese frameworks cannot [. . .] address every digital market policy concern’, as ‘[t]he debate about abusive conduct by large digital firms is a [. . .] microcosm of the broader discussion about competition in digital markets.’178 Against this backdrop, the following section shall provide an overview of those Article 102 TFEU cases which have, until to date, occurred within the online environment. The cases covered in the subsequent section mainly concern decisions of the European Commission and two decisions of the GC (Google Shopping179 and Google Android180) as, at the date of writing, the appeal decisions in the case Google AdSense181 pending at the GC as well as in the cases in Google Shopping182 and Google Android183 pending at the ECJ have not yet been issued. Moreover, while exciting and valuable, cases concerning the role of data and competition law (see, for example, the German Facebook184 case) or the free movement of services in general (see, for example, the ECJ decision in Uber185) will not be subject to an in-depth analysis. The latter are not dealt with in this monograph as they would go beyond its scope. However, as their existence again highlights the delicate nature of the digital era and the challenges imposed by the latter as regards a change in the way competition and society function, it seems at least worth to mention them.

175 Canon (2020). A motion to dismiss the case from Facebook was denied by the US Disrtict Court Coulumbia in January 2022: U.S. Federal Trade Commission v. Facebook Inc., 20-3590. 176 Digital Markets Act (Chap. 5, n 34). 177 Monopolies Commission Report (Chap. 5, n 36), paras 578–602. 178 OECD Dominance in Digital Markets Report (n 15), p. 7. 179 Google Shopping GC (Chap. 1, n 8). 180 Google Android GC (Chap. 1, n 8). 181 Case T-334/19 Google and Alphabet v Commission (Google AdSense) pending. 182 Case C-48/22 P Google and Alphabet v Commission (Google Shopping) pending. 183 Case C-738/22 P Google and Alphabet v Commission (Google Android) pending. 184 FCO decision of 6 February 2019, case B6-22/16 (Facebook) and the respective appeal decision of the Düsseldorf Higher Regional Court, decision dated 26 August 2019, VI-Kart 1/19 (V). 185 Case C-434/15 Asociación Profesioneal Élite Taxi v- Uber Systems Spain SL [2017] ECLI:EU: C:2017:981.

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6.3.2

Google Shopping

6.3.2.1

The Decisions of the Commission and the General Court

The case in Google Shopping concerned Google’s practice to self-favour its own comparison-shopping sites by displaying it prominently in the search result list of its search engine, that is, the Google search machine. Put differently, by giving its own services an advantage on its search platform, Google restricted and harmed competition on the downstream market for comparison-shopping services. Hence, the alleged abuse lies with the fact that Google systematically favoured its own comparison-shopping service in the Google search result list and thus treated it differently from those comparison-shopping services of its competitors as the former was ‘not subject to the same ranking mechanism as competing comparison shopping services [. . .]’.186 In the words of the Commission, Google abused its dominant position in the markets for general search services because the conduct constitutes a practice falling outside the scope of competition on the merits as it: (i) diverts traffic in the sense that it decreases traffic from Google’s general search results pages to competing comparison shopping services and increases traffic from Google’s general search results pages to Google’s own comparison shopping service; and (ii) is capable of having, or likely to have, anti-competitive effects in the national markets for comparison shopping services and general search services.187 (emphasis added)

Moreover, as regards the impact and effect of Google’s self-preferencing practice the EC explicitly stressed that the Commission is not required to prove that the Conduct has the actual effect of decreasing traffic to competing comparison shopping services and increasing traffic to Google’s comparison shopping service. Rather, it is sufficient for the Commission to demonstrate that the Conduct is capable of having, or likely to have, such effects.188 (emphasis added)

By the same token, however, the Commission also emphasised that it indeed had showed such effect and provided tangible evidence’.189 Therefore, while negating the need to prove an effect or impact of the self-preferencing practice on the market, the Commission nevertheless did so. Notwithstanding however, whether the effect proved by the Commission, that is, the decrease of traffic to competing comparison shopping services and the increase of traffic to Google’s services, indeed complies with the notion of effects and meets the respective standard required for the latter to be established.190 Arguably, equating a competitive disadvantage with harm to

186

Google Shopping (Chap. 4, n 52), para 378. Google Shopping (Chap. 4, n 52), para 341. 188 Google Shopping (Chap. 4, n 52), para 606. 189 Google Shopping (Chap. 4, n 52), para 607. 190 For more details as regards the argument that the EC did indeed not comply with the required standards for anticompetitive effects, see immediately below Sect. 6.3.2.3. Moreover, on the controversy regarding the notion of ‘anticompetitive effects’ and the respective standard of proof 187

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competition and thus recognise it being sufficient proof to have shown a measure’s anticompetitive effects disobeys the law as it stands.191 In its appeal decision in Google Shopping,192 the General Court has confirmed the by object path as chosen by the Commission. Moreover, the court explicitly stresses that ‘the promotion on Google’s general results pages of one type of specialised result—its own—over the specialised results of competitors involves a certain form of abnormality.’193 Hence, according to the GC, by its practice of self-preferencing Google departed from competition on the merits, due to the specific circumstances as set out by the Commission in its decision.194 Moreover, the GC also emphasised the ‘universal vocation of Google’s general search engine’.195 Therefore, the court recognised the anticompetitive nature of the self-preferencing practice and thus confirmed it being prima facie abusive. At the time of writing, an appeal is pending before the ECJ.196

6.3.2.2

Analysis of the Decisions

The case in Google Shopping has become subject to broad discussion and debate as regards various aspects in the academic literature, that is, the notion of abuse, the self-preferencing practices as such, as well as the remedy.197 This is owed to the fact that the conduct of Google does not fit into any of the well-established and pre-existing categories of abuse.198 Hence, ‘Google’s conduct is likely to be a novel abuse, or, at the very least, a novel interpretation of an existing abuse’.199 To this effect, Google Shopping arguably ‘reveals the limits of existing categories’.200 As a consequence, there is—as I have already indicated above201—no existing theory of harm ideally and adequately tailored for Google’s selfpreferencing practice. In other words, and borrowed from Akman, fitting the facts in Google Shopping

as developed by the EU Courts, see Colomo (2020b) and Colomo (2020a), pp. 33 et seq, in particular at 35. 191 MEO (Chap. 4, n 477); Deutsche Telekom (Chap. 4, n 84); for more details and examples to this effect, see Colomo (2020b), pp. 35 et seq. 192 Google Shopping GC (Chap. 1, n 8). 193 Google Shopping GC (Chap. 1, n 8), para 176. 194 Google Shopping GC (Chap. 1, n 8), para 283. 195 Google Shopping GC (Chap. 1, n 8), para 176. 196 Case C-48/22 P, Google and Alphabet v Commission (Google Shopping) pending. 197 To name just some: Holzweber (2018a); Petit (2015); Eben (2018); Colomo (2020a), Vesterdorf (2015); Akman (2017); Jones et al. (2019), pp. 527 et seq; Kokkoris (2017), pp. 313–333; Caro de Sousa (2020); Marsden (2020), pp. 553–560; Graf and Mostyn (2020), pp. 561–574; Achleitner (2022), pp. 253–270; Holzweber (2018b), p. 96. 198 For example: Akman (2017), p. 370; Eben (2018), p. 143; Colomo (2019c), p. 532. 199 Eben (2018), p. 147. 200 Colomo (2019c), p. 533. 201 See under 6.1(iii).

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into one of [the] existing types of abuse is equivalent to fitting a square peg in a round hole. Without entirely disregarding some of the fundamental concepts and rules underlying the existing framework for these abuses, the facts of [Google Shopping] do not fit into these categories of abuse.202

Another apparent issue in Google Shopping is the inherent tension of the qualification of self-preferencing measures as restrictive of competition. Notwithstanding the fact that the Commission and the GC took the opposite view, arguably considering the specifics of the facts and circumstances of the case at hand,203 there is no doubt that self-preferencing can also be an expression of competition on the merits.204 However, as correctly emphasised by Colomo, [t]he General Court goes as far as to suggest that favouring the firm’s own services is “not necessarily rational” for a search engine (or rather, that it is only rational for a dominant firm protected by barriers to entry).205

In principle, the issue in this regard is comparable to the concern, which is familiar from refusals to supply, which might, given particular circumstances only, end in a duty of the dominant undertaking to deal with its competitors. In this context the GC in Google Shopping even noted that Google’s general results page has characteristics akin to those of an essential facility [. . .] inasmuch as there is currently no actual or potential substitute available that would enable it to be replaced in an economically viable manner on the market.206

However, it explicitly held that the criteria as developed in Bronner207 relating to the assessment of a refusal to supply are not applicable to the facts in Google Shopping.208 Considering the above, it is my view that the objective of competition law is not to force a firm to deal with its rivals.209 Rather, it may impose such obligation in exceptional circumstances only,210 as there are, undoubtedly, conflicting interests, namely, an undertaking’s freedom to contract and the maintenance of an effective competitive structure to be balanced against each other. AG Jacobs got to the heart of the issue in its opinion in the landmark ‘essential facility’ case Bronner:211

202

Akman (2017), p. 370. Google Shopping GC (Chap. 1, n 8), para 169 et seq. 204 Colomo (2020a), p. 4. 205 Pablo Ibáñez Colomo, ‘The General Court in Case T-612/17, Google Shopping: the rise of a doctrine of equal treatment in Article 102 TFEU’, Chillin’Competition Blog, available at accessed 6 February 2023. 206 Google Shopping GC (Chap. 1, n 8), para 224. 207 Oscar Bronner (Chap. 4, n 82). 208 Google Shopping GC (Chap. 1, n 8), paras 212 et seq, in particular para 229 et seq. 209 Colomo (2019c), p. 535. 210 Ibid. 211 Oscar Bronner (Chap. 4, n 82). 203

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In the long term it is generally pro-competitive and in the interest of consumers to allow a company to retain for its own use facilities which it has developed for the purpose of its business. For example, if access to a production, purchasing or distribution facility were allowed too easily there would be no incentive for a competitor to develop competing facilities. Thus while competition was increased in the short term it would be reduced in the long term. Moreover, the incentive for a dominant undertaking to invest in efficient facilities would be reduced if its competitors were, upon request, able to share the benefits. Thus the mere fact that by retaining a facility for its own use a dominant undertaking retains an advantage over a competitor cannot justify requiring access to it.212 (emphasis added)

Against this backdrop, it is all the more striking that the Commission and the GC chose the by object path and qualified the self-preferencing practice of Google as anticompetitive by its very nature. However, the Commisison in its decision in Google Shopping followed (again) the familiar approach by which it arguably undermines the underlying reason for the distinction between by object and by effect infringements. In more concrete terms, the Commission, regardless of its qualification of the self-preferencing practice as prima facie abusive, also proved anticompetitive effects while emphasising that it was not obliged to do so.213 Moreover, the approach of the Commission and the standard applied as regards anticompetitive effects in Google Shopping brings along another discrepancy. As clarified by the Court over the years ‘a limitation of a firm’s freedom of action and/or a competitive disadvantage do not amount, in themselves, to anticompetitive effects’.214 Colomo gets to the heart of the issue stating that ‘[i]f the notion of anticompetitive effects were equated with a competitive disadvantage, then selfpreferencing would become, de facto and by definition, prima facie unlawful’215 (emphasis added). A fact which seems to have become reality considering the GC’s confirmation of the Commission’s decision in this respect. However, a fact which has arguably not been taken account of is that such equating of anticompetitive effects with a competitive disadvantage would in fact also undermine the very reason of the distinction between the notions of by object and by effect infringements of competition. Another aspect that can be criticised is the wording used by the Commission, as the latter speaks of the measure’s capability to produce an anticompetitive effect216 in tandem with its likelihood to have an anticompetitive effect as alternative.217 Despite the fact that ‘the Court has sometimes used [capability and likelihood] as synonymous’218 the actual analysis conducted allows an attribution of the threshold of capability to the notion of an object restriction of competition, whereas the

212

Oscar Bronner (Chap. 4, n 82) Opinion of AG Jacobs ECLI:EU:C:1998:264, para 57. Google Shopping (Chap. 4, n 52), paras 606, 607. 214 Colomo (2020a), p. 35; See the ECJ’s case in MEO (Chap. 4, n 477). 215 Colomo (2020a), p. 35. 216 Google Shopping (Chap. 4, n 52), paras 341, 606. 217 Ibid. 218 Colomo (2020b), p. 5. 213

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threshold of likelihood is relevant in the context of effect infringements.219 Therefore, also to this effect, the Commission seems to mingle the concepts relevant for the notions of by object and by effect infringements of competition. In a nutshell, Google Shopping is controversial for various reasons: Firstly, it mingles the capability and likelihood of a measure to produce anticompetitive effects; two thresholds arguably indicating different categories of infringements, namely by object and by effect ones. Secondly, it then conducts an analysis of the self-preferencing measure’s detrimental effects of competition, while emphasising that it was not legally obliged to do so thereby indicating that it considered the selfpreferencing practice being a prima facie abuse, that is, abusive by object. Such reasoning is not new, as the Commission has already in offline cases pursued such, as I call it,220 ‘Janus-face’ approach. Examples already mentioned in this respect221 provide the Commission decisions in Microsoft,222 Intel223 and Tomra.224 To this effect, my criticism that ‘such “better be safe than sorry approach” seems somehow at odds with the underlying reason justifying the two distinct concepts’225 of by object and effect infringements, ‘that is, the management of enforcement resources’,226 similarily applies to the Commission and the General Court decision in Google Shopping. Thirdly, a last point is the discrepancy that follows equating a competitive disadvantage with the notion of anticompetitive effects: Such approach would not only run counter to the principles established by the ECJ as regards the notion of anticompetitive effects.227 Rather, it would also end up in a de facto qualification of self-preferencing as prima facie abusive, and undermine the very reason of the distinction between the notions of by object and by effect infringements of competition.

6.3.2.3

Self-Preferencing as a Standalone Category of Abuse?

Undoubtedly, self-preferencing ‘has become central to discussions about the application of competition law in digital markets’.228 Practices falling into this

219

Ibid, 61. Zelger (2020b), p. 280. 221 See above under Sect. 4.6. 222 Microsoft (Case COMP/C-3/37.792) Commission Decision 24 May 2004 notified under document number C(2004) 900 (Microsoft COMP), para 835–954. 223 Intel Commission Decision (Chap. 4, n 9), paras 1597–1616. 224 Prokent/Tomra (Case COMP/E-1/38.113) Commission Decision of 29 March 2006 (Decision Summary published 2008 OJ C219/11), para 20 (Tomra Commission Decision). 225 Zelger (2020b), p. 280. 226 Ibid. 227 See to this effect Colomo (2020a), p. 35. 228 Colomo (2020a), p. 2. 220

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‘newcomer’229 category can arguably be qualified as Category III measures in the sense as defined above.230 Hence, self-preferencing in the online environment appears to be ‘particular’ as it does not seem to fit into any of the pre-existing categories, and thus no theory of harm seems to unambiguously apply to the latter.231 In this sense, they are new. However, as recognised in the literature,232 practices that could be labelled as self-preferencing or with a self-preferencing element are, firstly, indeed not that new in the competition law landscape. Rather they have been subject to scrutiny of the ECJ since the very early days.233 Secondly, there exists a variety of different legal settings and theories of harm upon which the breach of the law of abuse of dominance of an undertaking engaging in a self-preferencing practice or a measure containing a self-preferencing element could be established.234 Hence, it might not even be possible to develop a uniform theory of harm applicable to all measures of self-preferencing as the latter category arguably captures a variety of very different practices. As a consequence, self-preferencing seems to be rather too extensive of a label to provide for a standalone category of an abusive practice. Moreover, in many cases self-preferencing appears to be a mere element of various different practices only, rather than a suitable label for a standalone and sound legal category or form of abuse. A last point to be mentioned is that self-preferencing arguably results from competition on the merits.235 Put differently, ‘[f]irms, in the EU competition law system, are not under a general duty to subsidise rivals by sharing their competitive advantage’.236 Moreover, there is much truth in emphasising that the aim of EU competition law is to ensure that a firm can exploit its competitive advantage rather than to neutralise the latter.237 In light of the above, there are, in principle, two possible approaches for the treatment of self-preferencing practices. Firstly, the establishment of a category capturing all different forms of self-preferencing practices. However, as such category would arguably be overly inclusive,238 the role of effect analysis, that is, the treatment of the respective measures concerned according to their effects thereby applying an effects-approach seems not only necessary and appropriate but rather an inevitable consequence: As self-preferencing practices or measures with a self-

229

Ibid. See pages 155–156. 231 See above 6(iii). 232 Holzweber (2018a), p. 364; Colomo (2020a), p. 2; Petit (2015), p. 2. 233 For example, Joined Cases 6 and 7/73 Istituto Chemioterapico Italiano and Commercial Solvents v Commission [1974] ECLI:EU:C:1974:18; Case 311/84 CBEM v CLT and IPB [1985] ECLI:EU:C:1985:394. 234 Petit (2015), pp. 2 et seq; Akman (2017); Vesterdorf (2015), p. 4. 235 Colomo (2020a), p. 4. 236 Ibid. 237 Colomo (2020a), p. 4. 238 Colomo (2020a), p. 36. 230

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preferencing element can occur in various ways and forms, such variety arguably conflicts with the qualification as prima facie abuse, but rather requires a case-bycase analysis and thus an effects-approach. Secondly, as the finding of a uniform ‘one size fits it all’ theory of harm for all variations and forms of self-preferencing practices or measures containing a selfpreferencing element is anything but likely, the focus should lie with grouping the various self-preferencing practices and develop appropriate theories of harm corresponding to the latter’s particularities. Arguably, the existing case law provides suitable guidance to this effect. Moreover, the respective theories of harm must not only comply with the standards and principles established in the previous lines of case law, but also be refined where necessary considering the particularities of the digital economy. To this effect the threshold of indispensability, for example, has been proposed as a suitable benchmark.239 However, while developing robust theories of harm and appropriate legal tests, the effect-route seems adequate as, arguably, there is a lack of experience regarding the detrimental nature of various practices in the online environment. Put differently, as the ambiguity of a measure with respect to its impact on competition requires its treatment under the effectheading in the first place does not oppose, however, the development of legal tests that enable the establishment of a precise line between ambiguous and non-ambiguous practices and thus the establishment of criteria qualifying a certain measure as abusive by object in the second place.

6.3.3

Google Android

6.3.3.1

The Decisions of the Commission and the General Court

The second case of the Google saga is Google Android.240 It concerned practices of Google which amounted to an abuse of a dominant position by strengthening and cementing its dominant position as regards general search services. In this sense, it is a classical leveraging case. According to the Commission, the abusive practices consisted in:241 (i) The tying of apps, that is, Google Search and Google Chrome, to its app store Google Play being a ‘must-have’ to device manufacturers. (ii) Making the licensing of Google Play and the Google Search app conditional on ‘anti-fragmentation’ obligations thereby preventing original equipment manufacturers (‘OEMs’) from selling devices based on a modified version of Android, that is, so-called Android forks, or taking any other actions

239 For an extensive illustration of this argument and analysis of the respective relevant case law see: Colomo (2019c). 240 For a comment on the case, see: Caffarra (2022); Achleitner (2023). 241 Google Android (n 7), para 4.

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fragmenting Android. Hence, the practice arguably reminds of a non-compete clause242 raising exclusivity issues. (iii) The compensation of OEMs of mobile devices as well as mobile network operators (‘MNOs’) by means of revenue share agreements (‘RSA’) provided the latter abstained from the pre-installation of any other general search service than Google. The practice was qualified as exlusivity payments. The measures identified by the Commission arguably cover tying practices, ‘antifragmentation’ agreements raising exclusivity issues as well as exclusivity payments. The Commission qualified all the aforementioned practices as abuse. Most of the decision was upheld by the GC. However, the latter annulled the finding of a stand-alone abuse as regards the exclusivity payments due to errors in the reasoning of the Commission.243

6.3.3.1.1

The Tying of Apps

With respect to the tying practice, the Commission complied with the law as it stands since the General Court’s decision in Microsoft.244 Hence, it applied an effectsapproach and assessed the practice according to its effects rather than putting it into the object box. The GC upheld the Commission’s decision. Reiterating the principles established in Microsoft245 the GC confirmed that the Commission therefore correctly found, as it did in the decision which gave rise to the judgment [in Microsoft], that close examination of the actual effects or further analysis, according to the terminology used in the past in that regard, was required before it could be concluded that the tying in question was harmful to competition.246

In light of the ambiguity of tying practices in the context of both, the offline and the online world,247 this may be a revolutionary momentum as the case law of the ECJ regarding tying practices (in the analogue world) is clear in qualifying the latter as prima facie abuse of Article 102 TFEU.248 In this respect, as argued and illustrated in the foregoing,249 the Court applied a fairly formalistic approach in the past.

242 Pablo Ibáñez Colomo, ‘The Android decision is out: the exciting legal stuff beneath the noise’, Chillin’Competition Blog, available at accessed 6 February 2023 comparing the respective clauses with obligations in a franchising agreement ‘to protect goodwill around a business’. 243 Google Android GC (Chap. 1, n 8), para 802. 244 Microsoft (Chap. 4, n 81). 245 Google Android GC (Chap. 1, n 8), para 284 et seq. 246 Google Android GC (Chap. 1, n 8), para 295. 247 See to this effect as regards offline markets under Sect. 4.4.3.1 as well as with respect to online markets below under Sect. 6.3.3.2. 248 See to this effect under Sect. 4.4.3. 249 Ibid.

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However, the effects-approach adopted by the Commission and upheld by the GC seems to take account of the refinement necessary as regards the assessment of tying in the online world. Qualifying as Category II,250 tying arguably requires a new assessment approach, as the online environment adds a further dimension and alters the circumstances in such a way that requires a modification of the latter. This fact is arguably echoed in the decision of the Commission and the General Court. As the latter observes after having confirmed the necessity of an effects-approach before concluding upon the harmfulness of a tying practice:251 Such an examination, first, serves to reduce the risk that penalties may be imposed for conduct which is not actually detrimental to competition on the merits and, second, further to clarify the gravity of the conduct in question, which will facilitate determination of the appropriate level of any penalty.252

However, at the time of writing, an appeal against the GC decision is pending at the ECJ.253 Therefore, contrary to the case in Microsoft (where no appeal was issued),254 it is the latter having the final say in the Google Android case. This is, considering legal certainty and all difficulties inherent to the online environment and a digital economy, welcome.

6.3.3.1.2

The ‘Anti-Fragmentation’ Obligations

Making the grant of a license for the Google Play as well as the Google Search app conditional on acceptance of the ‘anti-fragmentation’ obligation contained within the respective agreements was qualified by the Commission and confirmed by the GC as restrictive of competition by its nature.255 The practice thus constituted an abuse of Google’s dominant position on the market for Android app stores and for general search services.256 The General Court upheld the Commission’s finding and, contrary to what was claimed by Google in its appeal, confirmed that it ‘duly took into account the relevant economic and legal context’.257 However, while establishing the anticompetitve nature of the ‘anti-fragmentation’ obligations and qualifying them as prima facie abuse, the Commission nevertheless also proved the measure’s anticompetitive effects.258 Therefore, as the General Court put it, the Commission has

250

As regards the various different assessment categories, see Sect. 6.1. Google Android GC (Chap. 1, n 8), para 295. 252 Ibid. 253 Case C-738/22 Google and Alphabet v Commission, pending. 254 Microsoft (Chap. 4, n 81). 255 Google Android (n 7) para 1036; Google Android GC (Chap. 1, n 8), para 892. 256 Google Android GC (Chap. 1, n 8), para 893. 257 Ibid. 258 Google Android (n 7) para 1076 et seq, 1092 et seq; Google Android GC (Chap. 1, n 8), para 893. 251

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sufficiently demonstrated the existence of the restrictions at issue and of their effects on competition [. . .]259 (emphasis added).

As a consequence, so the court goes on the Commission was not also required – contrary to the views taken by Google and the parties intervening in its support – to carry out a counterfactual analysis to evaluate the hypothetical consequences that might have been observed, in the absence of the second abuse, on the markets for Android app stores, for general search services, on which that abuse was identified, and for licensable OSs, on which Google also holds a dominant position.260

6.3.3.1.3

The Exclusivity Payment

Moreover, the last set of abuse concerned the exclusivity payments in form of the compensation granted by means of the revenue share agreements. The Commission’s assessment of the RSA is, in principle, compliant with the ECJ’s case law on exclusivity agreements. As emphasised by the General Court Google is not justified in claiming that the Commission made an error of assessment when it found that the payments in question were exclusivity payments.261

However, as identified by the court while taking account of the law established in Intel262,263 the Commission’s assessment of the RSA was annulled as a result of the various errors of reasoning264 in so far as it considers the portfolio-based RSAs themselves to constitute an abuse, without it being necessary to examines Google’s arguments in relation to users’ access to competing general search services and the need for a counterfactual test.265

In more concrete terms: Following the judgement in Intel the Commission, among other aspects, has to assess the share of the market covered by the challenged practice.266 Its examination of the ‘significant’ market coverage of the practice267 constituted the first error in its assessment of ‘essential aspects’,268 while the second one concerned doubts as regards the correct application and validity of the as

259

Google Android GC (Chap. 1, n 8), para 893. Ibid. 261 Google Android GC (Chap. 1, n 8), para 657. 262 INTEL (Chap. 1, n 43). 263 Google Android GC (Chap. 1, n 8), para 639 et seq. 264 Google Android GC (Chap. 1, n 8), para 800. 265 Google Android GC (Chap. 1, n 8), para 802. 266 INTEL (Chap. 1, n 43), para 139. 267 Google Android GC (Chap. 1, n 8), para 693; the GC dealt with the market coverage criterion already in its decision in Case T-286/09 RENV – Intel Corporation v Commission [2022] ECLI:EU: T:2022:19, para 499, by which the latter annulled the Commission’s decision. 268 Google Android GC (Chap. 1, n 8), para 800. 260

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efficient competitor test (‘AEC test’).269 Therefore, while the finding and qualification of the practice as exclusivity payments was confirmed by the GC, the flaws of the Commission decision had occurred in conducting the necessary context analysis, that is, the taking account and assessment of the legal an economic context (i.e. by means of the AEC test and considering the ‘significant’ market coverage of the practice), and thus with respect to errors in the Commission’s reasoning. As a consequence, the law as it stands since the ECJ’s judgement in Intel, that is, that the qualification of measures conferring exclusivity as by object abuse has been complied with by both, the Commission and the General Court.270 In a nutshell: The by object standard undoubtedly applies to exclusivity payments; however, the Commission failed to conduct a context-analysis to the extent and standard necessary, as the court identified errors as regards the correctness and validity of the AEC test271 conducted by the EC as well as regarding the qualification of the market coverage of the practice as ‘significant’.272

6.3.3.2 6.3.3.2.1

Analysis of the Decisions The Practices Raising Exclusivity Concerns (Exclusivity Payments in Form of RSA and ‘Anti-Fragmentation’ Agreements)

To begin with, to qualify the RSA, that is, Google’s practice to pay its customers in order to ensure the exclusive pre-installation of the Google Search app (thereby arguably preventing competing search services from being pre-installed) as exclusivity payments is anything but a surprise. Rather, the assessment is in line with the case law developed by the ECJ.273 In this sense, the practice falls under Category I. Hence, the assessment of exclusivity payments in Google Android is compliant with the case law concerning similar measures, that is, payments in return for exclusivity (i.e. promotional payments) such as in BPB Industries274 as well as compensation payments to customers for their breaching of contracts with competitors of Intel in Intel.275 Moreover, treating exclusivity payments as by object abuse is also

269

Google Android GC (Chap. 1, n 8), paras 734 et seq, 752, 800. With respect to this argument as regards the Intel case see under Sect. 4.4.2.4. 271 Google Android GC (Chap. 1, n 8), para 752. 272 Google Android GC (Chap. 1, n 8), para 800. 273 See, for example, the ECJ decisions Hoffmann LaRoche (Chap. 1, n 40) and in INTEL (Chap. 1, n 43). Moreover, see the Commission’s decision in Google Android (n 7), paras 1188 et seq; arguing similarly Friso Bostoen, ‘The Commission’s Android decision: Google cements its dominance in search. . . to the benefit of consumers?’, CoRe Blog, available at accessed 6 February 2023; also see Colomo (n 241) labelling the exclusivity payments as ‘perhaps least exciting’ of Google’s practices. 274 BPB Industries (Chap. 3, n 297). 275 INTEL (Chap. 1, n 43). 270

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compliant with what is recognised in economics literature.276 However, similar to what has happened to the Commission in the Intel case, also in Google Android, as regards the latter measure, it had difficulties in conducting a thorough and correct context analysis by means of a valid and correct application of the AEC test as well as a correct assessment of the market coverage being ‘significant’. In other words, its errors in reasoning, that is, the Commission’s non-compliance with the necessary standard of a valid and correct AEC test as well as its erroneous qualification of the market coverage being ‘significant’, caused the annulment of this part of its decision by the GC. Hence, the qualification of the practice as object abuse was confirmed by the GC,277 while it was, at the same time, annulled on procedural grounds. The second abuse in form of ‘anti-fragmentation’ obligations is, in principle, compliant with the law as it stands as regards exclusivity agreements too. Therefore, a practice that warrants a dominant undertaking exclusivity by means of a non-compete clauses is, in principle, treated under the object heading.278 To this effect the Commission decision is sound and in line with the case law. However, similar to its decisions in Google Shopping,279 Microsoft,280 Intel281 and Tomra,282 the Commission adopted, as I have repeatedly referred to it in this monograph and elsewhere,283 a ‘Janus-face’ approach. Hence, while an anticompetitive object and thus nature of the latter practice was identified by the Commission, it nevertheless also proved the practice’s anticompetitive effects. My repeated criticism that such approach undermines the very reason of the distinction between by object and effect infringements thus applies similarily also to the decision in Google Android. Moreover, the treatment of ‘anti-fragmentation’ obligations as abusive by object can, from an abuse of dominance perspective considering the online environment, be discussed controversially too. To this effect ‘anti-fragmentation’ obligations raising exclusivity issues serve as example of Category II measures as there are arguments in favour of a refinement of the latter’s assessment approach. Arguably, by making the licensing of the Google Play Store and the Google Search app conditional on ‘anti-fragmentation’ obligations, Google found a way to combat free-riding as it thereby prevented OEMs from selling devices based on a modified version of Android. Therefore, in its simplest terms, one could argue that Google is accused of fostering its own Android operating system by the imposition of a non-compete clause (deriving from the license for the Google Play Store as well as Google Search)

276

See under Sect. 4.4.1.4. Google Android GC (Chap. 1, n 8), para 657. 278 For the respective relevant case law, see above Sects. 4.4.1 and 4.4.3. 279 Google Shopping (Chap. 4, n 52). 280 Microsoft (Case COMP/C-3/37.792) Commission Decision 24 May 2004 notified under document number C(2004) 900 (Microsoft COMP), para 835–954. 281 Intel Commission Decision (Chap. 4, n 9), paras 1597–1616. 282 Prokent/Tomra (Case COMP/E-1/38.113) Commission Decision of 29 March 2006 (Decision Summary published 2008 OJ C219/11), para 20 (Tomra Commission Decision). 283 Zelger (2020b), p. 280. 277

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preventing OEMs to sell devices running Android forks, that is, an operating system version of Android other than Google’s official version thereof. To this effect, the decision arguably raises fundamental questions as regards a dominant undertaking’s (arguably legitimate) protection of its own products. Hence, the issue in this regard also surrounds the legitimacy of practices pursued by a dominant undertaking protecting or self-preferencing own products over those of its competitors.284 Put more provocatively: Are dominant undertakings really obliged to share competitive advantages gained by their being successful and innovative? Would such approach not result in punishing a dominant firm for its holding of a dominant position (something EU competition law has committed itself to actually not penalise)? Moreover, does such approach not run risk to backfire and therefore lead to a distortion of competition rather than a protection of it by hindering, inter alia, innovation? Arguably, the issue to be solved in this respect is inherent to tension between the special responsibility a dominant undertaking has, on the one hand, as well as its legitimate interest to combat free-riding, that is, to protect its own products and services, on the other hand. In other words, what is the legal test in this regard or put differently, ‘[u]nder what conditions are dominant firms precluded from measures against free-riding?’.285 Against this backdrop one could argue that the practice concerning Android forks in Google Android is, from a competition law perspective, at least to be qualified as ambiguous, as there are also pro-competitive rationals for Google’s conduct.286 Consequently one could argue that the ambiguity of the measure actually required its treatment according to its effects on competition, which were anyway proved by the Commission. A fact which does not exclude, however, the future development of legal tests that enable the drawing of a precise line between ambiguous and non-ambiguous practices. Be that as it may, it is up to the ECJ to decide upon a refinement of the law and the approach on the protection of a dominant undertaking’s own goods and services by means of non-compete or exclusivity clauses in the digital economy. Hence, the ECJ’s appeal judgement in Google Android (as in Google Shopping) is highly anticipated.

6.3.3.2.2

The Effects-Approach to Tying

The tie in Google Android was, according to the law as established in the GC’s decision in Microsoft, treated according to the measure’s effects. This is an arguably revolutionary but welcome momentum for the following reasons: In principle, it

In this vein, see Konstantinos Stylianou, ‘Help Without Borders: How the Google Android Case Threatens to Derail the Limited Scope of the Obligation to Assist Competitors’, available at SSRN: accessed 6 February 2023; Aguilera Valdivia (2018), pp. 43–68; Colomo (n 241). 285 Colomo (n 241). 286 Bostoen (n 272); Colomo (n 241). 284

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would be compliant with the ECJ’s case law as it stands if the tie in Google Android were treated under the object heading.287 However, the adequacy of treating tying in online markets as by object infringement is not necessarily suitable for various reasons. In this sense, as indicated above, they qualify as Category II measures. In essence, the decisive question here is whether the by object rule as established for tying and bundling in traditional markets is indeed adequate for the assessment of the latter practices in the context of digital markets. Arguably, as the Commission and the GC decisions legitimately prove, it is not. In other words, they were right in not treating the latter as prima facie abuse but rather according to its effects and thus under the effect-heading. Insofar, the tying practice in Google Android serves as Category II example of an abuse.288 The refinement of the approach towards tying arguably adjusting it to the particularities of a digital economy is welcome. The controversy surrounds, on the one hand, the fact that a traditional tying scenario is fundamentally different from non-traditional tying where a platform or access to input is involved.289 On the other hand, the fact that traditional tying is concerned about the way how products are sold, however, practices occurring in the digital environment seem to be troubled by the way how products are made,290 that is, product design,291 contributes to further complication, as ‘[i]t is submitted that EU competition law is, and should be, agnostic about business models’.292 To this effect, doubts as regards the adequacy of the law and the traditional approach as regards tying for assessing cases in the digital economy almost suggest themselves.293 Consequently, the change in paradigm, which the GC has started in its decision in Microsoft294 and continued in its decision in Google Android,295 is—in my view— favourable. Moreover, there are no doubts that according to traditional economic theory (i.e. economic theory considering traditional, that is, offline markets) tying undoubtedly has an ambiguous effect on competition.296 Rather, it is clear that it can be presumed to be detrimental to competition only given the existence of a very particular set of circumstances.297 Therefore, the particularities of digital markets and the respective products sold require all the more a refinement of the assessment

287

For the respective relevant case law, see above Sects. 4.4.1 and 4.4.3. As regards the defined Categories I-III, see above under Sect. 6.1. 289 Colomo (2019c), pp. 537 et seq. 290 Colomo (n 241); also see OECD Dominance in Digital Markets Report (n 15) 41 et seq illustrating that ‘digital products feature modularity or linkages with other products’ and the particularities in the assessment deriving thereof. 291 Eicher (2019), p. 428. 292 Colomo (2018b), p. 10. 293 For an overview as regards the academic debate to this effect see Jones et al. (2019), pp. 480 et seq with further references. 294 Microsoft (Chap. 4, n 81). 295 Google Android GC (Chap. 1, n 8). 296 See to this effect Sect. 4.4.3.1. 297 Ibid. 288

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approach and revision of the law applicable to tying (argumentum a fortiori). In other words, given the controversy around tying even in traditional markets and taking account of the voices advocating for an effects-approach, the argument to treat tying practices according to their effect on competition seems all the more striking given the online context with digital goods and services and thus in the context of cases occurring in the digital economy. To this effect the Commission and the General Court’s decision is a welcome continuum in changing paradigms. Nevertheless, it is up to the ECJ having the final say as regards tying in digital markets and thus in the Google Android case. While the notion of effects is not the main focus of this monograph, a last point worth mentioning here is the necessary standard required to establish a measure’s anticompetitive effect referred to by the General Court in its decision in Google Android. The criticism raised in Google Shopping,298 where the Commission equated a competitive disadvantage with harm to competition, a principle confirmed by the General Court in Microsoft,299 does not apply to the GC’s decision in Google Android. Rather, by means of its decision in Google Android the court has arguably abstained300 from its approach in Microsoft. Hence, a mere competitive disadvantage cannot be equated and considered meeting the necessary standard as required in the context of the notion of effects.301

6.3.4

Google AdSense

6.3.4.1

The Commission Decision

The case in Google AdSense concerned three types of clauses within agreements concluded between Google and its large costumers of online search advertising intermediation services (‘Partners’) basically conferring exclusivity upon Google’s products and services. According to the Commission, the abusive practices consisted in: (i) Exclusivity clauses requiring its Partners to ‘source all or most of their search ads requirements from Google’.302

298

See to this effect Sects. 6.3.2.1 and 6.3.2.2. Microsoft (Chap. 4, n 81), para 1054. 300 Google Android GC (Chap. 1, n 8), para 280 et seq. 301 Pablo Ibáñez Colomo, ‘The notion of abuse after the Android judgment (Case T-604/18): what is clearer and what remains to be clarified (I)’, Chillin’Competition Blog, available at accessed 6 February 2023. 302 Google Search (AdSense) (AT.40411) Commission decision of 20 March 2019 notified under document number C(2019) 2173 (Google AdSense) Decision Summary published 2019 OJ C369/6 (Google AdSense Decision Summary), para 11. 299

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(ii) Premium Placement clauses requiring its Partners to ‘reserve the most prominent space on their search results pages [. . .] for a minimum number of Google search ads’.303 (iii) Written Approval clauses requiring its Partners ‘to seek Google’s approval before making changes to the display of competing search ads on [the respective] websites’304 concerned. Basically all of the aforementioned clauses were arguably construed to warrant, one way or another, exclusivity of Google’s search ads. Moreover, importantly, Google’s strategy to guarantee preferential treatment of its search ads had been subject to change over the years. Whereas the clauses agreed upon in the very beginning, that is, since at least 2006,305 were ‘naked’ exclusivity clauses (as described under (i) above), later on Google refined its strategy insofar as it altered the clauses and replaced them by the abovementioned Premium Placement clauses (see (ii) above) in tandem with the Written Approval clauses (see (iii) above) starting in 2009.306 With respect to all of the clauses, the Commission held that they were capable of restricting competition ‘based on an analysis of all the relevant circumstances’.307 Moreover, with respect to the ‘naked’ exclusivity clauses the Commission, while committing itself to conduct a context analysis, not only once also stressed its not being legally obliged to do so.308

6.3.4.2

Analysis of the Decision

The measures fined by the Commission are, arguably, clearly to be qualified as exclusionary practices aiming to foreclose competitors. Insofar their treatment as abusive by object does not seem controversial but rather complies with the principles and the law as developed for exclusivity as well as de facto exclusivity clauses.309 To this effect, the practices in Google AdSense serve as Category I examples of an abuse.310 In principle, with respect to all of the aforementioned clauses, the Commission held that they were capable of restricting competition ‘based on an analysis of all the relevant circumstances’.311 Hence, arguably it applied the principles and the law as developed by the Court in the context of exclusivity agreements or practices

303

Google AdSense Decision Summary (n 301), para 12. Google AdSense Decision Summary (n 301), para 13. 305 Google AdSense (n 6), para 456. 306 Google AdSense (n 6), paras 563 and 623. 307 Google AdSense (n 6), paras 362, 494 and 573. 308 Google AdSense (n 6), paras 345, 362. 309 As regards the law on exclusivity in the analogue world, see above under Sect. 4.4.1. 310 As regards the defined Categories I-III, see above under Sect. 6.1. 311 Google AdSense (n 6), paras 362, 494 and 573. 304

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conferring de facto exclusivity in a traditional market context. With respect to the ‘naked’ exclusivity clauses it is, however, all the more interesting that the Commission, while concluding that the clauses were capable of restricting competition considering all the circumstances, also emphasised that ‘it is not legally required to do so’. This is, in this author’s view, at odds with the case law as it stands. As emphasised above,312 also in the context of ‘naked’ exclusivity obligations, the ECJ has ever since taken into consideration the actual legal and economic circumstances and thus conducted a context analysis.313 Nevertheless, despite this aspect, the decision of the Commission in Google AdSense appears, considering the approach to exclusivity as developed in the case law concerning analogue markets, to be the least controversial of the decisions of the Google triad. Arguably, the legal test and the principles applied to Google’s practices conferring exclusivity seem sound also in the context of the digital economy and thus in the context of online markets. Consequently, Google AdSense provides for Category I examples of an abuse.314

6.3.5

Interim Conlusion

The so-called Google saga, that is, the Commission decisions in Google Shopping, Google Android and Google AdSense, as well as the decisions of the General Court in Google Shopping (GC) and Google Android (GC) provides for a triad of all categories, that is, Category I-III, as defined above under Sect. 6.1. The self-preferencing practices in Google Shopping arguably falls into Category III. Hence, the latter case concerns practices that are somehow ‘new’.315 Moreover, the self-preferencing practices are, arguably, a source of major concern particularly in the context of a digital economy. However, it seems that the category of ‘selfpreferencing comes across as an overly inclusive category that is not sound from a legal and economic perspective’.316 As emphasised above317 and by various authors in the literature,318 there are different categories of behaviour already developed in the analogue case law that contain a self-preferencing element. In other words, selfpreferencing is no novelty. Whereas the latter can, arguably, be subjected to the prerequisite of the essential facility doctrine,319 there are other theories of harm that

312

See under Sect. 4.4.1.1. See for example: INTEL (Chap. 1, n 43) Opinion of AG Wahl ECLI:EU:C:2016:788, para 75; Gormsen (2013), p. 245. 314 As regards the defined Categories I-III, see above under Sect. 6.1. 315 See above 6(iii). 316 Colomo (2020a), p. 36. 317 See above 6(iii). 318 Colomo (2020a), p. 36; Petit (2015), pp. 2 et seq. 319 Vesterdorf (2015). 313

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could be thought of as legal basis for the treatment of self-preferencing measures as well. Namely, tying (Article 102(2)(d) TFEU), discrimination (Article 102(2) (c) TFEU),320 and unfair pricing (Article 102(2)(a) TFEU).321 Therefore, as selfpreferencing elements occur in the context of various different measures, there is no theory of harm prevailingly suitable in the context the latter. The same is true as regards practices containing a self-preferencing element in the online environment. In fact, one could argue that it is simply not possible to establish a uniform category of self-preferencing being capable to catch all the different practices of self-preferencing and providing for an adequate (and uniform!) theory of harm to this effect. Put differently, it is not appropriate to make an element of a variety of very different practices a standalone category suitable to catch all of the latter. Consequently, the argument goes, as self-preferencing is rather a single element of a practice or the mere result of a variety of different practices, there cannot be a ‘one size fits all’ theory of harm. Rather, theories of harm must comply with the standards and principles established in the previous lines of the case law and adapted where necessary and required considering the particularities of the digital economy. Hence, the practices occurring online currently captured under the notion of selfpreferencing require not only the search for appropriate and corresponding theories of harm in order to be capable to adequately assess the latter. The more, they also demand for a refinement of self-preferencing as catch-all category, as the latter fails capturing the variety, richness and complexity of the different forms of selfpreferencing and the various circumstances and scenarios within which the latter might occur. In this respect, the treatment of self-preferencing according to its effects does, in the given context and in the first place, not seem far-fetched. This is even more so, considering the ‘Janus-face’ approach, that is, qualifying a measure as abusive by object while also proving the anticompetitive effects, as applied by the Commission in Google Shopping (and cases in the context of Article 101 TFEU, for example, cases such as Servier,322 Cartes Bancaires,323 CISAC324 and ISU325). Such approach, that is, appliying an effects-based approach to self-preferencing measures, would not oppose the development of robust theories of harm and legal tests in the second place. Rather, the latter would arguably enable the drawing of a precise line between ambiguous and non-ambiguous practices and thus the establishment of criteria qualifying a certain measure as abusive by object. A different picture is drawn, however, considering the conduct in Google Android and Google AdSense as, arguably, the latter practices actually fit into pre-defined categories of abuses as established by the case law of the EU courts.

320

Petit (2015), p. 3. Petit (2015), p. 6. 322 Servier (Chap. 3, n 249). 323 Cartes Bancaires Commission Decision (Chap. 3, n 370). 324 CISAC Commission Decision (Chap. 3, n 370). 325 Commission Decision ISU (Chap. 3, n 90). 321

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However, such fit does not say anything about the adequacy of the application of theories of harm and legal tests developed with resepct to traditional markets in the context of digital markets and the digital economy. In both of its latter decisions, that is, Google Android and Google AdSense, the Commission obeyed the respective relevant law and principles established by the Court in the context of traditional markets. However, whereas the application of the law concerning, in its broadest sense, exclusivity clauses in Google AdSense serves as example of a Category I abuse, the practices in Google Android provide for more controversy and can thus be in part allocated to Category II. Regarding the latter, the law as it stands and the respective principles established in the context of traditional tying are arguably not adequate for the assessment of tying practices in the online environment. For that reason, the effects-based approach of the Commission and the General Court is an arguably revolutionary but welcome momentum as the case law of the ECJ regarding tying practices (in the analogue world) is clear in qualifying the latter as prima facie abuse of Article 102 TFEU.326 However, traditional tying is, undoubtedly, fundamentally different from non-traditional tying involving access to a platform327 such as, for example, a search engine. For that reason, one could doubt that the law of tying and the rather strict by object approach provides for a suitable assessment kit for cases occurring in a digital environment. Given the controversy around tying even in traditional markets and taking consideration of the particularities of the online economy, the argument to treat tying according to its actual effect on competition seems all the more striking (argumentum a fortiori). Moreover, adding the fact that many aspects as regards the digital economy and online markets are arguably rather poorly explored and thus economic effects and the potential impact of a measure occurring online from an economics perspective is anything but certain, a rather cautious use of pre-defined categories of abuse should prevail over rigidity. Notwithstanding the fact that requiring a dynamic approach necessarily raises legal certainty concerns, it is my view that such dynamic would, while temporarily providing for legal uncertainty, indeed warrant adequacy as regards the outcome of competition law decisions in the long term. Hence, as a consequence, it finally serves to the better of both of the latter. Put differently, it would indeed lead to the strengthening of both, that is, legal certainty and adequacy as regards the final outcome of competition law decisions. Moreover, a lack of (economic) experience necessitating a treatment of the respective practices in the online environment as restrictive by effect does not exclude the qualification of the latter as by object infringement later on, given the aforementioned lack is actually filled with valuable experience gained over the years justifying a shift in the approach. In this respect, ‘effects’ in the establishment of competition law infringements might be a useful tool for a safe manoeuvring in testing and/or re-thinking the law. Hence, such approach would, as a consequence, not only foster legal certainty, but also be perfectly in line with the requirement that a

326 327

See to this effect under Sect. 4.4.3. Colomo (2019c), p. 537.

6.4

Chapter 6 Conclusions

195

measure only qualifies as detrimental by its very nature and thus abusive or restrictive of competition by object in case a measure is indeed capable of having ‘net negative effects’ without it being a potential source of pro-competitive gains; an assessment which is and can, in turn, be guided by economic analysis and experience only. Against this backdrop and considering the variety of cases and open proceedings currently pending at the European Institutions,328 needless to say, there is a large number of opportunities to clarify the law, set legal boundaries and develop strong and robust categories of abuse as well as adequate theories of harm in the nearby future. Moreover, not subject of this monograph, however, necessary to mention in the context of competition in the digital economy is the EU Digital Markets Act.329 Hence, considering the tools the European Union already has to face the challenges imposed by the digital economy (i.e. the competition law provisions) as well as current developments and (regulatory) tools of the Commission further regulating the digital sector, it will be interesting how the European Union will master the challenges imposed by the ‘digital revolution’.

6.4

Chapter 6 Conclusions

Undoubtedly, digitisation imposes challenges not only on our society, market economy and democracy, but also upon the application of competition law. New phenomena, such as the digital platform model, the increase of two-sided markets linked to the latter as well as further characteristics, such as the decline of price asymmetries, an increase of market transparency and speed, e-commerce as distribution channel, as well as, for example, the role of data complicate competition law assessment as regards the potential or likely effects of a measure presumably being detrimental to competition. Put differently, what holds to be true in offline markets from an economic perspective does not necessarily need to be true as regards online markets. Thus, rules and standards as applied in the analogue world are not automatically adequate for the assessment of a practice occurring in an online environment. This becomes particularly apparent in the decisional practice of Article 102 TFEU. Furthermore, also technology and new forms of collusion add on further complexity. Crucial in this respect remains whether the practice presumably being at odds with the competition provisions actually requires a novel assessment approach or whether such approach can remain unchanged as the practice at hand is ‘old wine in new bottles’ not requiring adaption. In other words, whether a measure occurring online that is familiar from analogue markets is to be qualified the same way as its equivalent offline depends on whether the measure was practiced in an online

328

Pending cases at the General Court in Google AdSense (n 181); furthermore: Commission Proceedings in Apple Music Streaming (n 171); Apple E- and Audiobooks (n 171). 329 Digital Markets Act (Chap. 5, n 34).

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environment ‘only’ or whether ‘the online aspect added a relevant dimension for the competition law assessment by, for example, involving a platform’.330 It has been shown that, whereas Article 101 TFEU cases with a link to the digital economy are rather uncontroversial, the picture drawn in the context of the law of abuse of dominance is a different and more delicate one. Hence, with respect to Article 102 TFEU the online environment arguably adds ‘the’ further dimension requiring a refinement of a measure’s assessment approach from a competition law perspective. Put differently, what holds to be true as regards a practice’s anticompetitive effects in offline markets cannot be transferred to the digital environment, that is, to online markets. Apart from the new dimension the online aspects provided by, for example, involving a platform, such refinement of the assessment approach is also owed the characteristics and particularities of online markets in general such as, for example, their being prone to tipping, concentration etc. Hence, the digital revolution requires competition law and, in particular, the law of abuse of dominance, to refine and adapt established standards and principles in order to meet the challenges imposed by the particularities of online markets and the digital economy. However, the existing tools and principles of Article 102 TFEU arguably provide for a framework flexible enough to accomplish the former mission. Notwithstanding the fact, however, that ‘[t]hese frameworks cannot [. . .] address every digital market policy concern’, as ‘[t] he debate about abusive conduct by large digital firms is a [. . .] microcosm of the broader discussion about competition in digital markets.’331

330 331

Akman and Sokol (2017), p. 146. OECD Dominance in Digital Markets Report (n 15) 7.

Chapter 7

Conclusions

7.1

An Overall Analytical Framework of Articles 101 and 102?

The debate concerning the differentiation between by object and by effect infringements of competition has existed since the birth of EU competition law, that is, Article 101 and 102 TFEU. Moreover, whether effects or a negative impact on competition play a role also in the context of object infringements, somehow runs in the same vein. Insofar, the debate and controversies surrounding the latter are, arguably, anything but new. However, considering digitisation, recent market developments as well as the particularities of the digital environment and online markets, the debate is arguably to be flared up again. Furthermore, although extensive research exists as regards the notion of by object infringements of competition, also in the context of the analogue world, there is no systematic review of this topic covering both competition provisions, namely Articles 101 and 102 TFEU. This gap is filled by this monograph also covering new phenomena owed to the digital revolution and its impact on and altering of the functioning of traditional markets. With respect to an overall analytical framework regarding both Treaty competition provisions, from a formal perspective the distinction between by object and by effect restrictions can be found within Article 101 TFEU. Such distinction, however, is lacking in the context of Article 102 TFEU. Nevertheless, the EU courts have clarified that there is also a distinction between by object and by effect in the context of abuses and Article 102 TFEU. Moreover, also an objective justification is possible in the context of both, Article 101 and 102 TFEU, regardless of the fact that Article 102 TFEU lacks an equivalent of paragraph 3 of Article 101 TFEU. In this sense, the framework for the assessment of a certain practice under the competition law provisions seems sound and uniform. However, a small difference lies with the concept of non-appreciability of a measure’s effects, as, with respect to Article 101 TFEU, there does exist a threshold for the presumption of de minimis, © The Author(s), under exclusive license to Springer Nature Switzerland AG 2023 B. Zelger, Restrictions of EU Competition Law in the Digital Age, Studies in European Economic Law and Regulation 25, https://doi.org/10.1007/978-3-031-31339-4_7

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which is lacking, however, in the context of Article 102 TFEU.1 Nonetheless, as the de minimis presumption does not apply to object restriction of Article 101 TFEU either,2 it appears that the framework is indeed not that different, as it is in both cases possible to prove a measure’s lack of effects and thus its non-appreciable nature, thereby rendering either of the Treaty competition provisions inapplicable. Moreover, the debate as regards by object and by effect infringements runs along the lines of the rivalry between rules versus standards which basically echoes the debate as regards legal certainty versus adequacy in competition law decisions. Furthermore, as competition law undoubtedly serves a broad spectrum of goals and objectives, regardless of the fact that the main emphasis, since the introduction of the more economic approach (beginning with Article 101 TFEU, however also shifting towards Article 102 TFEU lateron), lies with consumer welfare as well as— as a particularity of the European context—market integration, such pluralism does not make the competition law assessment of a measure easier. However, arguably, the more economic approach made economics and economic thinking the ‘constant benchmark which may provide a stabilizing effect and a focal point for antitrust enforcement’.3 Apart from the broad, overall analytical framework as regards Article 101 and 102 TFEU, which appears to be shaped uniformly with respect to both of the latter provisions, there is also uniformity in the context of the principles and standards regarding the establishment of by object infringements of the competition law provisions. Hence, object restrictions as well as object abuses are not per se infringements in the sense that they can be established in the abstract and without consideration of the actual legal and economic context within which a measure occurs. Rather, in the context of both a ‘context analysis’ is necessary. Notwithstanding the fact that, in the context of Article 102 TFEU, the EU courts have, in the early days, not been that explicit as regards a consideration of all the circumstances while however indeed having taken account of the latter. Moreover, such context analysis, which aims to shed light on whether or not a practice can be qualified as anticompetitive by its very nature is, to a large extent, informed by what economic theory can tell us about the likely or potential anticompetitive effects or the latter’s impact on competition. Hence, it is highly influenced by and intertwined with economic theory. Therefore, as we use economics as a benchmark, also the establishment of a by object restriction is not free of a consideration of a measure’s likely or potential effects, as it is the latter’s capability justifying the presumption of it being harmful or detrimental to competition by its very nature. In other words, it is economic experience that enables us to qualify a practice as restrictive or abusive by object, as economic

1

Post Danmark II (Chap. 4, n 80), paras 72–73; Intel (Chap. 1, n 52), para 116; MEO (Chap. 4, n 477), para 29. 2 See to this effect the ECJ’s judgement in Expedia (Chap. 3, n 270) as well as my remarks under Sect. 3.8.1. 3 Ezrachi (2017), p. 59.

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theory tells us something about the potential harmful nature of a certain business practice or behaviour. Moreover, it is also clear from the case law that where a certain practice has ambiguous effects or an ambiguous impact on competition, the latter should be treated according to its effects. Against this backdrop, it becomes apparent that the underlying legal and economic context within which a measure occurs is crucial when it comes to the qualification of a measure as by object, by effect or not detrimental to competition at all. Hence, slight differences in the facts and circumstances might have a great impact on the qualification of a business practice and thus entirely change its assessment and qualification. Such context-specific outcome can be observed in the case law concerning both Article 101 and 102 TFEU. Taking account of the particularities of online markets, such particularities might provide for the slight change in the legal and economic context, that is, in all the circumstances to be considered, which alters the assessment of a measure or requires a refinement of its assessment approach. Put differently: As what holds to be true with respect to a measure’s potential or likely effect in the analogue or offline market is not necessarily correct also in the context of online markets or a digital environment, the qualification of a practice as by object or by effect can actually differ. The qualification of the very same business practice as restrictive by object offline might alter due to the latter’s occurrence in an online environment. Moreover, the lack of substantial economic experience as regards the functioning of online and platform markets adds on further complexity. Against this backdrop, it has been shown that digitisation imposes challenges upon not only competition law, but also our economic system and consequently, the functioning of our society as such. Hence, my arguing in favour of effects goes beyond the scope of the genuine ‘by object or by effect’ saga. Rather, when put into broader perspective, that is, considering historic motives of the law, its developments, its broader function to serve a democratic society as well as its role in an arguably changing (economic) environment, effects (that is, effect analysis) are a valuable tool to warrant the balance between legal certainty and adequacy. In other words, in a changing world where policy adaption might be necessary due to changes as regards economic reality and the functioning of markets, a certain degree of ‘[f]lexibility may be particularly appropriate during such reviews, due to the unpredictability of the future’.4 Furthermore, whereas the ECJ arguably applies a coherent approach, the Commission has a slight tendency to favour object infringements of competition. However, although at first glance such approach seems to foster legal certainty, as undertakings know exactly what is held to be ‘good or bad’, it actually undermines the latter as such favouring leads to an imbalance as regards the notions of object and effect infringements. Put differently, when each and every single practice, that is, also measures of arguably ambiguous nature, is put into the object box, an increase of false negatives and a distortion of the competitive process is anything but

4

OECD Digitisation Report (Chap. 5, n 6), para 38.

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unlikely. Furthermore, also the handling of cases by way of commitment decisions seems rather critical in this respect as the latter decisions ‘preclude a full assessment and leave many questions untested’.5 Moreover, a coherent legal standard as regards ambiguous practices can only be developed provided actual experience as regards their effects to competition are gained.6 In light of the complexity and ambiguity of various practices that have been qualified as per se illegal, such argument becomes even stronger, as certainty that presumably comes along with ‘clear rules’ is prone to oversimplification. Following Watzlawik,7 admittedly rather loosely and not in a competition law context but however, in the context of social systems, oversimplifying views of, generally speaking, ‘our modern, interdependent and fast changing world’8 can only be maintained by refusing their complexity.9 However, such argument seems to be true with respect to competition law analysis too. Hence, the notions of by object and by effect infringement and their different approaches running in the vein of the tension of legal certainty and adequacy as regards competition law decisions should be seen as mutual correctives. In that sense, a high legal certainty standard can only be obtained and maintained by using both of the latter to develop a coherent standard of the notion of a competition law infringement as well as a consistent framework for the establishment of the latter. By way of illustration, economic experience gained over time, supported and will continue to support developing categories of object restrictions and abuses. However, as long as the effects of a measure are considered ambiguous, it should be treated according to its effects, notwithstanding the possibility that such categorisation might—after some time and after having gained the experience necessary for economic ‘clarity’ as regards a measure’s impact on competition— change and lead to a treatment of the latter practice as restrictive of competition by object. In case the economic environment requires an adaption of the qualification of a measure due to factual or circumstantial changes and uncertainties as regards the adequate assessment of a practice associated therewith, such approach could also shift vice versa, that is, from a by object infringement to a treatment of the measure according to its effects. It seems that the shift as regards the treatment of RPM in the US, which had ‘occurred just as Internet markets began to flourish’10 as well as the tying in Google Android serve as prime examples in this respect. Such necessarily flexible framework seems inherent to the nature of competition law. In light of the above, it appears obvious that—at least some—measures occurring in an online environment seem to be prime suspects for a treatment according to their

5

Colangelo (2017), p. 13. For example, Cartes Bancaires (Chap. 3, n 4) Opinion of AG Wahl ECLI:EU:C:2014:1958, paras 55–56, Peeperkorn (2017), p. 23. 7 Watzlawick et al. (1974). 8 Watzlawick et al. (1974), Chap. 4 ‘Die schrecklichen Vereinfachungen’, p. 60. 9 Ibid. 10 Akman and Sokol (2017), p. 136. 6

7.1

An Overall Analytical Framework of Articles 101 and 102?

201

effects. An increase of effect cases would not only establish the ‘long-desired’ balance necessary as regards by object and by effect infringements but fill the legal vacuum by providing guidance as regards effect infringements and the required full-effect analysis. Following Aristotle by keeping the golden mean, such approach seems anything but unreasonable. However, in the context of decisions concerning the digital economy, it seems that the European Commission sticks to its tendency to put everything into the object box, notwithstanding the fact that it has indeed ‘developed an impressive theoretical framework for assessing the effects of agreements on competition.’11 Hence, arguably ‘potential infringements tend to be construed as “by object” violations.’12 Take for example its approach to reverse patent settlement agreements in the pharma cases, as well as its ignorance of the free-rider concern as echoed, for example, in ISU (both of the latter concerning Article 101 TFEU decisions). Moreover, a prime suspect in the context of unilateral behaviour and thus Article 102 TFEU to this effect provides the Commission and the General Court decisions in Google Shopping concerning Google’s self-preferencing measure. An exemption however provides the analysis of the decision in Google Android, where the Commission adopted an effects-approach to tying. Insofar the fact that the digital economy requires a refinement of the assessment approach as regards tying, as traditional tying seems to differ fundamentally from tying occurring in digital markets, seems to have been considered by the EC. Another aspect in the approach of the Commission that can be criticised is that in some cases it follows a ‘better be safe than sorry’ or ‘Janus-face’ approach qualifying a practice as restrictive or abusive by object while also proving actual anticompetitive effects. Such approach can be criticised for being ‘at odds with the underlying reason justifying the two distinct concepts of Article 101 TFEU, that is, the management of enforcement resources’.13 Nevertheless, the overall framework and principles for the establishment of by object infringements of competition as developed by the ECJ seem to be consistent. Admittedly, an in-depth analysis and knowledge of the case law and peculiarities of each of the cases’ facts and specific circumstances seems indispensable in order to comprehend the existing framework. Clear-cuts are hardly ever possible. This is owed to the fact that, as mentioned above, a ‘context analysis’, that is, the consideration of not only the plane content and object or alleged ‘purpose’ of a business practice, but also the legal and economic context within which it is actually operated, is necessary in order to successfully establish a by object restriction or abuse. Thus, to deviate the harmful and detrimental nature of a practice from its form only is just not possible. Therefore, content and object of an agreement or unilateral practice need to be analysed within their actual context in order to determine whether the

11

Witt (2018), p. 1. Colomo and Lamadrid (2017), p. 18; Detecting a tendency as regrads an extension of the object box, see also Witt (2018), p. 8; Lamadrid (2023); Colomo (2023); Colomo and Lamadrid (2017), p. 18. 13 Zelger (2020), p. 280. 12

202

7

Conclusions

latter indeed falls into the object category of competition law infringements. As illustrated, slightly different circumstances and facts might deny potential ‘net negative effects’14 of a practice and kick it out of the object box, notwithstanding the fact that a similar measure qualified as restrictive by object in a (maybe only slightly) different set up. The ‘context-specificity’ of competition law cases is captured and echoed by the context analysis necessary with respect to by object cases. However, such context analysis is different from a full effect analysis as required in the context of by effect infringements of competition.

7.2

A Hymn to Effect Analysis

The above analysis outlines the necessity and indispensability of a meaningful and conscious use of effects in the establishment of competition law infringements with respect to both, the analogue as well as the digital environment. Such use seems indispensable not only to warrant future adequacy of competition law decisions, but also when considering the aim to develop a coherent legal certainty standard. Arguably, legal certainty and adequacy in competition law cases are mutual correctives. Loosely speaking, whenever there are doubts as regards the potential or likely impact of a practice, the latter ambiguity should lead to a treatment of the measure under the effect heading. Clarity as regards potential or likely effects, however, leads to a practice being treated under the object heading. Consequently, during times of change, that is, in particular when considering digitisation and phenomena occurring in the online environment, a deliberate use of effect analysis as regards potential competition law infringements appears anything but unreasonable. Whereas the ECJ has not shied away to stress the important role of effects, arguably such approach seems not to have been followed by the Commission. However, the Commission would be well advised not to put everything into the object-box but rather also shape the notion of by effect infringements of competition by means of conducting—more often than not—an actual analysis of a measure’s effects in order to warrant future adequacy of competition law decision as well as the development of a coherent legal certainty standard.

14

Which means that object restrictions must be sufficiently deleterious, harmful, obvious or injurious by its very nature.

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